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Why do We Need Differential Pricing?/Industry Perspective

Mark McClellan PhD '93

Judy C. Lewent SM '72: August 12, 2004; Running Time: 56:05

About the Lecture

About the Lecture

Why do We Need Differential Pricing?/Industry Perspective

The very first tablet or drop of a new medicine comes at a dear price-- $800 million – according to recent studies of R&D in pharmaceutical industries. But manufacturing subsequent pills costs literally pennies. What’s a fair way to price life-improving, or life-saving medicine? The two speakers in this part of the forum vigorously defend charging different prices for medicines in different parts of the world. Judy Lewent argues that differential pricing ensures global access. She says, “There would be little sense selling drugs at prices people can’t afford.” It also generates the revenues necessary to generate new cures. “When we price for access, it’s a reflection of our belief in the power of free markets to advance the social good. We can meet the world’s health needs and also make a profit and continue to prevent, treat and cure disease.” Mark McClellan sees on the horizon a new order of drug treatments, such as tailoring molecules to the needs of an individual patient. But, he says, we won’t reap the benefits of these potential cures if current trends continue: nations that band together to lower drug costs for their citizens, and the reimportation of brand name innovator drug products. McClellan says if we don’t “provide financial rewards that reflect the value of innovation, we may not continue to get improvements that biotech makes possible.” Both speakers endorse more affordable medicines, but through insurance coverage rather than price controls.

Lecture Details

Location: Wong Auditorium

About the Speakers

Mark McClellan PhD '93

Leonard D. Schaeffer Chair in Health Policy Studies
Director, Engelberg Center for Health Care Reform, Brookings Institution

Mark McClellan served as administrator of the Centers for Medicare & Medicaid Services, and prior to that, as commissioner of the Food and Drug Administration beginning in November 2002. During 2001 and 2002, McClellan served in the White House as a member of the President's Council of Economic Advisers and was a senior policy director for health care and related economic issues. From 1998-99, he was deputy assistant secretary of the Treasury for economic policy, where he supervised economic analysis and policy development on a wide range of domestic policy issues.

McClellan also held a position as associate professor of economics at Stanford University. He was also a research associate of the National Bureau of Economic Research and a visiting scholar at the American Enterprise Institute. Additionally, he was a member of the National Cancer Policy Board of the National Academy of Sciences, associate editor of the Journal of Health Economics, and co-principal investigator of the Health and Retirement Study (HRS), a longitudinal study of the health and economic well-being of older Americans.

McClellan is a Member of the Institute of Medicine . He earned his M.D. from the Harvard-MIT Division of Health Sciences and Technology and his Ph.D. in Economics from MIT.

Judy C. Lewent SM '72

Former Executive Vice President and Chief Financial Officer, Merck & Co., Inc.

Judy Lewent served at Merck until September 2007. She was responsible for worldwide financial, corporate development, and corporate licensing matters, as well as for the Merck human health business in Asia North and Asia South, and for Merck's joint venture relationships with Johnson & Johnson and Aventis.

Lewent is a member of the board of directors of Dell Inc., and Thermo Fisher Scientific, Inc. She served on Motorola's board of directors from 1995 to 2010. Lewent is also a trustee of the Rockefeller Family Trust; a life member of the MIT Corporation; and a member of the American Academy of Arts & Sciences.

Lewent earned a B.S. in Economics from Goucher College in 1970 and an M.S. in Management from MIT Sloan School of Management.

About the Host

About the Host

MIT Sloan School of Management

The MIT Sloan School of Management, based in Cambridge, Massachusetts, is one of the world’s leading business schools — conducting cutting-edge research and providing management education to top students from more than 60 countries. The School is part of MIT’s rich intellectual tradition of education and research.

MIT Sloan began in 1914 as engineering administration curriculum in the MIT Department of Economics and Statistics. The scope and depth of this educational focus have grown steadily in response to advances in the theory and practice of management to today’s broad-based management school.

A program offering a master’s degree in management was established in 1925. The world’s first university-based executive education program — the MIT Sloan Fellows — was created in 1931 under the sponsorship of Alfred P. Sloan, Jr., an 1895 MIT graduate who was then chairman of General Motors. A MIT Sloan Foundation grant established the MIT School of Industrial Management in 1952 with a charge of educating the “ideal manager.”