GSK Annual Report 2002

12 GlaxoSmithKline Description of business
Over the last decade, regulatory authorities have focused
significant attention on measures to manage the risk associated
with the use of prescription products. This is particularly noticeable
in the USA, where the FDA and the pharmaceutical industry have
been subjected to intense public scrutiny of the adequacy of
measures taken to protect the public health. Substantial funding
for the FDA to strengthen post market surveillance activities was
included under PDUFA III. Under performance goals associated
with the legislation, drug manufacturers are encouraged to submit
voluntarily proposed Risk Management Plans as part of applications
for marketing new drugs. These recent developments represent an
additional challenge to the market registration process in the USA.
On 7th June 2002, the FDA announced approval of a supplemental
New Drug Application (sNDA) that allows restricted marketing of
Lotronex (alosetron hydrochloride) to treat only women with severe
diarrhoea-predominant irritable bowel syndrome (IBS). The
November 2002 reintroduction followed an advisory committee
review and implementation of a FDA-GlaxoSmithKline agreed risk
management programme intended to ensure patients and
physicians are fully informed of possible risks and benefits of
Lotronex.
Across International markets, countries outside the USA and
Europe, the regulatory environment continues to be extremely
varied and challenging. GlaxoSmithKline anticipates that the
introduction of new products will continue to require substantial
effort, time and expense to comply with regulatory requirements.
Price controls
In many countries the prices of pharmaceutical products are
controlled by law. Governments may also influence prices through
their control of national healthcare organisations, which may bear
a large part of the cost of supplying products to consumers.
In the USA, debate over the reform of the healthcare system has
increased the focus on pricing. Currently there are no government
price controls over private sector purchases, but federal legislation
requires pharmaceutical manufacturers to pay prescribed rebates
on certain drugs in order to be eligible for reimbursement under
Medicaid and other federal healthcare programmes.
In Europe, historically affected by government regulation in pricing
and reimbursement, the pharmaceutical industry continues to
experience pressure on its prices through a range of measures,
including across-the-board cuts, linking to low-cost countries, price
referencing and delays in agreeing reimbursement. There is an
increasing pressure for generic substitution and cross-border
imports from low-priced markets may exert a commercial pressure
on in-country pricing.
In Japan, discussions are ongoing as to which new price and
reimbursement controls the government will introduce.
During 2002, the worldwide pharmaceutical market continued to
experience increasing pressure on pricing and reimbursement from
governments and healthcare providers, though it is non-price
factors, new products and higher volumes, which are principally
driving the growth of pharmaceutical expenditure.
Value for money
It is becoming increasingly necessary to demonstrate the value for
money of new products, in particular the impact upon drug
budget expenditure and the burden of the disease that will be
treated.
In some markets, the need to satisfy healthcare purchasers as to
value for money is becoming an additional hurdle for product
acceptance over and above the regulatory tests of safety, efficacy
and quality. This can delay bringing effective and improved
medicines to the market and reduce their effective patent
protection time.
In many markets it is becoming increasingly difficult for a
significantly improved therapy to obtain a premium price over
existing medication. Philosophies founded on value-based pricing
are difficult to follow in such circumstances although in the USA
it is still possible to price products to reflect their value.
It is not possible to predict whether, and to what extent, the
Group’s business may be affected by future legislative and
regulatory developments relating to specific pharmaceutical
products or their price.
Regulation – Consumer Healthcare
The consumer healthcare industry is subject to national regulation
for the testing, approval, manufacturing, labelling and marketing
of products. In many countries high standards of technical
appraisal entail a lengthy approval process before a new product
is launched.
National regulatory authorisation is also required to approve the
switch of products from prescription to OTC. The requirements
include long-term experience of the quality, safety and efficacy
of the product in a wide patient population and data to confirm
that the relevant condition is both self-limiting and can easily be
diagnosed by the consumer.