David Ricks, welcome to 7:30.
Great to be with you again.
These weight loss and diabetes drugs have been phenomenally successful. Do you actually want Mounjaro to be listed on the Australian PBS, or are you concerned about how it might impact how much you can charge for the same drugs in America?
Well, we definitely want Mounjaro to be listed on the PBS scheme. I think we've attempted that at least three times so far, and it's unusual to not be listed because it's on the WHO essential medicine list. And I think your expert clinicians, well, expert clinicians everywhere, but including in Australia, are highly recommending it for people with diabetes. Of course, now the global pricing system has adapted over the last decade, and most recently with the US, you mentioned, but Australia is not an island when it comes to pricing. So when we consider the price point, it ripples across the world and can debase the medicine everywhere, which has an effect on our ability to reinvest in R&D. So we're not interested in access at any price point. We think a fair price point would be good. How about one similar to the UK or Canada or other countries that have moved forward with listing? That's what we're suggesting.
How far apart were you and the Australian government on price?
I wasn't in the discussion personally, but the team reported it wasn't close enough to bridge. We're struggling to think of a way to resubmit at this point.
So, is the disagreement about price or about how many Australians would be eligible for the drug?
Well, so this was part of the problem as I understand it, is that the PBS was insisting that they put a cap on the number who are eligible, and that anything over the cap we would be responsible for, even though we don't control the rollout and utilization. That's just an uncapped risk we can't accept. So that was a major, major issue. I think the problem overall, though, is not unique to Mounjaro. We talked about this last time. For us, we've launched 13 new medicines in the last eight years. Only two of them are listed on the PBS. And I think for the industry, only one out of four. So unfortunately, Mounjaro is not the exception; it's the rule that typically new medicines are not listed. I think that's a choice to be considered, because here's a really valuable, important therapy that's shown to help people control diabetes, reduce heart attacks, and other risks, and won't be available.
Are your people still talking to the Australian government, or have you closed the door?
We never close the door. I think we can always talk about new ideas. The basic problem from our standpoint is how Australia is valuing the medicine, and again, not just Mounjaro. The overall value of medicines in the total health system has fallen from about 6% of the budget 10 years ago to about 4% now. So medicines have been devalued in a way by 50%. And I think despite incredible medical advances like a product like Mounjaro, which could really aid so many Australians with their diabetes. So we're not shirking all the blame on the government; we can be flexible and think about adaptive schemes, and we're open to new schemes, but at the core of it is the value placed on the medicine.
You say that the issue about price is to do with the very high cost of developing drugs from scratch, but when we're talking about these blockbuster drugs, they're earning tens of billions of dollars for Eli Lilly, way more than your total R&D budget. So, aren't we actually here talking about generating even more revenue for Eli Lilly's bottom line?
Well, of course, there's profit as well, and taxes and capital spending and manufacturing costs, and all those things are in the P&L, but I raise R&D because of the time dislocation and the sense of how this industry works. So unlike a small biotech where we would go to investors and say give us some money, we'll bet on one thing, and in 10 years time if it works and we can sell some, we'll pay you back. For big companies, we self-fund R&D out of our own cash flow for future generations of medicine. So the success of a drug like Mounjaro is literally paying for hopefully dozens of medicines that will appear in a decade's time. Maybe for people who don't use Mounjaro, maybe for a different disease state, maybe for someone we've never met. But nonetheless, that's how breakthrough medicines get funded in the main, for the world. The other issue at stake here in Australia, and it relates to the question of referencing other markets, is what share of that cost should Australians bear so that in 10 years there's another new medicine for maybe brain cancer or Alzheimer's or diabetes like Mounjaro. And is the answer zero, or is it something above zero? And our point of contention is, for the most developed countries, surely we should allocate a portion of the drug budget to cover the R&D cost to develop future cures. I think countries like, well, the UK has just changed its policy, Canada's changing its policy, of course the US, to say okay, we'll fund, we want to participate in that. We want a good deal when the drugs come out, but in return we'll pay a little bit of a premium so you continue to invest, and we want the medicines early, not toward the end of the life cycle.
