Health economist Professor Alan Maynard examines the ills of Big Pharma, and offers his own prescriptions for improvement.

Big Pharma is struggling, and with a continuing history of naughtiness involving greed and corruption, its critics are out for blood.

As ever, capitalists like Big Pharma are the enemies of capitalism: their pursuit of profit is regularly accompanied by corruption and skulduggery e.g. GSK’s current problems in China.

Declining innovation mitigated by high prices?
The new characteristic of the drug industry is the lack of blockbuster innovation. In past decades, science identified new chemical entities that had large markets e.g. anti-hypertensive drugs, cholesterol-lowering drugs and products that healed stomach ulcers and remedied gastric reflux.

These products produced billions in revenue and enhanced the R&D capacity of the industry. However, they have now fallen off the patent cliff: their exclusive property rights have expired, and generic companies have cut prices. The price of Pfizer’s Viagra fell from circa £10 per tablet to less than £1 when the patent expired in June.

Now, as a result of the absence of blockbuster products, and augmented by knowledge of genetic responses, the industry is producing products for more narrowly defined conditions, covering small patient groups.

The consequence has been high launch prices for these new products as industry seeks to harvest a return on their investments. Thus for a cancer condition such as myeloma the first-line treatment tends to be an old drug, Thalidomide, where a 28-tablet month’s dose pack costs an excessive £300.

When this fails, the patient makes their way to the ‘filling station’ for an intravenous dose of Velcade. This may involve twice-weekly treatment for three weeks in each month with each dose costing over £762 (circa £27,432 for 6 months) plus staff costs.

After Velcade comes Lenalidomide, a derivative of Thalidomide which also comes with a warning of not to have sex with fertile women! A 21-tablet pack costs £3,750 i.e. circa £22,500 for six months’ treatment. The challenge for patients using this product is to survive this treatment for 26 months, after which the company provides continuing treatment free following an agreement with NICE! (Note 1)

New cancer treatments are numerous and with the death of Cameron’s Cancer Drugs Fund, accessing treatment for these and other conditions where innovation is producing very costly treatments remains problematic, especially given “austerity”.

Pricing new drugs
Will value-based pricing help? Currently, the Pharmaceutical Price Regulation Scheme (PPRS) which regulates company profits allows companies to set prices freely provide their overall rate of return on UK capital does not exceed generous PPRS limits of circa 17 to 20 per cent

In 2007, the Office of Fair Trading criticised the PPRS and advocated value-based pricing. Since then, Ministers have lauded the notion but been tardy in developing the policy. It now seems likely that NICE will be given powers to negotiate prices with this industry.

This would be a significant development - but likely to be controversial with companies. Currently, they complete their clinical trials and then fix a price that is likely to meet a NICE cost per QALY estimate of marginally less than £30,000. Recently, research at the Centre for Health Economics in York has produced an evidence-based cost per QALY cut-off of circa £18,000. Value-based pricing and a cut off of £18000 per QALY would seriously erode industry profits.

How to foster innovation
Does this matter? Industry claims that each product they bring to market is likely to cost a billion dollars. This is because many chemical entities fail to meet stringent safety controls, initially put in place after the Thalidomide disaster five decades ago when women users of this product gave birth to children with major physical defects.

Because of these regulations, industry demands high revenues from the few successful products to compensate them for the many products that fail to reach the market.

But the industry is proving rather lacking in the production of innovative products. They spend significant sums on ‘me-too’ products, which clone others’ modest innovations with sometimes little additional clinical benefit. Genuinely new product development has declined.

Is a radical solution necessary to remedy this problem and increase the flow of radical new drugs?

Much of the innovation that emerges is from small new companies and from universities. Often, the results of their entrepreneurship are swallowed up by takeovers by Big Pharma. As outside small innovators are consumed by the big, expensive but poorly-innovating companies, there is a clear risk that mergers and takeovers may diminish innovation!

Perhaps a solution is to separate the production of new knowledge and its marketing. Big Pharma are good at the latter, but failing at the former.

A combination of public and private funding of university science and small company researchers competing with universities may produce new products. These could then be licensed to Big Pharma to market, with payment from the marketing companies to the innovators so that they can continue their work. (See Finkelstein and Temin’s “Reasonable Rx” (2008) for more).

Conclusions
For decades, Big Pharma has been able to hide clinical trial data and “fine tune” applications for product licences in ways which have not always been in the best interests of patients and taxpayers (Maynard and Bloor, BMJ, 1997; Avorn’s “Powerful Medicines”, 2005; and Goldacre’s “Bad Pharma” 2012).

Indeed in some cases there is clear evidence of the grossly unacceptable face of capitalism, fostered by lackadaisical policymakers and sustained by NHS revenues.

However their products have also improved the length and quality of life of millions of patients - including me.

What to do?
There are some obvious ways in which Big Pharma could improve its image and performance e.g. opening clinical all trial data to researchers (unlike the way Roche has prevaricated about making some of their data available), and being more open about their use of patient groups to protect their bottom line and close off trial data to reviewers on the basis of “confidentiality”.

Clearly, the work of NICE remains central to the scrutiny of clinical effectiveness trial data, and the efficiency of this would be enhanced if they had access to all trial data for each product. Their role in determining cost-effectiveness and now pricing is also central to the welfare of patients and the efficient use of NHS resources.

Ministers must be scrutinised in thought word and deed to ensure they remain rational and efficient in dealing with NICE, and do not listen to the “siren songs” of MP colleagues and lobbyists working for industry!

Even though we might like to strangle this “golden goose” at times, the challenge is to control its squawking and firmly steer it onto a path of transparency and greater accountability to its funders, the great British taxpayers!

Note 1 - All prices from a recent edition of the British National Formulary