Andrew Lansley has recently said:
“I am determined that not only will we have a reimbursement price for medicines which reflects their benefit to patients, but also one which incentivises for innovation, and supports those new medicines which respond to unmet healthcare need and those which provide wider benefits to society.”
The emphasis on encouraging innovation within the drug pricing system is an important step in the right direction.
Drug innovation has been one of the most important drivers of improved health and increased life expectancy over the past hundred years. By far the most significant source of new drugs has been the pharmaceutical industry. Nearly everyone would like to see major medical breakthroughs continue in the future. Governments around the world recognise the importance of encouraging pharmaceutical innovation through drug pricing and patent systems.
The questions must be asked:
- What makes a drug innovative and can it be measured?
- How can Government best take pricing action to make innovative breakthroughs more likely?
Dictionaries define “innovative” in terms of being of a new kind that was previously unknown. What we seek in a breakthrough new medicine is more complicated than this. An important new drug must by definition be innovative but it must also fulfil an unmet healthcare need.
A drug that is innovative but does not meet an unmet healthcare need is largely useless. An exciting academic discovery may lead to highly innovative new drugs that work in new ways but patients will not benefit if older drugs are just as good. On the other hand a scientifically unexciting innovation can sometimes transform the outlook for patients. There are many historical examples. One was the idea that asthmatics should inhale anti-inflammatory drugs rather than taking them by mouth. Another was the idea of administering specially designed surfactant into the lungs of premature babies in order to provide lubrication and prevent damage. Neither of these innovations shook the scientific world on its axis. However, they both improved medical outcomes enormously and are today recognised as having represented major medical advances.
My conclusion is that innovative new drugs are needed but that what matters is not how innovative they are. What matters is the extent to which they fulfil unmet healthcare needs.
Drug R & D is a very risky, very expensive long-term commitment. A drug often requires about ten years of work between discovery and launch at a cumulative cost of well over £ 100m. When the product is first given experimentally to human volunteers, the odds of its eventually reaching the market are typically about 1 in 10. Pharmaceutical and biotechnology companies never forget that large R & D budgets only make commercial sense if drugs fulfilling important, unmet healthcare needs emerge. The industry is fully aware of the financial rewards that success can bring and of the consequences of failure.
Companies with major new drugs about to be launched are not in the most need of encouragement to sustain R & D. Often companies that have recently been successful in R & D grow rapidly and try to expand their R & D to keep pace. They may in fact not have enough good ideas for research projects to justify the speed of their R & D expansion and so R & D productivity may fall enormously. Many such examples have arisen in the history of the pharmaceutical industry. A surprisingly large number of medium-sized pharmaceutical companies have been built up around just one or two major breakthroughs.
My view is that the pricing system should favour products from companies with proportionately high R & D expenditure rather than concentrate the reward for R & D into a small number of newly launched products. There is no contradiction between this approach and value-based pricing, because the best value for money is not achieved by a “winner takes all” approach.