GSK’s Andrew Witty underlined his growing concerns with the business climate in Europe with his comments to the UK’s High Pay Commission last week. The Commission, set up by left-wing pressure group Compass, reported on the ‘corrosive’ effects of ‘boardroom excess’ and called for greater transparency in the setting of executive pay. The pay of the head of Barclay’s bank, the report revealed, rose by nearly 5,000% in 30 years, from £87,323 ($136,224) a year in 1979 to £4,365,636 ($6,810,392) a year in 2010. The figures stirred anger and dismay among left-leaning politicians but, rather more surprisingly, several newspaper reports led with Witty’s comments that trust in business “has clearly eroded and needs to be reconstructed.” He went on: “It’s very dangerous if a country doesn’t trust the private sector.”
This announcement came just a couple of weeks after Witty — in his capacity as President of EFPIA — outlined the industry’s “significant concern” to EC Health Commissioner John Dalli over the debt crisis in Europe, particularly in Greece, Italy, Ireland, Portugal and Spain, where, he pointed out, pharma has been obliged to take price cuts and discounts of more than €7 billion ($9.3 billion) during 2010 and 2011. “The pressures on innovation are now immense,” Witty wrote. “I believe it is time to review current pricing and reimbursement practices…” Last month The Telegraph reported that the European price-cut toll has seen GSK’s revenue fall by 4% in the region during the third quarter. Witty predicted that the ongoing crisis (along with the effects of US healthcare reform) will cost GSK about £325m ($507 million) this year.
GSK’s lifeline, of course, is now coming from the emerging markets — outside America and Europe, the company’s Q3 sales grew by 17% — which now represents 38% of its total turnover. But with pharma particularly vulnerable to issues of trust and pricing, Witty’s stance suggests that standing firm and stoically weathering the blows is no longer going to be enough to ride out Europe’s economic storm.