Medicines Matter

I used to teach a course in Pharmaceutical Economics. Over the past week I have been forced to re-live that experience as politicians and pundits have struggled to understand the realities of drug regulation. Pharmaceutical policy is not simple for good reason; it always has been complex, and in recent years this complexity has multiplied. Treatment has moved from synthetic pharmaceuticals to biologics; from a process of largely incremental advances for millions of people achieved by highly profitable global firms, to a flow of step-changes in treatment for thousands achieved by small, focused biotech companies reliant on determined investors. The regulatory system has never kept pace with the rate of change. Nevertheless, it is shocking to realise how low is the knowledge base amongst those who hope to be responsible for the policy.

I have written previously about the misconceptions behind Labour’s idea that it can simply seize patents and set up a state-owned generics company to bring down prices. That might have been a realistic option in 1999, but it is not a realistic option twenty years on. The biotech revolution has happened and these complex products are making the untreatable treatable. In doing this they are also driving up drug bills. Even so, it is important to remember that drugs still comprise a small part of health spending, typically 10-15%, whether in the UK, US or elsewhere.

The Labour Party tried very hard to popularise officials’ reports from the preliminary technical trade talks between the UK and US. They inevitably struggled. But they have, at least, prompted health commentators to brush up quickly on the details of patent protection and data exclusivity provisions. It is fascinating to see the usual health policy commentators struggling with this topic, outside their comfort zone of debates on health funding and NHS reorganisation. Once again, the whole Election debate has been about inputs and structures, and not outcomes. Their neglect of the most exciting area of advances in health, and the policy mechanisms behind it, has been laid bare.

It is true that the US has extraordinarily high list prices for drugs. The reason for this is not that other countries have lower prices; it is that the US lacks a properly functioning market, which is reflected in all system costs (not just drugs) and which varies hugely within the US. It lacks purchasers with the market power of other countries’ health systems, and weak competition means that many of the larger US purchasers fail to pass their price rebates on to patients, with a few notable exceptions. President Trump has tried and failed to tackle this particular problem. Nevertheless, the US market does support a pharmaceutical sector that dominates in the discovery and development of new treatments. There is much that we can learn from them, and them from us.

For example, it was the socialist French health minister, Simone Weil, who in the 1990s pushed hard for the European Union to copy President Reagan’s 1983 Orphan Drug Act , which has used a range of incentives, including 7 years of market exclusivity rights, to promote research into previously untreated “orphan” diseases. The EU duly produced its own regulations in 1999, offering 10 years of market exclusivity.

We also learnt much from the US in how to remove barriers to a thriving generics sector, ensuring that real competition is faced as soon as patent protection expires. The UK has led the way in this, particularly by pushing generic prescribing (instead of brand names) since the mid-80s. More recently it has led the way in reducing the barriers to the uptake of “biosimilars” 1 once biologic products are open to competition. On this the US has much to learn from Europe and the UK, in how to regulate and support a market for biosimilars, in which it has been slow to reap the benefits.

Whilst it is an easy option for US presidents to say that other countries need to pay more of a fair share of drug development costs, no country is willing to harm its own health system in order to trade with the US. Furthermore, the UK’s record on pharmaceutical investment is a particularly strong one. It is a very small pharmaceutical market, but it’s the fourth biggest pharmaceutical exporter in the world.  If we look at recent trade deals, since the US-Canada-Mexico deal President Trump has been attempting to legislate to legalise the import of lower-priced drugs from the Canadian health system into the US. This is the opposite of the pundits expectations for a UK-US trade deal. Similarly Trump is also aiming to reduce US prices by benchmarking them to ours through an International Pricing Index.

There is much in pharmaceuticals that we should continue to negotiate on with the US. We are currently in the midst of implementing new transatlantic arrangements on drug manufacturer inspections, for example. Rather than each country’s regulator needing to inspect manufacturers the other side of the Atlantic, there is huge sense in our regulators trusting and recognising local inspections. This mutual recognition of Good Manufacturing Practice frees up the regulators to inspect sites elsewhere in the world where the risk is highest. Similarly, the EU and UK have a major interest in improving the sharing of data from clinical trials and patient registries, reducing the costs of drug development and accelerating advances for patient care.

Finally, it makes great sense to start a conversation about appropriate terms of market exclusivity for biotech products. At present they are treated as if they are all the same, with common provisions for protection. They are not. Development time and development costs vary widely, and a more nuanced system of incentives may be required, based on the experience that now exists. For some it may, indeed, be appropriate to lengthen the protection period, in order to secure the biggest breakthroughs for currently untreatable serious diseases. For others, experience could suggest that the system could be a little less generous, allowing biosimilar competitors to be licensed earlier.

There is no doubt that these new treatments are awaited with bated breath by patients. Aside from the introduction of vaccines, it is hard to think of a period in modern healthcare when health systems had such an opportunity to deliver a step-change in health outcomes. The complexity of doing so requires countries to collaborate for mutual benefit. That is after all the reciprocal purpose of trade.  These issues were covered in the TTIP2 talks between the EU and US, and the CETA3 deal between Canada and the EU. We need to keep working with our European and American partners, for the benefit of our populations and the sustainability of the NHS, as a comprehensive service free at the point of use. It must be on the table. None of this means that the NHS is “for sale”. It is good to talk.

1 In biotech a true generic is impossible: A biologic medicine is a living organism. The process and composition affect the final product, meaning that variations between batches, are inevitable.
2 TTIP. Transatlantic Trade & Investment Partnership, bilateral negotiations for a trade deal between the EU and US. This was ended by President Trump
3 Comprehensive Economic & Trade Agreement

Dr Tony Hockley

Dr Tony Hockley is a Visiting Senior Fellow at the Department of Social Policy at the London School of Economics & Political Science. He is Director of Policy Analysis Centre Ltd and the co-author of Politeia’s Working Systems: Towards Safer NHS Nursing (2014) and A Premium on Patients: Funding the Future NHS (2010).

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