From today's Wall Street Journal:
An ObamaCare Drug Preview in Germany
By John C. Lechleiter
Germany was in many ways the birthplace of the pharmaceutical industry. But today, German policies place the industry's future progress at risk.
More than a century after Eli Lilly's founding, many of us still trace our company's greatest "spark" to Germany, and to a scientist born in 1877 named George Henry Alexander Clowes. An Englishman, Clowes was determined to become a great chemist and was dedicated to improving human health. In the late 19th century, such a goal meant one thing: Go to Germany. Clowes left Germany not only with a Ph.D. in chemistry but also with a conviction that breakthroughs against disease depended on the collaboration of industry, academia and medicine.
Twenty-six years later in 1922, Clowes had crossed the Atlantic and become the head of research at a small company in Indianapolis. He helped to spearhead the commercial manufacture of insulin for the treatment of diabetes—turning what was once a death sentence into a manageable condition.
Today in Germany, it's doubtful that George Clowes would find much inspiration. The ethos of hard work certainly still exists, but intrusions of bureaucracy, misunderstandings of science, and an exaggerated emphasis on short-term cost savings are jeopardizing the country's legacy as a pharmaceutical powerhouse.
Of particular concern is a new law passed last year that imposes a complex new assessment mechanism to determine the added benefit of new pharmaceutical products, which in turn is used to set prices. The situation in Germany bears close scrutiny in the U.S., as health-technology assessment processes grow in significance under the recent health-care overhaul.
Our concerns begin with the timing of Germany's assessment: at the point of launch. Pharmaceutical companies invest hundreds of millions of dollars into clinical trials to prove the efficacy and safety of new medicines—but efficacy and safety are not the same things as added benefit. We introduce products into the market with well-founded hypotheses about their unique benefits, but rarely with definitive evidence. By insisting that we provide such evidence before a single patient has used a medicine in regular medical practice, German authorities are devaluing the final and arguably most important stage of pharmaceutical development.
Contrary to popular mythology, so-called blockbuster medicines are not the result of slick marketing campaigns but of demonstrated success in the actual practice of medicine. At Lilly, we wonder how many of our earlier blockbusters—which might have appeared very similar to existing medicines at their launch but proved more effective in practice—would have survived the requirements of Germany's new early assessment requirement. Similarly, we wonder if incremental innovations in the treatment of cancer, for example, or new medicines that limit side effects and improve patient compliance with doctors' orders in diabetes care, will be considered beneficial under Germany's new system.
Even that bleak conclusion assumes that the early assessments will be carried out in a fair and transparent manner, which is far from assured based on what the industry has seen so far. Companies such as Lilly are looking at the all-important "comparators" being assigned to our new molecules in the assessment process. In many cases, German authorities appear to be comparing cutting-edge products with decades-old generic products and still pricing the new products just pennies above the generics. Our conclusion is that we are being set up for negative decisions on added benefit and ruinous price controls as a result.
The wisest decision that a company can make in such circumstances may be to delay the launch of a new medicine in Germany until evidence can be generated elsewhere. The other alternative may be to keep new drugs off the German market entirely to prevent the global reputational damage of a slap from the German authorities.
Meanwhile, the broader uncertainties created by the new German law—literally any product can be drawn into the new evaluation process without advance notice—wreak havoc on our industry's business planning.
Now is the time to step back and consider the unintended consequences of Germany's new law, and make sure we don't repeat the same mistakes in the U.S. We share Berlin's goals of generating value and limiting unnecessary costs in health care. We see ways of harnessing and improving health-outcomes research.
Most of all, we believe that dialogue between government and industry is the only way to ensure that the cradle of the pharmaceutical industry remains a nurturing environment for new medicines in the 21st century.
Mr. Lechleiter is chairman and CEO of Eli Lilly & Co.
