DRUGS: Tranquilizer Tension

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Over the past nerve-rattling decade, millions of patients round the world have shooed the blues or relieved tension by swallowing Librium and Valium, the tranquilizers that are among the biggest-selling prescription drugs ever marketed. Every little capsule adds to the billions of dollars in sales and untold millions in profits reaped by their discoverer: Switzerland's secretive F. Hoffmann-La Roche & Co., which may well be the world's largest seller of drugs (estimated volume: $1.6 billion per year). That phenomenal success has now embroiled Roche in a worldwide dispute that has driven its British prices for the two drugs down 60% and 75% respectively, and made it the target of government investigations in eight other countries from Australia to Sweden. The battle has raised fundamental issues about how drugs should be priced.

Like other pharmaceutical manufacturers, Roche executives contend that the price of widely used drugs must be set high in order to subsidize the heavy development costs of new drugs—some of which can never be profitable because they are sold only in small quantities to treat rare diseases. Says Roche Chairman Adolf W. Jann: "There are just a handful of drugs priced at the level we need to recover the extremely high research costs of all drugs."

Remedy Prescribed. Roche's arguments do not impress British health officials, who have been pressuring the drug industry to lower prices since the mid-1960s, when the cost of running the socialized National Health Service began getting out of hand. Among other things, the Department of Health and Social Security has urged doctors to prescribe drugs by their generic rather than their brand names, and the government has granted rival drug companies the right to copy patented drugs such as Librium and Valium if they pay a royalty to the developing firm. The remedies have had some effect: after Berk Pharmaceuticals Ltd. came out with a copy of Valium called Atensine in 1971, Roche's British subsidiary cut its prices by 36%. Though the wholesale cost of a kilogram of Valium was lowered from about $5,000 to roughly $3,000, the government was not satisfied; late in the year it took a complaint to the U.K.'s Monopolies Commission.

Last spring the commission recommended that Roche be forced to cut prices even further, partly because the Company was still charging many times more for the drugs than they cost to manufacture. (In Italy, for example, one kilo of diazepam, the generic name for Valium, costs only $28.) More perplexing to Roche executives, the commission concluded that the firm was spending too much money for research (about 15% of revenues, v. 7% to 12% for other firms). Hoffmann-La Roche executives were so incensed by the British order that they called the first press conference in the company's 77-year history to protest. Said Chairman Jann: "They accused us of doing too much research! Until now, all scientists have expressed the opinion that so many problems are unsolved that every possible effort should be made to solve them."

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