British pharmaceutical giant GlaxoSmithKline PLC is taking the unusual step of giving government health-care systems a say in deciding which drugs advance in its research pipeline, a move it hopes will result in more products these customers will pay for.
Glaxo's new chief executive, Andrew Witty, said the effort is part of his drive to help the world's second-largest drug maker adapt to a tough pharmaceutical market. In recent years, soaring health-care costs have led insurers, governments and other drug buyers to tighten their belts.
"I'm going to deal with the pharmaceutical realities of the next 10 years, and they're very different from those of the 1990s," Mr. Witty said in an interview at a company townhouse here.
Bringing a single drug to market can cost hundreds of millions of dollars, so drug companies are constantly searching for ways to better target the money they spend. Knowing the preferences of state health-care systems, which pay for the vast majority of all drugs sold in Europe, could make a big difference.
A few weeks ago, Glaxo's chief of research and development invited a group of health-care officials from the U.K., France, Italy and Spain to London to examine the drugs Glaxo is developing. It "was an opportunity for us to say, 'Look, here's what the development pipeline at [Glaxo] looks like, here's what these drugs are going to be...Which one of these do you think, 'This is exactly where I would prioritize healthcare dollars?'" Mr. Witty said.
The officials were mostly looking at the drugs Glaxo is testing in small, intermediate human trials. They gave some pretty blunt feedback on which drugs to prioritize and what sort of data Glaxo would need to show to make state health-care systems willing to buy the drugs, Mr. Witty said. Glaxo will change some of its development plans accordingly, he added, declining to give specifics.
Noël Renaudin, head of a French government committee that negotiates drug prices, said he attended the meeting but declined to comment further.
Glaxo isn't the only company seeking new ways to divine the needs of government buyers. Recently, Novartis AG approached Britain's state health system about an immunology drug and then altered its plans for the drug's human testing so its studies could answer Britain's concerns about efficacy and cost.
Like most big drug companies, Glaxo has struggled to bring new products to market in recent years. At the same time, it is facing generic competition to some of its biggest sellers, which is undermining its sales.
To try to foster more innovation in Glaxo's research organization, Mr. Witty says he is considering organizing the scientists who discover drugs into smaller groups. The idea came in part by watching the small biotech companies Glaxo has acquired in recent years. At Domantis Ltd., of Cambridge, England, scientists work in groups of about 25 or so. During a recent visit, Mr. Witty says he saw one scientist drop what he was doing and help a colleague who'd had a breakthrough with an experiment.
That kind of intimacy and flexibility is key to innovation, Mr. Witty believes. Glaxo has already cut its thousands-strong research staff into groups of several hundred, but Mr. Witty wants to go further.
Key to bolstering a biotech mentality at Glaxo will be keeping the scientists Glaxo has won through recent acquisitions. This month, Glaxo spent $720 million to acquire Cambridge, Mass.-based Sirtris Pharmaceuticals, a small company conducting early research on potential drugs. To try to retain chief executive Christoph Westphal, Glaxo is offering a bonus of $1 million payable as soon as a Sirtris drug is approved for sale by a regulator, according to Sirtris filings with the Securities and Exchange Commission.
Dr. Westphal is also eligible for cash bonuses of $250,000 each time Glaxo decides to conduct a large human trial of a Sirtris drug.
In addition, Dr. Westphal will receive about $2 million of his gains from the sale of Sirtris in the form of Glaxo stock, but only if he remains at Glaxo for a few more years.‹
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