R&D-Based Drug Pricing Deemed Too Costly; In the UK, a Way Forward, Focus Reports
Release Date: 2010-11-24
In a hearing held on November 18th, Members of the European Parliament (MPs) examined arguments advocating a shift away from a system of drug innovation that directly associates the price of novel medicines with the costs of R&D. In recent pharmaceutical price cuts throughout the EU, regulators have accentuated their inability to afford the high prices innovators are demanding, especially in a time when innovation is not readily forthcoming. Given the economic downturn, governments in Europe are trying to discover a new way to finance the too-costly price of their publically funded healthcare systems.
Parliament members must be careful not to engage in overzealous pricing regulation, as research-based companies must remain incentivized to develop new pharmaceuticals. A recent study by Novartis systematically solidified the already intuitive link between profit incentives within a given pricing system, and the number of new drugs that come to market. However, some experts believe that the pharmaceutical industry needs to restructure their business models, freeing up resources and reducing the costs of drug introduction. When she addressed the Parliament, Sophia Bloemen, of the NGO Health Action International, asserted that companies exhaust too much capital on acquiring defensive patents, on litigation, and on marketing.
Nevin Bradford of Ranbaxy UK, a generics company, believes that the unappeasable drive for defensive patents, in particular, is not necessary. In a recent interview with Focus Reports, he explained that one could view the drug innovation scheme as a “conveyor belt.” In the beginning, innovators take on a lot of risk, because in the pharmaceutical industry, many molecules are examined at great expense, and few make it past supervisory scrutiny. Their novel drugs go into the conveyor, and they are rewarded for a long period of time, which is “right and fair.” The drugs travel along the belt in this fashion. Then, they fall off the belt, as the patent expires and generic companies are allowed to produce their cheaper versions.
Typically, companies try to prevent this kind of competition at all costs, by, say, making incremental improvements to the drug, in hopes of being awarded a new patent and extending the life of their brand along the conveyor belt. But Bradford thinks that the costs saved by national healthcare agencies, when they are finally able to buy generic versions of expensive medications for their patients, can be pumped back into innovation. After all, current thinking barely encourages innovation, but rather promotes defensive scrambles to preserve profits from existing intellectual properties.
Bradford thinks embracing generics competition will spur research-based companies to engage in true R&D rather than cosmetic innovation, while freeing resources for governments to pay for it.
The UK government has signaled that it is in line with Bradford’s argument. Warwick Smith, head of the British Generic Makers Association, has stated multiple times that generics involvement will be purposefully broadened within English National Health Service (NHS) legislation. Meanwhile, medicines pricing will shortly shift to a value-based system, wherein the price of drugs will be determined by the value they bring to the market—e.g., how much they reduce disease incidence, to what extent they improve upon previous molecules, and etc.—rather than how much their R&D cost.
These UK legislative goals can serve as a model to the EU at large. In a mired innovation structure, with extremely high incurrent costs to government payers and little innovation, enhancing low-cost generics presence and rewarding specific drug value are intelligent steps forward.
| Type: | NORMAL |
| Company: | Focus Reports |
| Country: | Switzerland |