[Ip-health] UK Health chief attacks drug giants over huge profits

[Michelle Childs]

http://www.guardian.co.uk/uk/2008/aug/17/pharmaceuticals.nhs
Health chief attacks drug giants over huge profits
=B7 Watchdog slams high medicine prices
=B7 Share value driving industry priorities

     * Gaby Hinsliff, political editor
     * The Observer,
     * Sunday August 17 2008


The drugs industry is overpricing vital new medicines to boost its
profits, the chair of the health watchdog Nice warns today in an
explosive intervention into the debate over NHS rationing.

Professor Sir Michael Rawlins spoke out after critics last week
accused the National Institute for Health and Clinical Excellence
(Nice) of 'barbarism' for refusing to approve expensive new kidney
drugs for NHS use, on the grounds that they were not cost-effective.

In an outspoken interview with The Observer, he warned of 'perverse
incentives' to hike the prices of new drugs - including linking the
pay of pharmaceutical company executives to their firm's share price,
which in turn relied on keeping profits healthy. Traditionally some
companies charged what they thought they could get away with, he said.
'We are told we are being mean all the time, but what nobody mentions
is why the drugs are so expensive.'

Kidney cancer drugs could be produced for about a tenth of their
current cost, Rawlins said. While developing such medicines from
scratch added to these costs, as did some 'unnecessary' bureaucracy
around clinical trials which should be scrapped, he said that was not
the whole story. 'Part of the problem is that the pharmaceutical
industry is looking at a very bad period in the future because a lot
of their big earners are going off patent [allowing rivals to make
cheaper versions], and many companies are looking at a 30 or 40 per
cent reduction in the next five years unless they come up with new
drugs,' he said. 'And so part of the cost is cushioning against that.
The other thing, of course, is that the share price is very important
to a pharmaceutical company.'

Share prices were driven by profits, he said. 'Pharmaceutical
companies have enjoyed double-digit growth year on year and they are
out to sustain that, not least because their senior management's
earnings are related to the share price. It's not in their interests
to take less profit, personally as well as from the point of view of
the business. All these perverse incentives drive the price up.

'The other thing we have to pay for is the costs of marketing.
Marketing costs generally are about twice the spend on research and
development.' Advertising to patients was forbidden in Britain, but
widespread in the US, and some of that marketing cost was built into
European drug prices, Rawlins said.

He said halting such perverse incentives could bring a 'significant'
reduction in prices. 'Traditionally the pharmaceutical industry will
admit that they actually charged what they think the market will bear.
The wiser ones are recognising that that model is no longer available.'

His claims will infuriate the industry, which argues that prices have
fallen 21 per cent in real terms in 10 years. A spokesman for the
Association of the British Pharmaceutical Industry said companies were
committed to reducing prices, adding that one company had offered to
make kidney drugs rejected by Nice available initially for free.

'Of course, pharmaceutical companies make a huge investment into
public health when they develop a new medicine: it costs on average
=A3550m, and takes more than 10 years, to bring each new treatment to
patients,' she said. 'Naturally companies will look to recoup such
costs through the final price.'

However, the Office of Fair Trading found in a report last year that
drug prices did not reflect benefits to patients, arguing that they
should be directly linked to therapeutic value - with a pill
delivering significantly better health to many people becoming more
expensive than a drug giving only marginal benefits to a limited
number of patients.

Nice is discussing these proposals with the Department of Health, but
Rawlins said some companies were already exploring possible deals,
including making new drugs that will have limited applications
available cheaply in return for being allowed to raise the price if
wider uses for them emerge later.

The kidney drugs assessed by Nice were rejected because they gave
patients only a few months more to live at high cost, infuriating
sufferers who said extra time with their families was priceless. But
Rawlins said other patients would have lost out. 'We have a finite
amount of money for healthcare, and if you spend money one way you
can't spend it in another,' he said. Next year, however, Nice will
review whether the criteria it uses to judge cost-effectiveness -
linked to calculations about how many extra years a patient could
expect, at what quality of life, for what price - are right.

In his wide-ranging interview, Rawlins admitted he was 'disappointed'
for personal reasons that Nice's advice to offer all infertile couples
three free cycles of IVF had not been implemented. 'I have a little
grandson who was the result of IVF. The sadness of people who want to
have children and can't is very real and so I wish it was more widely
available.'

Rawlins, who is also the outgoing chair of the Advisory Council on
Misuse of Drugs, also backed up suggestions last week by a senior
government drugs adviser that drug crackdowns were misdirected.
'Parliamentarians think there's a legislative way out of it and there
isn't,' he said, adding that it was 'absurd' to suggest teenagers
could be locked up for possessing a few cannabis joints. 'There are
criminal justice elements to the solution, but it's primarily a public
health problem,' he added.





Michelle Childs
Head of European Affairs
  Knowledge Ecology International
www.keionline.org / www.cptech.org
Phone:+44(0)207 226 6663 ex 252
Email: michelle.childs@cptech.org