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Choosing drugs on price alone will stifle innovation, says report

BMJ 2016; 355 doi: https://doi.org/10.1136/bmj.i6065 (Published 10 November 2016) Cite this as: BMJ 2016;355:i6065
  1. Nigel Hawkes
  1. London

The NHS in England should not focus exclusively on price when buying medicines, says a new report published by the London School of Economics (LSE).1

Doing so risks endangering constructive partnerships between clinicians, NHS managers, and drug companies and conflicts with the government’s aim of balancing affordability with encouraging innovation, the report warned.

While the Pharmaceutical Price Regulation Scheme and HM Treasury both seek to strike this balance, the report warned that growing pressure on NHS budgets will encourage cost saving to the detriment of cooperation and innovation.

Tender Loving Care? was written by Andrew Bonser, a consultant who has worked for Pfizer and Boots; Panos Kanavos, deputy director of LSE Health; and David Taylor, emeritus professor of pharmaceutical and public health policy at University College London. It was commissioned and funded by Shire, a specialty biopharmaceutical company.

“Real markets aren’t only about what’s cheapest,” Taylor told a meeting at LSE to launch the report on 9 November. “You don’t want to spend too much, but you want to spend enough to get a good product. If everything is bought at the lowest possible price, what are the long term costs to patients and to society?”

The report suggested that the 2014 EU Procurement Directive, which allows a range of criteria to be considered in determining the most economically advantageous tender, can be difficult to realise in practice. The directive allows innovative characteristics and after sales service (among other things) to be considered along with price, but legal constraints often interfere, and the forces favouring “lowest price at any cost” can be hard to overcome.

Procuring medicines for the NHS is a complex process and increasingly centralised. About half by value of the £15.5bn (€17.64bn; $19.21bn) spent by the NHS in England on medicines in 2014-15 was spent in hospitals, where most of the expensive branded drugs are prescribed. The other half was spent by GPs and mostly covered cheaper generic products. The hospitals’ share of spending has been steadily rising as a proportion, from 20% by value at the start of the 1990s to almost 50% today.

The report did not find NHS procurement systems to have been inefficient. Overall spending has been kept below the average in developed countries, expressed as a proportion of GDP. But more could be done, it said—reviving an idea last in vogue in the 1990s, of allowing drug companies to help in managing diseases as well as providing medicines to treat them.

The suggestion is that companies with a good record in supporting healthcare innovation should get the status of NHS innovation partners, where their contribution is considered in the drug purchasing process. Contributions might include helping to gather information about the response of individual patients or providing specialist nurses.

If companies can afford to do this, the report admitted, some would say it shows that they are charging too much for their products. Allan Karr, an expert in NHS drug procurement who was not involved in writing the report, told the meeting he believed that, if the work done by a drug company was worthwhile, it should be paid for by NHS commissioners and not provided free.

But the counter argument adopted in the report is that such activities benefit consumers, help innovation, and challenge bureaucratic service planners. It argues that the status of NHS innovation partner or improvement partner (both terms are used in the report) could be awarded in a light touch process by an independent regulatory agency.

“If we’re not careful we’ll create a system that doesn’t allow people to innovate,” Taylor said. “I don’t believe the commissioning system we’ve got at the moment is capable of avoiding that. Our suggested solution, that companies become recognised as innovation partners, would be more than rhetoric.

“We don’t claim it’s a complete answer, but we do believe that, without it or something like it, we could slip back into a lip service approach to innovation that in reality would lead to a profoundly bureaucratised country.”

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