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What is the true price of good health?

Survival rates for cancer have doubled over the last 40 years and there are enough bright, “golden ages” of medical advances to blind even the most sceptical.

Molecular mechanisms that baffled and confounded for a generation are now being picked apart by genetic code-crackers with regular success while “breakthroughs” have almost acquired cliché status.

There is great promise from generics and biosimilars, copies of standard and biologic pharmaceuticals, which lower costs of treatment regimes across a spectrum of conditions. Every day we take a step closer to personalised medicine where therapies can be tailored to individuals.

But, despite these triumphs, there is a perception that pharmaceutical salvation is being charged at too high a price.

Drug pricing

The National Institute for Health and Care Excellence (NICE), the government agency that evaluates drugs for use in the National Health Service, has rejected treatments for breast and lung cancer, multiple myeloma, multiple sclerosis and pancreatic cancer over the last year alone on cost grounds.

NICE applies a strict formula that calibrates the number of good health quality years gained against price when judging if a drug should be made available on the NHS. Its litany of refusals sparks outrage from charities and patient populations, but it also lasers attention on to pharmaceutical company balance sheets.

They are an easy target and US President Donald Trump used the first press conference of his administration in January to promise that drug prices would be slashed to save millions of dollars. In a further blow to pharma, approved drugs can now be stalled for up to three years if the NHS deems them too expensive, costing more than £20 million in the first three years, potentially forcing companies to abandon the UK as a market.

There is a perception that pharmaceutical salvation is being charged at too high a price

The atmosphere is further darkened by the government’s consumer watchdog, the Competitions and Markets Authority (CMA), investigating huge price hikes in some drugs.

It issued a record £90-million fine against drug giants Pfizer and distributers Flynn Pharma for allegedly charging excessive prices to the NHS for the anti-epilepsy drug phenytoin, the price of which rocketed from £2.83 for a 100mg pack to £67.50 after it was debranded. GSK picked up a £44.9 million fine for allegedly manipulating the market to minimise the impact of generic copies on its £90-million-a-year blockbuster anti-depressant Seroxat. Both cases are being appealed.

Lowering price

The Department of Health is promoting a new Bill enhancing government powers to act on excessive price hikes on unbranded drugs. A spokesman says: “No pharmaceutical company should exploit the NHS. We are working closely with the CMA on unwarranted price rises of unbranded generic medicines and, where companies have breached competition law, we will seek damages and invest that money in the NHS.”

This legislation is trained, principally, on the generic and biosimilars market where rival companies create copies of branded medicines and start selling them when the original patent expires, usually after 20 years.

The practice relies on competing firms and hard-bargaining high street pharmacies to keep prices down. The British Generic Manufacturers Association (BGMA), which represents 90 per cent of companies that produce one billion prescription items annually, believes the competition has seen some named drug costs drop by up to 95 per cent and a notional £13 billion saving for the NHS on branded drugs.

“There is a benefit in saving money in itself, but this competition also increases access to medicines,” says Warwick Smith, BGMA director. “There was a study when the statin Simvastatin came off patent which showed that the price dropped by 95 per cent with the introduction of generics while the use of all statins increased. The result was more people were being treated for a lower overall cost.”

Generics and biosimilars suppliers have freedom of pricing on most drugs, but the government can step in to stabilise the market in some cases and these powers will strengthen with the new legislation.

We have an adversarial set-up which is actually driving up costs and not serving the public well

“The system works well with the pharmacists as effectively the government’s gatekeeper, but if the price goes down too much the manufacturer will not sell. It is a flexible supply-and-demand system that drives low prices,” says Mr Smith. “Data shows we are in the top three countries in Europe for low prices, with average charges in Europe around 3.5 times more than the UK.

“But we need a mechanism for drugs where there are no competing suppliers. We would never defend putting the price up for no good reason. We exist to drive access for patients, but we are commercial companies and we need a return and prices at a sustainable level that will allow us to keep putting these products into the market.”

It is easy to be seduced into thinking that the stratospheric returns for some blockbuster drugs – the top three generated $18 billion sales in 2016 – means pharma companies are drowning in profits, but for every successful drug there is a $1-billion bill and nine out of ten drugs fail to make it to market.

Healthcare expectations

“Society almost banks medical successes and treats them like they’ve always been there,” says Dr Virginia Acha, executive director of research, medical and innovation at the Association of British Pharmaceutical Industry (ABPI), which represents companies that supply more than 80 per cent of all medicines used by the NHS.

“My father had polio as a child; how many people now have childhood polio? My son is 20 and has no memory of anyone having mumps. Over time, these innovations become part of normal health and the bar continues to be raised. The bigger question for society is what do you expect from healthcare of the future?”

David Watson, the ABPI’s director of pricing and the Pharmaceutical Price Regulation Scheme, the voluntary arrangement aimed at ensuring fair prices and a safe and effective drug supply, says: “Industry struggles to communicate the value of medicines. There are some new medicines that are very expensive, but they end up being used in a small patient population with complex conditions, while you have widely used medicines that were expensive 20 years ago but are now much cheaper.

“The bigger picture is that we are at risk of demonising the price of medicines. The UK spends relatively little on healthcare compared to some countries and, within that, a bit less than some other countries on medicines. We are not massively generous. It was recently said that we spend more on gin in the UK than we spend on cancer drugs.”

Steve Arlington, director of the Pistoia Alliance, a global, not-for-profit organisation of life science companies, technology and service providers, publishers, and academic groups, believes drug-pricing strategy in the UK needs radical restructuring.

“The British public are being done a disservice as we are no longer able to have access to top-quality life-extending drugs because of the parameters applied by NICE,” he says.

The nation’s reputation as a medical powerhouse is being eroded and important clinical trials are being lost to other countries as patients in the UK are not on gold-standard treatments which are needed for trials for newer, even better drugs, he claims.

“We are losing ground and are no longer approving drugs in the NHS so when global pharma companies launch new drugs, the UK does not come into the dictionary,” Mr Arlington concludes, calling for greater collaboration between industry, government and regulators. “At the moment, we have an adversarial set-up which is actually driving up costs and not serving the public well.”