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Carroll School of Management

Daniel Vasella, M.D.

chairman & ceo, novartis international ag

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Daniel Vasella addresses the Chief Executives’ Club of Boston.

Novartis CEO: Easing rules on drug imports may loom

Novartis AG chief executive Daniel Vasella yesterday said that he "wouldn't be surprised" if US regulators ease rules limiting the importation of cheaper drugs from Canada, but cautioned that would damage the industry's financial footing and wouldn't help patients much.

Speaking to a luncheon sponsored by the Boston College Chief Executives' Club at the Boston Harbor Hotel, Vasella, head of the Swiss pharmaceutical giant, echoed the concerns of other drug executives who worry that proposals in Washington might scare away investors.

One change that has been much discussed would be to allow consumers or large importers to buy drugs from Canada directly, where drug prices are set lower by government policy. So far the Food and Drug Administration has largely blocked this, citing safety concerns.

Vasella acknowledged that political pressure is mounting to change the rules, but cited examples from Europe where trading companies have learned to capture profits based on the price differences, rather than passing them along to customers.

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James Mongan (President & CEO, Partners HealthCare System, Inc.), Timothy McMahon (President, Adams Harkness), Kerry Healey (Lt. Governor, Commonwealth of Massachusetts), Sean Healey (President & CEO, Affiliated Managers Group),John Kaneb (Chairman, President, & CEO, HP Hood LLC), The Rev. J. Donald Monan, S.J. (Chancellor, Boston College), Charles Baker (President & CEO, Harvard Pilgram Health Care), The Honorable Salvatore DiMasi (Speaker of the House, MA House of Representatives), and Francis Lunger (Chairman, Milipore Corp.) listen to Dr. Vasella's address.

These companies are known as "parallel importers," buying drugs in one country and distributing them in another. In answer to a question from the audience, Vasella said because of them patients save just 10 percent of the total price difference between the antifungal drug Lamisil sold in Germany and the same drug sold in Spain.

"I bet you the day that parallel imports are legalized from Canada to the US, and I wouldn't be surprised if that would be the case, there will be some talented importers," he said. "I'm not sure that the deal patients will get will be so much better than what they get today."

Other executives including Tom McKillop, chief executive of AstraZeneca Pharmaceuticals, have made similar criticisms of the parallel trade in drugs in recent weeks.

Broadly, these executives say that governments that allow such imports and impose other heavy regulations on pharmaceutical and biotechnology companies will damage these industries even as they hope these companies will create jobs in their states. In Germany, for instance, seven major healthcare reforms in 10 years are the main reason companies like Bayer AG have fallen from the ranks of the top pharmaceutical companies, he said.

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James Mongan (President & CEO, Partners HealthCare System, Inc.), Kerry Healey (Lt. Governor, Commonwealth of Massachusetts), and Sean Healey (President & CEO, Affiliated Managers Group) enjoy the afternoon.

Meanwhile, European companies including Novartis have been expanding their US presence, saying they were drawn both by current federal policies and the pool of talented employees. Novartis, based in Basel, is moving its research headquarters to Cambridge where it is refurbishing the old New England Confectionary Co. Building along Massachusetts Avenue.

Preserving patent protection is another key issue for pharmaceutical companies, and Vasella criticized those who suggest such protection should be weakened to make drugs more affordable or easier to copy. "From my perspective, it is unethical to fight patents," he said, listing a host of programs through which Novartis provides low-cost or free drugs to developing nations.

Vasella got the biggest line of applause after he was asked whether he could offer any advice on US public-health practices, based on his European experience.

"You mean, east less, move more?" he said.

Article by Ross Kerber
Boston Globe, Business Section
Thursday, November 18th 2004