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

[mkamalyanni@Oxfam.org.uk]

At last serious questioning to industry's attack on NICE.


'We are told we are being mean all the time, but what nobody mentions is
why the drugs are so expensive.'


Mohga


Best wishes
______________________________________
Mohga -dictating to the computer so please forgive silly mistakes
Dr. Mohga M Kamal-Yanni
Senior health & HIV policy advisor
Oxfam GB
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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.



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