A lot has been made about the subsidy of the cervical cancer vaccine gardasil and the PBAC's decision to knock back CSL's application.

CSL licences the vacine to Merck in the USA and charges them a 7% fee, yet they want to charge the same amount as Merck charge, this is a blatant attempt to make $35,550,000 for nothing.

To my mind this rip-off is shameful and shows how drug companies try to charge too much for their drugs.

Steve I am not in a position to judge whether $35m is an excessive amount or not. But dont forget that these drug companies have to put years of research into the development of these drugs. Many will never see market because they dont perform as hoped or have unintended side effects. During these years of research I imagine a large sum would be paid by way of salary to chemists and engineers to work on the development both of the drug and of the most effective delivery technique, and then the equipment in labs needs to be taken into account. Further there are trials that need to be run to prove the effectiveness and safety. Rather than charging for these, people are often paid to participate - a further cost.

Given the large lead time in turning a profit from these research activities, the effect of inflation on the cost of the investment means that much more money in terms of straight dollar figures needs to be made than the project actually cost, in order to get a real return.

I am in no way supporting a grab for money by these companies, or advocating that they should be given any price that they ask for, but there needs to be some understanding of their cost structures and how that impacts on the prices that they need to set for their products.

It's patently obvious that drug compamies are putting profits before public health. We had a good chance to change the way patents are administered when the FTA with the USA was being negoiated. Instead of Howard bending over forwards to accomodate Bush, at the time when Bush wanted our support for the mess he created in the Middle East, he could have negotiated are far better deal for Australians before one soldier was sent, as other countries have done. We are now paying the price of the failure of the Howard Gov't to stand up when it counted.

CountryGal

The research for the vaccine was done at The University of Queensland.

The point is that Merck sell it in the US for US$360 for the 3 injections after paying CSL a 7% royalty. CSL want to sell it for the same price A$460 in Australia when of course they do not have to pay themselves a 7% royalty.

I held shares in CSL a couple years back and made a tidy profit. If you can't beat them, why not join them?

Who paid for the research though, is my point. I'm sure UQ didnt fund the lot.

Look, if your gripe with CSL in this situation is that they arent proposing to sell the vaccine for $430 instead of $460 (taking out their 7% royalty in round figures), then I cant really understand it. All they are doing is selling the drug into Australia at the same price that someone else is already selling it overseas. They have vertically integrated and are making more money as a result. The royalty is for the intellectual property. The rest of the money charged goes towards manufacturing, marketing and other aspects of diong general business. Are they making a tidy profit? Probably. But CSL doesnt have a monopoly on the market, so that's hardly a crime.

I don’t think there is any real issue hear. Companies will charge what they think people are prepared to pay. The bigger the profit they make the more it will encourage like minded companies to try even harder to find other cures for other forms of cancer so that they to can join the bonanza. 7% is neither hear nor there.

Who knows CSL may have put it to auction and Merck was the highest bidder in the US and the bid they made may have come in under what CSL was hoping for? They might be getting even more money from other countries in Europe? Maybe $500 - $600 a pop.

I am just glad that the break through has been made. Well done CSL and all others involved you deserve to be greatly reward for the many lives you will save.

I can't see the problem with CSL being able to recoup the research costs from the Pharmaceutical Benefits Scheme to the same level as a multi national pharma company.

I think its scandalous that Australian young women are denied a mass vaccination program by a Minister for Health who is more concerned about controlling women's fertility than about the health of Australian women.

Its time the god botherers realise that the majority of the Australian population just tolerate them. Most Australians want to be free from religious strictures to live to the best of their potential in our once secular society.

CSL are not recouping their research costs they are trying to charge the Govt. $30 more per course of vaccination than it costs them. CSL have a monopoly on Gardasil in Australia and this extra $30 may seem little but it will equate to hundreds of millions of dollars before we see a reduction in cervical cancer rates 25-30 years.

What other drugs without such a high profile will be knocked back because CSL has ripped this money off the PBS?

Steve Madden,

You say CSL have a monopoly over supply of Gardasil into the Australian market. Is it part of their deal to license Merck to produce the drug that they (CSL) will charge the same price for it as would Merck if it was selling into the Australian market?

Presumably Merck's cost structure in putting the drug on the market internationally is significantly more favourable than would be CSL's. Otherwise why would CSL not be exporting the drug in its own right? (I am assuming that CSL has, or could contract, the capacity to actually make the drug.) Given that CSL may be manufacturing the drug itself, there is nothing to say that their cost stucture may not oblige them to charge more than the US price less license cost to make the drug available here. In which case the license component of the price of Merck supplied Gardasil has nothing necessarily to do with the cost structure of CSL sourced Gardasil, and you cannot necessarily claim CSL are ripping off the PBS to the tune of $30 per course or any lesser amount.

Of course if the actual source of the Gardasil that CSL is supplying to the Australian market, under the monopoly arrangement you claim exists, is in fact Merck, then it may be vastly more than $30 per course that may be being ripped off from the PBS. I do not know the industry, but I observed the attempts of the US negotiators to have the PBS dismantled as a condition of the Australia US Free Trade Agreement. It was an unforgivably arrogant attempt at interference in Australian domestic affairs, and the utterly muted defence of the scheme from both sides of politics in Canberra was a national disgrace. The PBS ensures that the US suppliers of pharmaceuticals get paid in cold hard cash, stupids! As such a cash cow, it only raises the most profound suspicions that the continued existence of the PBS is feared because it might focus the motivation and the resources to really look into the pricing policy of suppliers.

SteveM, Nice try, I see where you were going and you had a reasonable goal – sadly however you missed the understanding of basic business ‘politics’, or is it economics - whatever, it just is a fact of life now.

The key issue here is that Gardasil is a registered product of MERCK, produced by them and sold and distributed by them throughout the world, including Australia, so they get to set the price (made under licence perhaps, but it is still their brand named drug – not CSL’s)

CSL may have undertaken considerable scientific research that allowed Gardasil to be manufactured. They may hold the licencing rights to the chemical compound Merck use. But the Truth is CSL would rather make 7% of the world wide sales of Gardasil at absolutely NO further outlay or production costs to themselves rather than make their own competing brand name product for all Australians to perhaps enjoy at a lower price (assuming CSL is capable of producing a small number of supplies to fill the Australian market) than Merck would try and undercut them for.

That’s the way of the world Steve – Aussie companies would rather sell out Australians (if it is in fact the case that they could manufacture a competitor to Gardasil themselves for less than the price Merck can??) in favour of an easy buck, than be humanitarians and make a cheap product to save lives here.

Maybe you should have a go at Coles and Woolies instead since they rip us off to the tune of billions of dollars a year on the price of fresh local and OS Produce merely because we Aussies are too stupid to pay a just a reasonable profit on those items and are prepared to pay the ludicrous rates of hundred’s and thousands of percent profit so that we all can buy ‘pretty looking’ fruit and veg and not have to eat anything with a blemish like our grandparents were happy to do if they could find any in their local greengrocer/corner store after the War.

'Drain

Wrong, only CSL has approval for gardasil in Australia with the TGA. It was CSL who applied for its listing on the PBS and they have the "marketing rights" in Australia and New Zealand.

I agree that the prices charged by Coles and Woolies are a rip-off but they are not asking for a 100% Govt subsidy for these goods. (conflict of interest - I do have shares in Coles-Myer)

SteveM

You may have more information that i have been able to find - if so I would love a reference i can check your assumptions against.

My research shows Gardasil is a registered trade mark of Merck and Co. Merck have done and paid for the clinical Phase Trial testing and manufactured the drug.

While CSL are drug manufacturers i can find no evidence that they actually make Gardasil for Merck - the only indicated competitor to Gardasil is being made by GlaxoSmithKline under the brand Cervarix. (Unsure if CSL license them too?)

CSL might want a bigger slice of the pie than 7% in Australia and so have instigated the paperwork necessary to control Merck's sales here. That does not equate to them making the drug themselves and being willing to give away the 7% licensing commission they get on the price Merck fix worldwide for their drug.

Am i still wrong Steve?

You may be happy to know Costello's 'bud' Abbott has just told CSL to make 'their' Gardasil more 'cost effective' ('cheaper' in real human speak) than the current A$450 per three injections over 6 months (The real reason Abbott wants to delay the vaccine during a full school year - to ensure as accurate and complete vaccination program administration as possible).

By ripping us off to the tune of over 1000% for a potato or fruit juice, Coles and Woolies do not need to seek a 100% government grant neither do they invest millions of their own money to establish something entirely new that saves lives.
I'm sure your Coles shares have made you a tidy sum - far less than you pay them in profits on the fruit and veg you buy, probably, but hey.... It's only money - right?

CSL first owned the IP (intellectual property) of Gardasil, back in 1995 they sold the license to Merck who performed the expensive clinical trials etc. CSL in this agreement still owns 7% royalties. Therefore they a both making lots of money, but Merck will make a whole lot more than CSL obviously! But so they should! The approximate cost for a drug to go from development to market cost about $1 billion. And remember only a small fraction of these drugs make it to market. Dont you want drug companies to find more cures, they need this profit to do this. This is a huge discovery, the first ever drug that will prevent a particular cancer, of course they can put a price of $360 per pateint. Who would be stupid enough to not pay $360 for a vaccination against this virus which kills almost 300,000 people worldwide annually. I am all for the Government subsidising this vaccine. $35 mill is a small amount on money to the government over a 4 year period, and the ongoing cost is only estimated at $50 mill after this.