GlaxoSmithKline has agreed ground-breaking new pricing arrangements with two European governments, which will allow the prices set at launch for some of its new products to be increased, or lowered, as further information on their value becomes available through post-marketing studies.

These unique new pricing deals were discussed this week by Andrew Witty, GSK’s president for pharmaceuticals in Europe, at a conference in London organized by the Financial Times. However, a spokeswoman for GSK told Pharma Times that commercial sensitivities meant that the company had made no formal announcement of the new pricing model, nor would it be revealing which governments or products were currently involved.

She described the two agreements currently in place as “pilots,” in the sense that each set of negotiations had been conducted individually, with no set formula being followed.

The very long-established European model of setting a drug’s price at launch means it is then fixed for the product’s entire lifecycle, irrespective of any new information, whether positive or negative, which might emerge during its use in real-life settings, said the company spokeswoman.

In one of the two deals which GSK has agreed with governments so far, a price has been set relatively high but with room to reduce it in future if necessary, while in the other the price has been set at a relatively low level, but with the flexibility to raise it, reports say.

Pharmaceutical industry leaders have long claimed that a new medicine’s true value cannot possibly be judged at the time of its launch.

Setting the price at that time means that genuine innovations will not be properly rewarded, while governments also run the risk of paying premium prices for products which may prove to provide very little, if any, incremental benefits for patients. Therefore, European price control policies not only threaten the industry’s presence in the region by discouraging R&D, they also distort the market and prevent patients from getting access to the most innovative new treatments, says the industry.

Drugmakers’ belief that, for too long, Europe has regarded health as a cost rather than an investment has been taken on board by the European Commission, which has recently announced a series of actions based on the May 2002 report of the G10 Group (the High Level Group on Innovation and the Provision of Medicines - a panel representing industry, government and other stakeholders) which the Commission had asked to examine the problems facing the sector and make recommendations for change.

One such response is the setting-up of the Pharmaceutical Forum, a political platform tasked with taking the G10 process forward in three areas – pricing, innovation and patients.

Announcing the Forum’s establishment last year, Gunter Verheugen, European Commission Vice President responsible for Enterprise and Industry, said: “our objective is to examine the benefits of giving industry more flexibility in establishing prices without sacrificing any capacity of member states to protect their health care budgets.”

With the Forum set to hold its first meeting on September 29, the announcement of GSK’s new flexible pricing model is timely. The company says it is receiving very positive reactions to the scheme from other governments and that it is keen to expand these types of negotiations.