GlaxoSmithKline seeks favour on prices

By SIMON COLLINS

The world's biggest pharmaceutical company, GlaxoSmithKline, is considering investing in New Zealand biotechnology - but says it may not go ahead unless the Government pays more for its medicines.

The company already spends about $6 million a year on NZ research, but says it needs a bigger local market to justify its infrastructure here.

A report on the biotechnology industry, by former ANZ Securities chief executive William Randall and published this week by Industry NZ, says the country needs to weigh the advantage of cheap medicines through Pharmac's bulk-buying monopoly against the value for the biotech sector of an alliance with a pharmaceutical company.

Dr Randall said biotechnology originally "took off" in the United States through the research budgets of pharmaceutical companies, and New Zealand's small biotech companies needed to partner them.

"The average cost of a drug is $US600 million [$1.5 billion]. We just don't have the capital here to do that," he said.

"I think the Pharmac model must be looked at in terms of the opportunity cost of not having big pharmaceutical companies here."

Pharmac groups all medicines that have a similar effect, and pays only the price of the cheapest one. Companies selling other drugs with similar effects have either to accept the cheapest price or sell their products directly to patients without the Pharmac subsidy.

GlaxoSmithKline corporate strategy manager Michael Bryant said opportunities to develop products created by NZ biotech firms were being examined.

But he said the business had to be a certain size. "There is a lot of stuff going on around the world, so we have to fight for the local companies here to get their products into the development pipeline.

"That just probably won't happen in the absence of an infrastructure to oversee the sorts of investments that might be made down here."

Pharmac chief executive Wayne McNee said Pharmac's sole responsibility was to get the best health outcomes from the health budget.

Statistics showed that pharmaceutical companies spent $20 million on research here last year out of sales of almost $1 billion.