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From The Socialist newspaper, 4 December 2019

End profiteering from health - nationalise big pharma

The issue of allowing US corporations access to the NHS and the affect this could have on the cost of drugs has featured prominently during the election campaign. Jeremy Corbyn recently announced that a new public pharmaceutical company would be created if Labour is elected. This follows the publication of a Labour Party report: 'Medicines for the the many: public health before private profit'. The report contains an excellent analysis of how the profit motive and private market system in pharmaceuticals fails to meet the needs of society. Adam Goulcher from Gloucestershire Socialist Party looks at the report.
A scientist carrying out tests, photo US Army RDECOM (Creative Commons)

A scientist carrying out tests, photo US Army RDECOM (Creative Commons)   (Click to enlarge)

The government spends billions funding research and development (R&D) but has to spend billions more purchasing the drugs that are developed from this research. High-priced medicines prevent patient access to lifesaving drugs around the world. For example, for three years, the parents of children with cystic fibrosis have been forced to watch their child's health deteriorate as the US drug company Vertex Pharmaceuticals has pushed for the NHS to pay the highest possible price for their drug Orkambi. In that time, hundreds of eligible patients have died.

The report analyses problems in R&D, patents, pricing and lobbying.

R&D and Innovation

Although there have been breakthroughs, R&D led by private pharmaceutical (pharma) companies, often results in products which offer little benefit. In France, Germany and the Netherlands, analyses of new medicine approvals revealed that over 50% of new medicines did not offer any additional health benefits. Meanwhile, urgent public health needs, like antibiotic resistance, and poverty diseases like tuberculosis, are ignored as they are not considered profitable enough.

Extensive public funding supports the basic science behind pharma innovation yet the public gets barely any return on that investment when the research is commercialised, and the benefits do not accrue to society.

For example, British scientist Greg Winter undertook groundbreaking work on 'monoclonal antibodies' at a lab in Cambridge, and went on to found a company that discovered a monoclonal antibody now known as Humira. Acquired by pharma giant Abbvie, Humira is now the biggest-selling prescription drug in the world, with global sales of nearly $20 billion in 2018 alone.

Abbvie went on to file a vast array of patents on Humira. This led to the company being free to charge extremely high monopoly prices. The lab receives royalties but they are a tiny fraction of the revenues earned by Abbvie.

The biggest players are increasingly specialising away from 'breakthrough innovations' to maximise profits in the short term - a feature of capitalism generally today. This means disinvesting from riskier research, accessing products that are already in later clinical trial stages through acquisitions, and focusing more on development, marketing and patenting.

Globally, the sector's spending on marketing outstrips R&D. Rates of share buybacks are also extremely high - with some spending more of their revenue on their own stocks, boosting share prices and executive pay, than they do on innovation.

Patents

The biopharma sector interacts with academic institutions and publicly funded research labs and institutes. The system is highly fragmented with each working in isolation, with insufficient collaboration. 50% of clinical trials don't publish results, presenting risks to health, and research duplication and wastage.

Patents prohibit the manufacture, use or sale of an invention without the patent-holder's permission, for a minimum 20-year period. They provide the owner with market exclusivity so they can charge a premium on new drugs rather than reducing the price to the cost of production or that of competitors.

This market exclusivity is the largest public subsidy to the industry. It means companies are often paid many times above the costs of production and should be incentivised to undertake further innovation. In reality, patents provide excessive financial rewards. Companies frequently try to extend patents beyond the minimum 20 years, a practice known as 'evergreening'.

While critical health needs remain unmet, the patent system rewards the pharma industry for developing medicines that have little or no added therapeutic value. These 'me-too' medicines replicate existing drugs, but are sufficiently different to obtain patent protection, allowing for monopoly control and increased profits.

Prices

The government directly funds a network of institutions which support the innovation of researchers, spending 2.4bn in 2015. This sits alongside research funding from charities of 1.3bn. To 'incentivise' private-sector innovation the government purchases medicines at premium prices rather than the cost of production. The bulk of NHS spending on medicines goes on patented medicines. NHS England spent 18 billion on medicines in 2018.

The National Institute for Health and Care Excellence (NICE) independently assesses new medicines and advises whether they should be used in the NHS. NICE typically approves a medicine for use if it comes in under the threshold of 30,000 per quality adjusted life year (QALY) it delivers. This exercises some control on price because the monopolies know there is a cap. However, the pharma lobby constantly seeks to counter these controls and profits remain huge.

Lobbying

Big pharma is the biggest spender on lobbying in the US Congress, and a 2005 Health Select Committee report concluded that "the industry was, and is, permitted to have privileged strategic access to and involvement with government regulatory policy over and above any other interest group."

There is a revolving door between industry, the NHS and government. Andrew Witty, the boss of the biggest UK pharma company, took over implementation of the government's pharma policy, while his former GlaxoSmithKline colleague took over as the government's chief scientific advisor.

Industry figures have established themselves on key decision-making bodies in the health service, such as Erik Nordkamp, former UK boss at Pfizer, who sat on the board of Kings NHS Trust. Andrew Lansley, a former health secretary, moved jobs from the Department of Health to advising pharma companies. And pharma payments to NHS doctors, a potential source of corruption within our health system, are still shrouded in secrecy.

The report therefore shows that there is a great deal wrong with the profit, based pharma industry and makes proposals for change.

Labour's proposal

Corbyn announced Labour's plans to put "public health before private profit" by ensuring that companies make vital drugs available at prices the NHS can afford. Promising to take on the big pharma companies, he announced plans to secure generic versions of patented medicines at an affordable price, make public funding for research conditional on the resulting drugs being priced affordably for all, and create a new, publicly owned generic drugs manufacturer to supply cheaper medicines to our NHS.

Labour will use 'voluntary and compulsory licences' to secure affordable generic versions of patented medicines - these enable a government to issue a licence to another manufacturer to produce a patented drug at a lower price.

Labour will also increase the transparency of medicine prices, the true cost of R&D, and pharma company finances, so that the NHS can have informed discussions on drug pricing. It is also committed to resisting efforts to increase corporate control over medicine and drug intellectual property rights in future trade deals.

Longer term, Labour will create a publicly owned pharma company to manufacture generic drugs to sell to the NHS at affordable prices, with profits reinvested back into publicly funded R&D, used to offset the cost of more expensive drugs, or fund public health interventions.

They will also create publicly owned entities with the funding and capacity to undertake late-stage drug development with the aim of forcing the private sector to accept conditions if they want to license publicly funded technology.

A new system of innovation funding based on upfront grants or subsidies and funding awards, tied to social priorities such as antimicrobial resistance, will focus R&D on health priorities. And public interest conditions attached to public R&D funding will ensure patient access and affordability.

Is this a solution?

Socialists support the opening up of big pharma's books to scrutiny and ending the patents system that leads to excessive prices. A publicly owned drug company, and publicly funded R&D, as steps to reduce profits and focus on priorities, together with collaboration to share research and trial data, would also be welcomed. However, the key question is whether this will be enough.

There is likely to be very strong lobbying to water down the impact of these measures on the pharma companies' profits. Further, it is unlikely that genuine collaboration will result, as the proposals rely on incentives and rules which big pharma can avoid. For example they can undermine the scheme by:

Stepping up their own R&D (and withholding information), rather than relying on public R&D. This would get around any conditions the government may want to attach to funding.

Poaching the best researchers and scientists, paying more than the public sector can afford and setting up their own institutes.

EU regulations permit non-patent protection which further strengthens their market position; data exclusivity, preventing generic manufacturers utilising existing clinical trial evidence to secure approvals, marketing exclusivity (granted to prevent other manufacturers from selling an entirely different drug for the same condition), and Supplementary Protection Certificates (which extend monopolies beyond 20 years).

On the other hand, the record of public sector firms is one of uncertain funding, bureaucratic management, a lack of investment, and subject to continual worsening cuts due to the endemic crisis in British capitalism.

A public sector company would be up against well-resourced global pharma multinationals. It seems very unlikely that the public company would have the resources and scale needed to compete with the big corporations, which can shift production around the globe to minimise costs and maximise profits.

Labour's solution basically leaves the 'free' market intact but attempts to create incentives and some new regulations. This is the approach that has been used in the utilities (power, water, rail, etc.) since they were privatised, with a system of rules, incentives and regulations overseen by powerless government 'regulators'.

The private sector will find ways to work around the restrictions, including legal action, etc. There is a whole industry of advisers, which since the privatisation of the now 'regulated' industries have developed ways to beat the systems and enrich shareholders, executives and their hangers-on in consulting, tax, audit etc.

So the proposal raises the question of how to create a sustainable alternative. How can a Labour government provide the resources needed? The Socialist Party argues that all the big pharma operations in the UK, along with the banks and other funders should be publicly owned and democratically run through workers control.

A sector could be created that was truly integrated, starting with the priorities of society, the science, the R&D, trials and production, all as part of a fully public and properly funded NHS, within a democratically planned socialist economy. Why spend billions attempting to influence and regulate the market, when it can be abolished and replaced with a system of rational planning and production based on need?

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