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Drug companies are incentivised to profit not to improve health, says report

BMJ 2018; 363 doi: https://doi.org/10.1136/bmj.k4351 (Published 16 October 2018) Cite this as: BMJ 2018;363:k4351
  1. Melanie Newman
  1. London, UK

Government funding for health innovation is subsidising drug industry profits while providing little public health benefit, a report from leading health economists says.1

Most new drugs are not meeting public needs while economic and regulatory incentives have created a “highly inefficient pharmaceutical sector” which spends more on marketing than research and development, and focuses the research it does do on profits, the report explains.

This leads to prohibitively high prices, but also to the sidelining of treatments aimed at prevention or cure in favour of drugs with long term, high volume sales potential.

In wealthy countries, there is also too much focus on “me too” drugs, which offer little or no improvement on existing ones but are sufficiently different to obtain patent protection, the report says.

“Ultimately, this is a business model driven by profits rather than public health objectives,” the authors, from the UCL Institute for Innovation and Public Purpose, who wrote the report in partnership with campaigning organisations, said.

“That new drugs are not meeting public needs is problematic, given that many of them were researched and developed with public money,” the report adds. Public money is also spent buying the drugs, meaning the taxpayer pays twice over. In 2016, the NHS in England spent £1bn (€1.1bn; $1.3bn) buying drugs that had had public investment.2

The report highlighted the prostate cancer drug abiraterone, which was developed by the Institute for Cancer Research (ICR). The ICR gets 38% of its funding from charities and the UK Medical Research Council, and 14% from other government funding. The NHS spent £172m on abiraterone from 2014 to 2016. By the end of 2016, global sales of abiraterone by manufacturer Janssen had reached £7.5bn.

“This is in stark contrast to the ICR, which earned just £137m in revenues by the end of 2017,” the report says.

The report suggests a number of ways health innovation funding could be reformed to ensure the public gets more benefit from the research it pays for. As a first step it proposes “delinking” the cost of research and development from the price of any resulting product. Research would be paid for by governments through a combination of grants, subsidies, and rewards for successful achievement of milestones set according to public health priorities.

“The potential savings from this delinked system—in which new drugs enter the market at non-monopoly, generic prices—are vast,” the report says.

Other suggested reforms include attaching conditions to public funding. These could include reinvestment of a proportion of profits from innovative products in future research projects or public retention of a share of the intellectual property rights. Manufacturers could also be asked to guarantee supply of treatments on “reasonable terms.”

In the foreword to the report, lead author Mariana Mazzucato said “We should act with the same urgency toward improving health as we do when it comes to defence.”

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