Medicines for all?

PB Managing Director Dan Jones writes…

Dan JonesMany people will have missed the Labour party’s announcements on healthcare during their conference, focussing more on external events such as Supreme Court judgements and a return to Westminster for MPs. Those watching the Labour conference will probably agree that this was not a party looking to maintain the status quo. A whole host of bold and ambitious policy announcements came out – from bringing private schools into the state sector and ‘redistributing their assets’ to creating a national car club with vehicles in every town.

Things started relatively slowly in healthcare with announcements on free prescriptions for people in England and no more hospitals reforms without consultation. So far, so standard. Then Corbyn dropped a bombshell with his plans for total reform of the pharmaceutical sector.

Labour’s plan has three main elements; firstly to develop a state manufacturer of generic medicines; secondly to place stronger caveats on funding grants – more control over area of research and a commitment from those receiving funding to low prices; and finally, where the NHS is not getting a fair price, to issue crown or compulsory use licenses to allow cheaper access to patent drugs.

On one level there is a strong chance that most people will be supportive of these policies, big pharma is nasty, why not take them on? The political intent behind this is clear and obvious, the practical application might be more complex.

Firstly, the development of an NHS drug manufacturer. The NAO’s recent report on NHS spending on generic medicines in June last year found the NHS spent £3.5bn on generics, £300m above budget. So why not manufacture yourself? Patents have expired, removing the additional costs added by manufacturers, and wholesalers could save millions. This, however, ignores the reality of the complexity of establishing and running a manufacturing process with the ability to supply £3.5bn worth of drugs every year. Millions of individual units of different drugs. It’s unlikely that any single existing pharma company has the global capacity right now, asking the NHS to build it will be a challenge.

This idea does, however, have a precedent – in 2010, the NHS Supply Chain embarked on the ‘Direct from Manufacturer’ programme. This saw them procuring consumable products (NHS drapes, gowns, bandages and swabs) direct from manufacturers in India and South East Asia. The premise was simple, many of the products they bought were manufactured there and sold to them through third parties anyway, why not go direct? Well, it didn’t take long to realise the programme was complicated, complex and failed to generate savings.  Turns out working with manufacturers, ensuring quality control, continuity of supply and establishing a supply chain of vital NHS products in incredibly complicated. Labour should look at what happened to this programme. For the record, it was dropped after a few years.

The second element of Labour’s plan, ensuring research and innovation is focussed on ‘need not profit’ and delivers a return on investment for the Government in the form of lower prices, is hard to argue with in principle. It is well understood that pharma companies won’t invest in products unless they are confident they will get a return – not unreasonable when you are investing billions of pounds in developing a single product. Labour’s plans to tie R&D funding to projects they see as most ‘socially valuable and challenging’, is, on the one hand, commendable. It does, however, risk ignoring other areas of need and will incentivise certain areas in favour of others, creating healthcare needs in those left behind. This policy needs to assess the potential unintended consequences. The second element of the policy, to ensure lower prices from Government investment, ignores the ways the Government, through the NIHR, already seek to gain a return on investment where they support research. They are not simply handing out blank cheques!

The final element is possibly the most interesting. The issuing of compulsory or government use licences, known in UK law as Crown use licences, when patent monopolies prevent access to a medicine. This has been prompted by Vertex’s refusal to reduce the price of Orkambi, and therefore stop UK patients getting access to a vital drug.

Whilst you can make a moral case for the issuing of crown licence in this case, it would set an alarming precedent. This would be the first time a major western Government had taken such a step and would have long term implications for the NHS relationship with industry. All future VPAS negotiations would come against this back drop. It would place huge question mark over the future willingness of companies to even launch products in the UK, if they face the prospect of patents being smashed and prices dramatically dropped as a result of price negotiations.

There is a lot more in the policy paper that could be questioned. Some of it is misinformed, some of it is taking individual cases and seeking to change a whole industry as a result. One thing is clear, if the Labour party chose to implement the policies set out in this document, it would have devastating consequences for the UK pharmaceutical sector. Whilst it might be easy for some to shrug and say ‘so what?’ The impact of this would be far reaching. Initially it would mean the loss of tens of thousands of jobs. Secondly there could be an impact on the products available to UK patients. The UK’s reputation as a global leader in life sciences would be gone forever. All because Vertex wouldn’t drop their prices. This feels like a high price for the UK to pay.