Pricing threat looms large for global drugmakers

By Ben Hirschler

NEW YORK (Reuters) - Finding new drugs is only half the battle. Getting governments and insurers to pay for them is a growing problem for manufacturers.

The issue hit home this week in the United States, the world's biggest and most profitable drugs market, with the Democrats winning control of Congress and vowing to use federal buying power to drive down the cost of prescription medicines.

As drug stocks fell on the news, executives told the Reuters Health Summit that pricing and reimbursement had become a major hurdle for the $600-billion-a-year industry across the globe.

"You have price pressure all over the world, health systems that are struggling to provide health care benefits and pharmaceutical benefits for their populations," said Teva Pharmaceutical Industries Ltd. (TEVA.O: Quote, Profile, Research, Stock Buzz)(TEVA.TA: Quote, Profile, Research, Stock Buzz) President George Barrett.

"Me-too" medicines, offering no big advantage over the existing products, will be the biggest casualties, according to Novartis AG (NOVN.VX: Quote, Profile, Research, Stock Buzz) head of corporate research Paul Herrling.

"Payers are less and less willing to pay, especially in big patient markets, for drugs that do not deliver a very, very distinct new clinical advantage," he said.

Defining innovation, however, is not always simple.

Germany, for example, lumps similar medicines together in so-called "jumbo" groups and caps the price for the lot, to the frustration of companies like AstraZeneca Plc (AZN.L: Quote, Profile, Research, Stock Buzz), which reckons its cholesterol pill Crestor is superior to rivals.  Continued...