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Corporate Responsibility Report 2008

Pricing our medicines

Prices for newly approved medicines are determined on a country-by-country basis.

In some countries, prices are negotiated directly with governments or other payers, for example sickness funds and private health insurers. In others, manufacturers are free to set their own prices subject to other kinds of government controls.

Pharmaceutical R&D is a lengthy and expensive process. To develop one successful medicine or vaccine it can take, on average, ten to twelve years and typically costs around $1.2 billion¹. For every product that reaches the market, thousands do not make it through the research process.

We seek to ensure that the price of our new products reflects:

• Their clinical value to patients in terms of improved therapy, better safety and fewer side effects
• The high risks associated with R&D
• The need for a fair return on investment
• Affordability for our customers

Ultimately, national price regulation will often amount to a balancing act between managing public healthcare budgets, enabling patient access and rewarding innovation and R&D investment.

We sell our medicines to wholesalers and pharmacies, not directly to patients. These intermediaries often add their own price mark-ups to pharmaceutical products, and in addition duties and tariffs may be imposed on imported products. This affects the price paid by the end customer, for example national health services, hospitals and patients.

1. Tufts Center for the Study of Drug Development