Make up your mind, eh?

The Tories must learn from the Orkambi victory and keep drug-pricing off the table

OK:

The NHS has significant buying power, and regularly negotiates discounts,

Thought we just said that the NHS shouldn’t deal in drug pricing?

But the true stupidity is here:

Under pressure, the government admitted it had a “moral obligation” to explore providing access to cheaper versions of the drug, and Labour committed to doing so if it won power. Confronted with the real possibility that the government might break its monopoly, the public relations disaster of desperate families flying to Argentina to keep their children alive, and with an election looming, Vertex gave in and struck a deal.

The battle for Orkambi was won, but the problem is not going away. Whether it’s Trikafta, the successor drug to Orkambi, or any of the new wave of extremely expensive immunotherapy treatments for cancer, many more crucial yet overpriced drugs are coming on to the market. The country cannot be held to ransom every time the NHS needs to buy another medicine from another monopolist.

The monopoly is granted to get the spending on the development of the drug in the first place. If we don;t grant the monopolies then the development ain’t gonna take place…..

21 thoughts on “Make up your mind, eh?”

  1. True enough. The continual whining about neglected tropical diseases occurs because, if the companies developed a drug for them, the woke would scream that those needing it should be paid to take it. After the fiends who developed it were punished for their wicked experimentation on the poor helpless third worlders—–or punished for only testing it on genetically different whites of course.

  2. I’m always confused about extreme drug pricing, and it started for me when I read an internet account of some poor kid denied a drug that might just keep her alive, with the dose costing over £600k per annum. Apparently it wasn’t cleared for her cancer, but was for others. So far so good, and yes, the company had to reclaim their R&D before the thing came off patent, and then could be produced by others for about the same cost as paracetamol.

    OK, so production costs now can’t be much more, so 1 treatment £600k+50p, two treatments 2x£300k+£1, 100 treatments 100x£6k+£50 and so on. The monopoly supplier is fecking over the monopoly consumer. Why is it wrong for the monopoly consumer to do the same, but in reverse? The advantage the NHS has is that it can strike a ‘deal or no deal’, making it clear that without a deal that company would sell no prescription drugs in the UK, ever.

    Or better still: “Here’s our share of the development costs, now we want unlimited supplies at the production cost + a sensible profit”.

    Drugs for people who are inevitably going to die soon but may get some relief is a good business,because even if you have to worry about short term side effects, you don'[t need to worry about long term ones.

  3. @Excavator Man:
    A few points:
    1. Costs of development are typically >$100M, often even more. That poor kid probably had a very rare disease which barely anyone has (some genetic diseases may only be prevalent in $100M from 50 people. The COGS are irrelevant.
    2. Companies can and do decide to avoid launching in large wealthy countries if the price is not high enough. It is becoming very common for companies to choose not to launch in Germany, for example. as their pricing rules are very stringent, unyielding and frequently nonsensical. Given many other countries reference their price to Germany’s (and the UK’s) it is better to just not launch in Germany than to launch and tank your price globally. The NHS is a monopoly consumer in the UK but the UK is not a monopoly consumer globally.

  4. Damn typo:

    That poor kid probably had a very rare disease which barely anyone has (some genetic diseases may only be prevalent in <50 people). You do the maths on making back $100M from 50 people. The COGS are irrelevant.

  5. “protected by patents, giving Vertex a monopoly for years to come.” They carefully avoid stating how many years. Crooks!

    I suppose the crooks are proposing that the UK government rip off the shareholders of Vertex, hoping that the Americans will somehow pick up the bill.

    I expect MR is right: Vertex and other firms will perhaps choose not to supply the NHS at all. More generally, capital might flow out of drug development altogether. Because decisions have consequences.

  6. Also, what’s a sensible profit margin on that one drug when maybe only 1 in 10 (I don’t know the actual numbers) of every drug that you attempt in fact succeeds and gets to market. That profit margin has to take into account at least the costs for the other failed 9. And that’s being simplistic.

  7. Government regulations make the cost of development extreme.

    Government manipulation of the market results in a select few actually paying. Instead of spreading the cost over a hundred thousand patients, the thousand who have money and insurance pay for it.

  8. Here’s a quotation from Derek Lowe.

    ‘Roughly nine out of ten drug candidates that enter clinical trials in man are never launched. Even for the few drugs that are ultimately approved, the winnings are skewed. The most successful 10% of approved drugs, only 1% of those that entered clinical trials, maybe 3 new drugs each year, generate half of the profits of the entire drug industry.’

    Note that PF’s successful guess at one-in-ten applies only to the drugs that have not failed at earlier stages e.g. in tests on animals.

  9. Dearieme

    Thanks for the link. So in fact I was whole orders of magnitude out!

    (Say) 300 per year might enter clinical trials (with far more failing earlier), of which 30 are approved / launched, and of which just 3 might generate 50% of the industry’s profit.

    That’s a bit like catastrophic insurance. With that kind of profile / shape, only very large organisations safely get to play (and deal with the risks).

  10. The result of the precautionary principle, and governments’ unlimited power, is that the focus is to prevent harm to the public, rather than to cure the sick.

  11. It seems to me that most of the drugs currently being trialled emanate from China. Nothing to worry about there…

  12. PF – can be 1 drug in 10,000.
    That drug has to pay for the development costs of all 10,000 that don’t make it too as well as the cost of the 1 itself.
    Initial testing costs money. Some show promise in initial testing. So go to animal testing. Some show promise so go to human testing. And fail.
    Each stage costs money, further stages cost a LOT of money due to government regulations brought in to protect people and animals. And all the failed drugs have to be paid for – by the ones that succeed.
    A Pharma site is expensive, has high salary costs, high running costs, lots of expensive equipment. And can be years before anything done on that site makes any money at all. Who should pay for it?
    Sure, you can have much cheaper drugs. Just have governments pick up the cost of development out of taxation. Hey, you don’t mind 50% VAT rate.

  13. Bloke in Germany in New Jersey

    “Apparently it wasn’t cleared for her cancer, but was for others. ”

    So if there is no evidence of efficacy in her cancer, why did she think it would work in her cancer?

    There aren’t many drugs that cost 600K pounds per annum – really only ecilizumab, off the top of my head, and that’s not for cancer. There are some really new cancer things that cost that order of magnitude, but as a one-off treatment. Annual costs like that are only acceptable to insurers for super rare diseases (see: ecilizumab).

    “Government regulations make the cost of development extreme”

    Yes and no. We have good science in drug development nowadays because of the regulation surrounding drug development. I suspect that would remain even if you dismantled the entire regulatory edifice, because practitioners expect an evidence base for a drug and health insurers most definitely do. Costs are mostly determined by the effort spent on trials of drugs that never make it to market. Pricing of those that do is determined by what the insurers are prepared to pay.

    “The result of the precautionary principle, and governments’ unlimited power, is that the focus is to prevent harm to the public, rather than to cure the sick.”

    This is ignorant bollocks. The precautionary principle does not operate at all in drug licensing. Your license to sell a drug is based on weighing up the benefits of the drug against the risks. In fact, post Joe Biden’s “cancer moonshot” speech (no pressure, FDA, no pressure), I’ve noticed a dramatic reduction in the quality and quantity of efficacy evidence pharma companies are expecting regulators (not just the FDA) to accept as adequate for licensing.

  14. “Your license to sell a drug is based on weighing up the benefits of the drug against the risks.”

    License? A government requirement.

    And government is competent at weighing benefits against risks? From whence did they get the expertise, let alone the authority?

  15. bloke in Germany in New Jersey

    The authority in the USA, Japan, and Europe derives from the people, in China from the iron fist of the communist party, and so on. Ask a PPE major to explain the theory of legitimate power in democracies and other places, they will do a better job than I can.

    They get the expertise by hiring eggheads like me. I have merely chosen the way of the poacher over that of the gamekeeper, because I prefer the lifestyle, which comes with perks such as trips to the thrilling Jersey burbs.

  16. ‘The authority in the USA, Japan, and Europe derives from the people’

    In the U.S., it derives from fascist action by the federal government.

    See 18th and 21st Amendments.

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