Glaxo Says No to Russia on Cutting Price of HIV Drug

Published On: June 12th, 2009

GSK logo Drug makers have touted the importance of expanding in emerging markets like Russia, China and India to drive growth outside the slowing U.S. market. But one challenge is figuring out how to price drugs in those markets.

A continuing dispute between GlaxoSmithKline and the Russian government over the pricing of HIV medicines illustrates the conundrum for companies of maintaining an acceptable profit margin vs. gaining market share, according to the WSJ.

Russia wants GSK to lower the price of its anti-retroviral medication Combivir by 15%. GSK refuses, saying that such a price wouldn’t be able to support a “viable business model,” according to Glaxo’s general manager in Russia, Fabio Landazabal, reports the WSJ. “Pricing of this level is clearly not sustainable nor appropriate if applied to middle-income countries.”

GSK recently made a different decision in parts of Asia, cutting prices on some products by as much as 50% to make prices more affordable — and to increase increase sales.

“We’re ready to be flexible in our business model to be sure [Glaxo] is suited to the markets where we’re working,” GSK chief Andrew Witty told the WSJ.

Emerging markets have also been hit by the recession — IMS Health’s recent drug forecast said that expectations for growth in 2009 would be 3% to 4% lower than previously believed. Still, the top seven emerging markets “will contribute more than half of global market growth in 2009 and sustain an average 40% contribution through 2013,” according to IMS.

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