a bitter pill to swallow

Drugs for people,not just for profit

Jon Cruddasand Zoe Gannon

Southbank House, Black Prince Road, London SE1 7SJT: +44 (0) 20 7463 0632 | [email protected]

www.compassonline.org.uk

A BITTERPILLTO

SWALLOW

“The Compass report is a timely and important critical examination of the appropriaterole for the pharmaceutical industry in our society and in contributing to publichealth. It poses significant challenges to the industry, the UK government, the medicalprofession and patient organizations about how pharmaceuticals can meet the needsof UK citizens and the NHS more effectively.”

Professor JohnAbraham,University of Sussex, and ExpertAdvisor to theHouse of Commons Health Select Committee.

“This is an impressive report, which addresses high priority issues for the Britishpharmaceutical industry, the NHS, and government policy for health and industrialdevelopment. It asks hard questions and puts forward challenging policy proposalswhich deserve serious consideration.”

Professor RichardAshcroft,Queen Mary University London

“This sober and well documented report must be read by all health policy makers,medical practitioners, persons working in the pharmaceuticals industry, public policycommentators - and indeed anyone who cares about their own health.While over-reliance on pharmaceuticals is one of the problems produced by the power of theindustry, we still need a growing supply of effective, safe, properly tested, andinnovative medicines.This report shows that, as the sector is currently structured andregulated, it is under-achieving on all these points.Action is urgent needed before wehave a full crisis on our hands.”

Professor Colin Crouch,University ofWarwick Business School

“Free markets work well for shoes and toothbrushes, but for life saving drugs we needpeople to come before profits. But the deregulation of the pharmaceutical market isfailing not just people but profitability too. Something has to be done. Jon Cruddas andZoe Gannon’s report tells us what is wrong and more importantly tells us how we canstart to put it right. This is an area where government intervention would be timely,productive and popular. Otherwise the pharmaceutical industry could drag down theeconomy just like the deregulated banks did.”

Neal Lawson,Chair of Compass


A BITTER PILLTO SWALLOWDrugs for people not just for profit

Published by Compass − Direction for the Democratic Left LtdSouthbank House, Black Prince Road, London SE1 7SJT: +44 (0) 207 463 0632 [email protected]

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Contents

Acknowledgements 4Executive summary 5

Introduction 8The growth of the pharmaceutical industry 10

The problem1. Cost of drugs and declining innovation 13

The drugs industry 13Executive pay 16Blockbuster drugs 17Me too, me again and me as well 18Where is innovation actually coming from? 19

2. Bias in industry-sponsored clinical trials 21The gold standard of science: randomised controlled trials 21Who controls randomised controlled trials? 21Industry influence and bias 21

3. The medical profession and the pharmaceutical industry 25

4. The pharmaceutical industry and the public 28Patient groups 28

The consequences5. The human consequences of market failure in the pharmaceutical industry 30

6. Why is the pharmaceutical industry getting away with it? 34The Medicines and Healthcare products Regulatory Agency 34The Pharmaceutical Price Regulation Scheme 35The National Institute for Clinical Excellence 36

7. Policy recommendations 37

Conclusion 39

Appendix 1 Will the pharmaceutical industry leave the UK? 40Appendix 2 Existing regulation 42Glossary of acronyms 44

Acknowledgements

This report was written by Jon Cruddas and ZoeGannon. We are grateful to the Barry Amiel andNorman Melburn Trust, which supported theresearch. We would also like to thank all thosewho advised us on the project, including: MartinMcIvor, Meg Russell, Colin Crouch, Neal Lawson,Dan Leighton, Alan Finlayson, JonathonRutherford, Tony Harrison, Martin Rathfelder,Richard Wilkinson, Aubrey Blumsohn, JackStilgoe, James Wilsdon, Howard Reed, IanGibson, Richard Ashcroft, Doug Naysmith MP,Simon Reid-Henry, Nikolas Rose, Laura Biron,David Baines and Judith Wardle.

Executive summary

The pharmaceutical industry has long beenregarded as one of the jewels in the crown of theBritish economy. It is an industry in which Britainhas excelled. But like all other sectors its perform-ance needs to be assessed. It was not long ago thatthe financial services sector was viewed as evenmore competitive and world leading. But it hascrumbled because of lax regulation. We don’twant to see the same fate befall the pharmaceu-tical industry. The danger signs are there. Profitsand pay are up but productivity is down. Underthe threat of flight, companies are lightlyregulated in the pursuit of short-term profitsdriven by the bonus schemes of top executives. Ina normal private sector company this would besolely the concern of the shareholders.

But this is not any ordinary sector. Just like thebanks, the pharmaceutical companies are tooimportant to fail. Their products determinewhether people live or die and what quality of lifethey have. They are much closer to being essentialutilities than they think. The argument in thisreport is not that the pharmaceutical industryshould be nationalised but simply that it must bemore effectively regulated, so that all stakeholders –the public as well as the private investors – get abetter deal. Like housing, transport, gas, electricityand now financial services, some things are tooimportant to be left to the whims of the market. Thepharmaceutical industry should start to be viewedmore as a utility and less as part of the casinoeconomy which wreaked havoc with our banks.This does not mean being anti-business – far fromit – but it does mean being pro-society. The currentstructure of high costs, high profits and a low rate ofinnovation is unsustainable. Regulation and inter-vention is required to save the pharmaceuticalindustry from its own worst enemy, itself.

The pharmaceutical industry grew in the 1980sto become a commanding symbol of ‘the neweconomy’ and the power of the market to innovate.But it is failing to meet our needs for safe and inno-vative drugs. The pharmaceutical industry is andwill continue to fall short of delivering its raisond’être of producing drugs that improve our health.

Since 1991 the NHS drugs bill has grown by over£7.5 billion. This growing cost is not just the case in

the UK, as expenditure on pharmaceutical productshas grown faster than the gross national product inall European countries.1 At the same time, pharma-ceutical companies remain incredibly profitable,with some companies seeing annual profits ofbetween 20% and 30%. Despite these rising costsand profits, innovation is declining; if this declinecontinues our ability to fight increasingly complexdiseases will almost certainly be reduced.

During the late 1980s, nearly 60 new molecularentities were released onto the market each year,2but this figure had halved to a mere 27 by 2007 (seetable 1). Between 1993 and 2003 only 152 of the 359drugs licensed, less than half, offered potentialclinical improvements on already existing drugs(see table 2). Meanwhile our drugs bill is skyrock-eting. Why are we paying more for less?

This structure of high costs, high profits and lowrates of innovation is unsustainable not just forsociety but also for the industry. One city analystsaid, ‘For the first time in history, the industry willhave negative growth in 2011.’3 Just like in banking,the market is failing for pharmaceuticals.

It has been estimated that in order to sustaincurrent levels of growth, firms would need tointroduce one new product each year that wouldmake on average £2.7 million for each 1–1.5%share the firm has of the world pharmaceuticalmarket. Therefore, a company the size ofGlaxoSmithKline (GSK), which is one of thelargest of the UK-based pharmaceuticalcompanies, would need to release closer to sevensuch products each year; however, in 2008 onlythree of GSK’s products were approved by theFood and Drugs Administration (FDA) for theUS market and in the UK only four products wereawarded licences by the MHRA, one of which wasa Paracetamol product and all of which were metoo drugs4 – this is less than half that needed.5

None of the major companies is close to reachingthe necessary targets to maintain growth.

The profits that previously sustained the oligop-olous pharmaceutical industry are under threat:

1. Ess, S.M., Schneeweiss, S., Szucs,T.D. (2003) ‘European healthcarepolicies for controlling drug expen-diture’, Pharmacoeconomics, 21(2),pp.89–103.

2. Van den Haak, M.A, Sculthorpe,P.D. and McAuslane, J. (2002) NewActive Substance Activities: Submission,Authorisation and Marketing 2001,CMR International.

3. Alexis de Rosnay, global co-headof healthcare at Lehman Brothers,quoted in L. Saigol (2008) ‘A painfulprognosis for big pharma’, FinancialTimes, www.ft.com/cms/s/0/ab1b624e-1c8d-11dd-8bfc-000077b07658.html (accessed 1September 2008).

4. In 2008 only three drugsproduced by GlaxoSmithKlein wereapproved by the FDA: EltrombopagOlamine (on 20 November 2008)Naproxen Sodium; SumatriptanSuccinate (on 15 April 2008) andRopinirole Hydrochloride (on 1 July2008). Of these two were consid-ered to be me-too drugs – drugsthat appear to have therapeuticqualities similar to those of analready marketed drug; seewww.accessdata.fda.gov/scripts/cder/drugsatfda/index.cfm?fuseaction=Reports.ReportsMenu In 2008 only 4pharmaceutical products producedby GlaxoSmithKlein were grantedlicences by the MHRA in the UKthese were Nicabate Compressedlozenges, Paracetamol compressedtablets Requip prolonged releasetablets and Acwy vax – powder andsolvent for solution and injection ina prefilled syringe(a treatment formeningococcal disease); these areall me too drugs.

5. Horrobin, D.F. (2000) ‘Innovationin the pharmaceutical industry’,Journal of the Royal Society ofMedicine, 93(7), pp.341–5.

‘This structure of high costs, high profits and low rates

of innovation is unsustainable not just for society but

also for the industry’

� Blockbuster drugs account for 60% of theestimated £136 billion in sales of the ten leadingpharmaceutical companies; many of the patentson these products will expire in the comingyears.6

� Between 2006 and 2011 $40 billion (circa £22billion) in global sales by the top pharmaceu-tical companies will be lost.7

� 80 drugs that currently account for about 25%drug sales will lose their patents between 2007and 2011.8

The industry is no longer innovative. Much of theinnovation is found in the public sector. Themajority of drugs that are therapeutic advanceshave their roots in publicly funded research;9 70%of new molecular entities that have entered themarket over the last decade were discovered inpublicly funded science.10

This decline in innovation and rising costs raisesfurther concerns as the companies try and squeezemore from less through increasingly dubiousmethods that bring little benefit to the patient or thetaxpayer:

First, bias is created through the industry’scontrol over clinical trials. The industry designs,manages, funds and therefore controls the majorityof clinical trials. These clinical trials are used tomake licensing decisions and influence prescribingpractices. Trials sponsored by the pharmaceutical

industry have been shown to contain bias infavour of the industry sponsor.

Second, there is a significant degree of contactbetween the pharmaceutical industry and medicalprofessionals. The pharmaceutical industry investsheavily to influence doctors. While the Departmentof Health invests nearly £4.95 million in postgrad-uate education for doctors, the pharmaceuticalindustry spend over 300 times as much: £1.65billion. Influence by the pharmaceutical industrycan alter the prescribing habits of doctors, whichcan result in increased costs to the NHS and unnec-essary risks to the patient; it demands effectiveregulation.

Third, pharmaceutical companies are increas-ingly seeking to exert influence through patient oradvocacy groups in the UK. For the company the‘strong ties can advance corporate goals and brandobjectives’,11 but for the patient group they can limitindependence and objectivity. This degree ofinfluence is rife in patient groups. In a study ofpatient groups that disclosed financial information,83% had received funding from the industry.

Without appropriate intervention the pharma-ceutical markets will continue to fail not just thetaxpayer and the patients but their shareholderstoo.

Effective regulation must now be a priority.This report supports five priority policyproposals, which are described below.6. Herper, M. (2006) ‘Nagging

doubts for big pharma’, Forbes,www.forbes.com/2006/07/25/pharma-profits-dangers-cz_mh_0726drug.html (accessed 20 July 2008).

7. Forbes (2006) ‘Drug patentexpiration’, www.forbes.com/2006/06/22/cz_mh_0623genericdrugslide_6.html?thisSpeed=20000(accessed 1 September 2008).

8. Herper, M. (2006) ‘Naggingdoubts for big pharma’.

9. Goozner, M. (2004) The $800Million Pill: The Truth Behind theCosts of New Drugs, CaliforniaUniversity, Berkeley.

10. United Nations DevelopmentProgramme (1999) HumanDevelopment Report, OxfordUniversity Press.

11. Durand, M. (2006) Pharma’sAdvocacy Dance, http://pharmexec.findpharma.com/pharmexec/article/articleDetail.jsp?id=377999&searchString=Pharma’s%2520Advocacy%2520Dance (accessed 8January 2009).

12. BBC (2008) ‘NHS drug coststo be renegotiated’, http://news.bbc.co.uk/1/hi/health/6927814.stm.

6 | A bitter pill to swallow

Policy 1: Make a greater investment in publicly funded science.

Hypothecate savings made through introducing greater value-based drugs pricing for an addi-tional £1 billion of funding for publicly supported science research by 2010-11, increasing the totalfunding for publicly funded science from £1.7 billion to £2.7 billion. Some of this money has already been raisedthrough changes in the pricing system announced in 2007.These changes should now go further.Money could be raised through the savings made from introducing a value-based pricing system, which are

estimated to be £500 million per annum. Although much can be made of Alan Johnson’s12 achievements inregards to price cutting, this report argues that this still fails to incentivise therapeutic innovation actively.Therefore the report argues that beyond the obvious arguments for price cuts, the most pressing issue at thistime is the cost of drugs in relation to their relative therapeutic efficacy.This report supports the Office ofFair Trading’s proposals for reforming the Pharmaceutical Price Regulation Scheme (PPRS). This would linktherapeutic efficacy to price; in the short term it would reduce the NHS bill, and in the long term it wouldprovide the right incentive for drug companys’ research and development (R&D) investments.This would bea step towards ensuring efficacy and therapeutic innovation.In recent years the government has taken steps to ensure the UK remains at the forefront of drug devel-

opment. This has included increasing funding on health research, which is estimated to stand at £1.7 billionby 2010-11.This report supports using the estimated saving made through the introduction of a value-based

13. Abraham, J. (1995) Science,Politics and the PharmaceuticalIndustry, UCL.

Executive summary | 7

pricing system, which by 2011 could be £1 billion, based on estimated savings of £500 million per annumassuming the scheme was introduced in 2009.This would effectively increase funding by 60% and put totalgovernment spending on health research at £2.7 billion – nearly equal to the industry’s estimated invest-ments in R&D. The government must now take action to guarantee that therapeutic innovation willcontinue, through investing in publicly sponsored research. This not only improves the scientific base, andour potential to make therapeutic breakthroughs, but also can encourage investment in the UK by the drugsindustry.

Policy 2: Make clinical trials open to public scrutiny

Independent scientific information is essential for the future of modern healthcare and the future of the phar-maceutical industry. For this reason it is essential that all phase 3 trials be carried out independent from theindustry.These could be funded through an industry levy.This proposal was initially put forward by ProfessorJohn Abraham from Sussex University in his book Science, Politics and the Pharmaceutical Industry,13 as it wouldensure independence and allow greater scrutiny and accessibility to the necessary clinical trial data. Further,any trial used for licensing must have been registered before it was started, as is currently done in the US.Thiscould also be combined with a ‘guilty until proven innocent’ approach on all industry-sponsored clinical trials.

Policy 3: Educate doctors through public funding

For doctors, independence, transparency and freedom from bias are essential. This report has highlightedhow through industry funding and influence this is impossible.This report would therefore support greaterinvestment in independent education for doctors and other medical professionals.The current spending bygovernment on information for doctors stands at about £5 million. This report argues that this needs toincrease to £10 million, as doctors currently struggle to deal with often conflicting advice.The report wouldalso support other measures to limit industry influence, such as banning or limiting industry contact withdoctors. As of July 2009, Massachusetts and Vermont have introduced new legislation banning pharmaceu-tical companies from lobbying doctors, through providing free lunch and gifts; this report supports similarlegislation in the UK.

Policy 4: Review progress made since 2005 Health Select Committee report

The 2005 Health Select Committee report was the largest of its kind. Enacted over eight months, it exploredthe reality of the pharmaceutical industry and proposed a series of sensible policy proposals, includingstrengthening the power of the Medicines and Healthcare Products Regulatory Agency (MHRA), curbingintensive marketing by the industry, and adopting a national drugs policy. However, for this report to be mosteffective we believe that a review of the progress that has been made since its publication is essential andwould therefore lend support to such a review.

Policy 5: Control pay and bonuses

Control pay and bonuses so that executive rewards and share options do not disfigure the product market asthey did in financial services. Compass will be calling on the government to establish a pay commission toadjudicate on pay in key industries such as the pharmaceutical industry and the financial sector.

Introduction

Pharmaceutical products are an integral part of ourmodern healthcare system; from statins to antibi-otics to painkillers, the way we manage our bodies,treat disease and alleviate pain is increasinglythrough commercially produced pharmaceuticals.These pharmaceuticals are designed, produced,priced and distributed by an industry, which isfrequently failing to meet public expectations andits own potential for improved therapeutic efficacy.

The pharmaceutical industry grew in the 1980sto become a commanding symbol of new capi-talism and the power of the market to innovate,yet in these changing times it is increasingly clearthat innovation within the industry is declining,and its practices must come under increasedscrutiny. No longer meeting our needs for safeand innovative drugs, the pharmaceuticalindustry is falling short of delivering its raisond’être of producing drugs that improve health, andwill continue to do so.

Over the last 50 years the development ofmedicines produced by the pharmaceuticalindustry has contributed significantly to thewelfare of individuals and society in terms ofdisease management, pain control and quality oflife. Not only this, the pharmaceutical industryhas also made huge socio-economic contribu-tions in the UK. It:

� employs 73,000 people directly14

� accounts for 65% R&D investment in theUK15

� is the third largest industry in the UK aftertourism and finance.16

The report argues that although the socioeco-nomic contributions of the pharmaceuticalindustry should not be forgotten, they should notbe used to defend or legitimise the issues thisreport highlights in regard to the actions of somepharmaceutical companies or the declining ratesof therapeutic innovation. This report will go onto discuss these problematic practices, whichinclude influencing the medical profession andpatient groups, biasing science through clinicaltrial design, and investing excessively inmarketing and advertising.

The overriding concern for society will alwaysbe the health improvements gleaned from drugand medical technology; however, within thepharmaceutical industry each firm’s legal respon-sibility is not to the public, but to its shareholders,whose overriding concern is for the company tomaximise shareholder value and make a profit. Itis this internal contradiction which must beresolved. These are companies not charities. Theprofit motive can encourage a company toinnovate, streamline and work flexibly; however,it can also encourage pharmaceutical companiesto spend excessively on marketing and adver-tising, or research into areas with an existingmarket, rather than on areas of high need unlessthey are regulated and supervised effectively.

Expecting pharmaceutical firms to act likecharities, and not like the companies they arelegally obliged to be, is a delusion on our part, butit is an image that has been fostered by theindustry and its representatives. This misguidedperspective accounts for many of the inherentproblems that can be seen in the way the industryis treated by regulators and government. In failingto see the industry as a business, society fails torecognise the need for more stringent regulation,often expecting it to act in our best interest, notits own. The consequence of this is a decliningrate of therapeutic innovation accompanied by aplethora of practices designed to maximisemarket share and profit margins at the cost of truetherapeutic innovation.

The pharmaceutical industry understands theusefulness of fostering this image and thereforeactively presents itself as the archetype of a caring,science-based free enterprise. It pushes the imagethat it is the neo-liberal dream of an innovativemarket, which through competition willundertake risky and costly R&D, dedicated to thetreatment of disease, and alleviation of suffering.With attractive phrases like Johnson & Johnson’s‘our caring transforms’, Pfizer’s ‘life is our life’swork’ or GlaxoSmithKline’s ‘enabling people to domore, feel better, live longer’, pharmaceuticalcompanies seek to portray themselves not asprofit-seeking companies, but as the GoodSamaritan. The trade group in the UK that repre-sents the industry is the Association of the BritishPharmaceutical Industry (ABPI), which activelyseeks to present this image with the strap line‘Medicines for a healthy future’.

14. Association of BritishPharmaceuticals (2007) AnnualReport 2007, www.abpi.org.uk/publications/pdfs/AnnualReview07.pdf (accessed 9 February2008).

15. House of Commons HealthSelect Committee (2005) TheInfluence of the PharmaceuticalIndustry, Stationery Office.

16. Ibid.

The ABPI represents 72 companies. It is basedin Whitehall, employs 60 full-time members ofstaff and has considerable influence on and aclose relationship with government. The thenPresident of the ABPI, Nigel Brooksby, stated inthe ABPI’s 2007 annual report:

(I am the) envy of my colleagues in Europe for thestrong and mutually supportive relationship theindustry has enjoyed with government and theNHS in the UK.17

The current President of the ABPI, ChrisBrinsmead, stated in the ABPI’s 2008 annualreport:

I believe the year will be seen as one in which welaid the groundwork for significantly better rela-tionships with the Government.18

The ABPI, like its equivalents in the US andacross Europe, often opposes changes to legisla-tion, arguing consistently that prices are highbecause R&D costs are high, and that anyrestraint on charges – or changes to the regulatorystructure – could damage the pipeline and ensurethat medicines which were needed would notmake it through. It argues that the profit marginsit enjoys are the necessary incentive to ensureinnovation. Generally this body is mostconcerned with medicines and medical technolo-gies currently under patent and is less concernedwith the generic drugs market.

There is no doubt that the arguments againstregulation put forward by the industry and by itstrade group are powerful rhetoric, but the realityis less clear, as this report will explore. Althoughmuch of the pharmaceutical industry often fights

against regulation, this report will highlightwhere better regulation could actually save theindustry, and enable greater therapeuticadvances. These are the key areas affecting theindustry’s ability to make greater therapeuticinnovation:

� The structure of the industry, the cost ofdrugs and declining innovation. The NHShas a drugs bill of £11 billion and faces regularscandals over the availability of increasinglyexpensive drugs. This section looks at why theprices are so high, why innovation isdeclining, what this means for the future ofhealthcare and the industry, and, more impor-tantly, what can be done about it.

� Biased science – the gold standard ofevidence-based medicine. Closer scrutiny ofrandomised controlled trials shows thatevidence-based medicine is increasinglysubject to bias. This section explores how, whyand what this means.

� The medical profession. Much of the contro-versy surrounding the pharmaceuticalindustry centres on prescription medicine;this section looks at the relationship betweendoctors and the industry.

� Patient groups. There are numerous groupsto represent individuals who are affected bymost illnesses, disabilities and other medicalconditions; these groups lobby governmentand provide information and support. Thissection discusses the relationship betweenthese groups and the industry.

17. Association of BritishPharmaceuticals (2007) AnnualReport 2007, www.abpi.org.uk/publications/pdfs/AnnualReview07.pdf (accessed 2 September2008).

18. Association of BritishPharmaceuticals (2008) AnnualReport 2008, www.abpi.org.uk/Details.asp?ProductID=344(accessed 4 May 2009).

Introduction | 9

What is the difference between apatented drug and a generic drug?

A patented drug is a drug for which a specificcompany owns exclusive rights. When acompany develops a new drug it is patented bythat company and monopoly rights are granted,which last 20 years. Once a patent expires,generic copies of the drug can be produced byother companies.Thus a generic drug is one thatis no longer controlled by a patent. After themonopoly rights are lost numerous generic drugmanufacturers will produce the drug, which canpush the cost down by as much as 90%.

What is the pipeline?

Pipeline is a term commonly used to describethe potential drugs each company is currentlydeveloping.When a pipeline is described as lost,this means that the drug they were developinghas failed in a clinical trial. This can be throughlack of efficacy of the drug or through lack ofsafety; however, lack of efficacy is by far the mostcommon cause of a lost pipeline.

This report will focus on these four areaswithin the UK, but will draw comparisons withother countries, especially the US, which is thelargest market for and producer of pharmaceuti-cals. It has a very different and in many waysmore relaxed regulatory structure than that in theUK. However, with the election of Barack Obamathis is expected to change over the comingmonths and years, as he promised greater regula-tion of pricing for drugs, and healthcare reform.

What this report seeks to do is highlight therise and subsequent fall of the pharmaceuticalindustry. It tracks the changes in medical devel-opment and regulation and concludes that regu-lating the pharmaceutical industry effectivelymust now be a priority if we hope to continue tofind the medical interventions we desire.

It is vital to ask the right questions now: whereare new drugs coming from and how much dothey really cost to create? Who is innovating andwho profiting? And how can we ensure healthneeds are met? The market has proved wanting asa method of encouraging the right sort of drugs ata price that society can afford, making the phar-maceutical industry – like the financial sectorbefore it – another example of market failure. Away forward must be sought towards innovative,productive and humane drug development.

The growth of thepharmaceutical industry

The pharmaceutical industry came into its own inthe 1980s with high profits and high levels ofinnovation and development. However, most of

the large firms seen today – such as Allen andHanbury, Eli Lilly, GlaxoSmithKline, Merck,Pfizer, Squibb and Wyeth Laboratories – havetheir roots in the last century before theybloomed into large public corporations andrapidly expanded in the middle of the 20thcentury.

In the early 1900s the UK and the US intro-duced regulations to ensure the quality of phar-maceutical products. However, in 1911 the USand the UK took very different paths. In the UKthe National Health Insurance Act – whichprovided ‘medical benefit’ to people on lowincome – made the UK government the first masspurchaser of drugs.19 This gave the government avested interest in regulation, specifically costcontrol and the efficacy of pharmaceutical drugs.Its equivalent has only happened relativelyrecently in the US with the creation of Medicareand Medicaid, which has resulted in an increasedinterest in regulation.20

During the 1940s and 1950s a series of majorpharmacological breakthroughs, each offeringnew and exciting possibilities for the treatment ofdisease, offered potential growth in pharmaceu-tical companies. This ushered in an age of antibi-otics; Penicillin is perhaps the best known, butthis was rapidly followed by Streptomycin, (totreat tuberculosis) and Chloramphenicol (thefirst antibiotic to be manufactured syntheticallyon a large scale). This period also saw pharma-ceutical companies begin to transform into thecompanies that exist today where research, devel-opment, manufacture and marketing are allcontrolled and managed within the samecompany. As a result of the creation of massmarkets in Europe and the US, these companiesbecome increasingly global.

The birth of the NHS in 1948 further separatedthe regulatory paths of the UK and the US. TheUK became increasingly concerned with thecontrol of the cost of drugs, fearing wastefulexpenditure and unsafe use. In the US trade asso-ciations were set up, as there was less incentive forcentrally managed regulation. This resulted in thepharmaceutical industry intensifying thepromotion of drugs directly to doctors, especiallywhere drug companies were marketingpatentable, but molecularly similar, drugs withwhat appeared to be similar therapeutic effects.21

It is not surprising therefore that the pharmaceu-

19. Public Records Office (1921)MH58/241B Committee on thesupply of drugs for insuredpersons report.


21. These are commonly referredto as me-too drugs and arediscussed later. For further discus-sion see Temin, P. (1980) TakingYour Medicine: Drug Regulation andthe United States, HarvardUniversity Press.


What is a randomised controlled trial?

A randomised controlled trial (RCT) is a type ofscientific experiment most commonly used intesting the efficacy of a pharmaceutical product.They are seen as the best way to prove theefficacy of a drug or medical intervention. In aRCT people are allocated at random to receiveone of several possible treatments.One of theseinterventions is the standard of comparison, alsocalled the control. The control is mostcommonly a placebo (‘sugar pill’).

tical products are far more expensive in the USthan anywhere in the rest of the world.

There was an increased focus on regulation inthe UK in the 1960s after the public outcry overThalidomide. From the late 1950s to the early1960s Thalidomide was prescribed to women inthe first few months of pregnancy to relievemorning sickness, until it was later recognisedthat it had caused serious unforeseen birthdefects. In a bid to avoid another occurrence andin response to the public outcry the Committeeon Safety of Drugs was formed in 1963 in the UK.This later became the Committee on Safety ofMedicines (CSM) under the Medicines Act of1968. The Medicines Act of 1968 became law in1971 and since then has provided a comprehen-sive legal framework for the control of medicinesin the UK.

It is apparent that this regulation was enactedreluctantly. Legislators were optimistic about thebenefits and promises of new drugs and muchlike today were committed to protecting theindustry.22 Even after the Thalidomide disaster,the then UK Conservative Health Minister EnochPowell argued that it was in the commercialinterests of a drugs company to test its productsappropriately and ensure that they were safe andbeneficial – intimating that regulation was, inconsequence, unnecessary.23

Until the late 1970s the industry was driven lessthrough an understanding of biology and morethrough the mass random screening of chemicalcompounds. By the 1980s this had begun tochange. The 1980s and 1990s were a period ofhuge success and growth for the industry as aseries of blockbuster drugs, including medicinessuch as Prozac, made it to market, creating hugeprofits. Under Margaret Thatcher in the UK andRonald Reagan in the US a period of effectivederegulation and a pro-business legislationensured these companies grew to becomeimmensely profitable. In recent years the oligop-olous structure has remained, with the industrystill dominated by the few super firms, such asGlaxoSmithKline and AstraZeneca in the UK.

It is apparent that these companies are recog-nising that the current model of drug developmentis unsustainable. Those within the industry such asRichard Sykes, former chairman ofGlaxoSmithKline (previously GlaxoWelcome),argue that advances in areas such as genomics will

eventually identify new targets for the industry toact on.24 However, it will be years if not decadesbefore this basic research can be transformed intodrug development and it is increasingly apparentthat the industry may not last that long. The phar-maceutical industry was and still is going througha very painful transition period with theapproaching end of patents for all the largecompanies. During this period there have been anumber of super-mergers designed to shore upeconomic stability and future competitiveness.However, mergers have proved insufficient andwith the approaching end to the patent life on pastblockbusters it is thought that a lot of the earningsare coming from temporary gains, like a goodallergy season, and cost controls.25 For example, inthe US the share value of Pfizer rose as itannounced more cost cuts in 2008; it has removed$1.2 billion off its 2006 cost levels and expects cutsto reach $2 billion by the end of 2009.26 This isbeing echoed across the industry, with most of thelarger firms cutting staff and costs.

Running concurrent to these changes in theglobal pharmaceutical industry since the 1980sthere has also been a growth of small bio-techfirms at a national level in the UK, the US andacross some of Europe. These firms arecommonly located in and around the universities.They are highly active and very innovative; thesesmaller firms are appearing to take the lead interms of innovative drugs as the larger firms’innovation declines and they are seen by many askey to the future of the industry.27

There are three main bodies that supervise andregulate the industry and the distribution ofdrugs in the UK:28

� The pharmaceutical industry is regulated by alicensing system to ensure safety, quality andefficacy of drugs. The Medicines andHealthcare Products Regulatory Agency(MHRA) oversee this. The MHRA is alsoresponsible for monitoring medicines postlicensing.

� The National Institute for ClinicalExcellence (NICE) was created to explore andoffer guidance on the relative efficacy and costefficiency of drugs – this provides essentialinformation to doctors, health professionalsand the general public.

� The Pharmaceutical Price Regulation

Introduction | 11

22. Abraham, J. and Davis, C.(2006) ‘Testing times: theemergence of the practololdisaster and its challenge toBritish drug regulation in themodern period’, Social History ofMedicine Advance Access, availableat http://shm.oxfordjournals.org/cgi/content/abstract/hkj005v1(accessed 1 September 2008).

23. Medwar, C. (1992) Power andDependence: Social Audit on theSafety of Medicines, Social Audit.

24. Sykes, R.B. (2000) NewMedicines: The Practice of Medicineand Public Policy, Stationery Office.


26. FiercePharma (2008) ‘Pfizer:$800m in cuts to hit 4Q’,editorial, www.fiercepharma.com/story/pfizer-800m-cuts-hit-4q/2008-09-23?utm_medium=rss&utm_source=rss&cmp-id=OTC-RSS-FP0 (accessed 1September 2008).

27. BMJ (2003) ‘Fewer new drugsfrom the pharmaceutical industry:a better understanding of theeconomic challenges facingresearch based companies isneeded’, editorial, British MedicalJournal, 326, pp.408–9.

28. See appendix 2 for furtherinformation.

29. Abraham, J. (2005) ‘Regulatingthe drugs industry transparently’,British Medical Journal, 331,pp.528–9.

30. Petryna, A. et al. (2007) GlobalPharmaceuticals: Ethics Markets,Practices. Duke University Press.

31. ‘Foreword by the PrimeMinister’, Pharmaceutical IndustryCompetitiveness Taskforce,available at www.advisorybodies.doh.gov.uk/pictf/ (accessed11 March 2008).


Scheme (PPRS) regulates pricing throughprice cuts and profit controls.

Although the regulation of the industry can insome ways be seen to be relatively stringent, overthe past decade, a decade of New Labour, it isargued that drug regulation in the UK, Europeand the US has been restructured in responseboth to a neo-liberal agenda and to claims by thepharmaceutical industry that over-regulation wasstifling innovation.29

Yet if you trace the history of modern

medicine you see the role of government regula-tion in many forms designed to bolster medicalexpertise: peer reviews, RCTs and post-marketing surveillance were introduced as aprotective barrier against the encroachment offalse beliefs and business interests intomedicine.30

An awareness of the issues inherent in themodern pharmaceutical industry has existed forsome time within academia; however, it is onlyrecently that these discussions have reachedWestminster. In 2005 the Health SelectCommittee conducted the largest analysis byParliament of the pharmaceutical industry evercarried out. This review was only the secondselect committee report on the industry – thefirst was carried out in 1914. The reviewconducted in 2005 took eight months andcollected information from key stakeholders;including pharmaceutical companies, doctors,MPs, academics and patient groups, this reportwas highly comprehensive in its analysis andpresented 44 decisive policy proposals.

In February 2007 this was followed by anOffice of Fair Trading (OFT) report, whichanalysed the PPRS. It looked at the currentsystem of profit controls and price cuts andargued that instead we should implement avalue-based system, where price is based on ther-

apeutic efficacy.Despite this growing awareness in political

spheres New Labour seemed to struggle toregulate the industry effectively, never seeming torealise the impact that this was having on theNHS, the pharmaceutical industry and on publichealth. The comprehensive findings of the 2005Health Select Committee report, and the OFTreport in 2007, have not been implemented.

Tony Blair promised to protect the pharma-ceutical industry:

We must work together to ensure that the futureof the UK pharmaceutical industry is evenbrighter.31

Yet the Blair government seemed to acceptunquestioningly the industry’s own short-termdefinition of what a brighter future was. Forpublic health, for science, and for the medicalprofession it certainly was not the route definedby the industry. In fact, it now looks as if this wasnot the best route for the industry either. Theindustry itself is seeking new ways forward; it istrying to adapt, but it is now a huge clunkingmachine and seems unable to make the necessarychanges to ensure that public health needs aremet.

Now is the time to reassess the current state ofregulatory surveillance structures of the pharma-ceutical industry and put into place appropriatemeasures to protect medical expertise and publichealth from the encroaching interests of bigbusiness.

This report will focus on four key areas:

� the drugs industry – costs of drugs anddeclining innovation

� biased science� the medical profession and the industry� patient groups, the public and the industry.

“New Labour seemed to struggle to regulate the

industry effectively, never seeming to realise the impact

that this was having on the NHS, the pharmaceutical

industry and on public health”

1.The cost of drugsand declining innovation

The drugs industry

The cost of drugs is increasing. This is worryingin itself but when placed alongside the decliningrate of innovation in the pharmaceutical industrya case of market failure is clear. It is essential thatthis trend is reversed.

There is a crisis in productivity and thera-peutic advancement in the pharmaceuticalindustry. Globally the number of medicinescontaining new molecular entities (NMEs) hasdramatically declined from the average of over60 per annum during the late 1980s32 to a mere

27 in 2007 (see table 1); meanwhile our drugsbill is skyrocketing. In 1991 the drugs bill for theNHS (see figure 1) was £2.5 billion, a decadelater it was £7.5 billion and it now stands close to£11 billion. Since 1991 the drugs bill has grownby nearly £7.5 billion. Ess, Schneeweiss and

32. Van den Haak, M.A.,Sculthorpe, P.D. and McAuslane, J.(2002) New Active SubstanceActivities: Submission, Authorisationand Marketing 2001, CMRInternational.

33. Sources: Prescription PricingDivision of the NHS BusinessServices Authority, England, andDepartment of Health FinanceDivision. 2. Figures are net whichinclude Pharmaceutical PriceRegulation Scheme (PPRS) receiptsavings. 3. The total drugs spendinclude drugs expenditure inprimary care and the HCHS. Theprimary care expenditure reflectsamounts paid to pharmacy andappliance contractors andamounts authorised for dispendingdoctors and personal administra-tion in England. HCHS expendi-ture includes drugs and medicalgases. 4. From 2000-01 figures arein resource terms; prior to thisfigures are in cash terms. Cashfigures relate to February toJanuary prescribing due to delay inprescription processing andpayment calculations. Resourcefigures represent the actual costbetween April and March.

The problem

What is a new molecular entity?

A new molecular entity is an active ingredientthat has shown some biological activity, whichhas not been marketed before. The number ofnew molecular entities coming onto marketeach year is often recognised as a measure of therate of innovation.Therefore, if there are fewernew molecular entities making it onto themarket this is seen as demonstrative of adeclining rate of product innovation.

12,000

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Figure 1 –Total drug expenditure by the NHS 1990–200533

Szucs (2003) highlight that this is not just thecase in the UK but that expenditure on drugs hasgrown faster than the gross domestic product inall European countries and in the US.34 Yet at thesame time these companies remain incrediblyprofitable, with some companies seeing annualprofits of 20–30%.35

It is clear that the rate of product advancement isdeclining (see table 1), however, there is limitedinformation on the rate of therapeutic innova-tion. The MHRA and the European MedicinesEvaluation Agency (EMEA) do not even collectdata on the therapeutic advances of medicines

licensed. This can be seen as problematic as whileproduct advancements – which are patented asthey can also be classed as NMEs – ensure thatcommercial interests are met, it is largely throughtherapeutic innovation that health and societalneeds are met.

However, looking at figures from the US (theFDA in the US does distinguish between NMEsand therapeutic innovation) it is clear that thera-peutic innovation is declining. The FDA figuresshow that between 1993 and 2003 only 129 of the321 drugs licensed, less than half, offered clinicalimprovements (see table 2). Based on thesefigures it is fair to argue that we are simultane-ously seeing a decline in the number of drugs, thenumber of new molecular entities and the thera-peutic innovation of drugs making it to themarket. Thus while costs and profits increase,actual product innovation and – more impor-tantly for society – therapeutic innovation appearto be declining.

If this pattern of declining innovation – intherapeutic and product innovation terms –continues, we will increasingly struggle to fightthe disease burden through a pharmaceuticalmodel. Steps must be taken, both to improve thetherapeutic innovative potential of the industryand to explore alternative routes towards innova-

34. Ess, S.M., Schneeweiss, S.,Szucs, T.D. (2003) ‘Europeanhealthcare policies for controllingdrug expenditure’,Pharmacoeconomics, 21(2),pp.89–103.

35. Angell, M. (2004) ‘Excess inthe pharmaceutical industry’,Canadian Medical AssociationJournal, www.cmaj.ca/cgi/content/full/171/12/1451(accessed 20 March 2009).

36. IMS is a world leadingstrategic consultancy for health-care and pharmaceuticals; seewww1.imshealth.com/web/home/0,3153,64576068_63872702,00.html (accessed 1 October 2008).


How does a drug reach the market?

For a drug to reach the market place a ‘lead compound’ must first be found; this can be a NME or an existingmolecular entity presented for an alternative condition. This lead compound will have been found to haveinteresting biological activity with therapeutic potential. Once found, it will be taken through a series of tests,which begins with non-clinical testing in a lab and continues through three phases of clinical trials designed toensure its efficacy and safety:

� Phase I: trials in 20–100 healthy adults to test the safety of the drug� Phase II: trials in 100–300 patient volunteers to determine the safety and efficacy of the drug� Phase III: trials on larger groups of patients (typically 1,000–3,000), to gain further data on safety and

efficacy.

These trials are normally undertaken by the producer and submitted to a regulatory agency, such as the MHRAin the UK, to establish quality, efficacy and safety. If the drug is approved it is licensed and becomes publiclyavailable. Throughout this process, decisions are made on whether or not to continue, based on projectedprofitability of the product, but not necessarily on its projected therapeutic advantage. In the EU, US andAustralasia there has never been a requirement on companies to produce drugs with a therapeutic advantage.If such a requirement were put in place it is likely that we would see a change in the focus of pharmaceuticalresearch carried out by the industry, with a greater emphasis placed on therapeutic advance rather than onpredicted profitability.

Table 1 Number of new molecular entities

brought to market internationally, based on

IMS figures36

Year Average number of NMEsreleased onto the market

each year

1995–2000 44

2001–2006 33

2007 27

Source: http://us.imshealth.com/i360/

tion. This must in part be through increasedinvestment in publicly funded scientific researchand the science infrastructure as a whole.

With this apparent declining innovation, bothproduct and therapeutic, it is clear that we mustalso look to alternative methods of disease

management. Although we may hope thatchanges can be made to improve innovation if weare entering an age where there is not a ‘pill forevery ill’, we must look to life-style changes, toearly intervention and for example in the case ofcancer to a greater investment in supplementarytechnologies such as radiotherapy and surgicaltechniques. If the pills are no longer beingproduced we must look to the alternatives.

The current industry structure appearsunsustainableThe structure of high costs, high profits and lowrates of innovation is unsustainable. The pharma-ceutical industry asserts that the costs are highbecause drug development is expensive, andexpands on this to argue that only if we continueto pay marked-up prices for drugs can it continueto develop. However, this argument does not holdup. Insufficient investment in R&D is accompa-nied by an unproductive search for the ‘one sizefits all’ blockbuster drug, and an inefficient use ofresources to search for more me-too drugs hasresulted in fewer therapeutic innovations makingit onto the market. A greater degree of innovationis possible if the necessary checks and balancesare in place to encourage a greater engagement intherapeutic innovation.

The industry’s own attempts to revive its fortunes– in the form of super-mergers, acquisitions andmost recently cost cutting, which it has pursuedwith vigour – have not improved the industry’sability to innovate. To name a few:GlaxoSmithKline resulted from a £120 billion dealin 2001 between SmithKlein and GlaxoWelcome.AstraZeneca was created in a $102 billion (circa £52billion) deal in 1999. Sanofi-Aventis was formedfrom a $64 billion (circa £34 billion) merger in 2004and Pfizer completed a $53 billion (circa £29billion) takeover of Pharmacia in 2003.38 This

37. NMEs are given priority in theUS if they are considered to be atherapeutic innovation.

38. Saigol, L. (2008) ‘A painfulprognosis for big pharma’,Financial Times.

The cost of drugs and declining innovation | 15

What is the difference betweentherapeutic innovation and productinnovation?

Therapeutic innovation should not be confusedwith product innovation.Therapeutic innovationprovides the most benefit to patients, whereasproduct innovation may not improve therapeuti-cally on previously available therapies but it maybe of commercial advantage to the companies –for example it may extend the patent life of anexisting product. However, a degree of productinnovation can also be useful to patients; forexample, a product innovation may mean thatthe drug needs only to be taken once a weekrather than daily – this can be of considerablebenefit to patients.

What is a blockbuster drug?

A blockbuster drug is one that grosses over $1billion. These are often seen as the drugs thatsustain the largest of the pharmaceuticalcompanies, including Pfizer’s Lipitor, whichgrossed $12 billion in 2007, and AstraZeneca’sNexium, which grossed over $5 billion in 2007.

Table 2 FDA review and approval times for

priority (with therapeutic innovation

potential) and standard NMEs, 1993–200337

Total priority Total standardNMEs approved NMEs approved

1993 13 12

1994 12 9

1995 10 19

1996 18 35

1997 9 30

1998 16 14

1999 19 16

2000 9 18

2001 7 17

2002 7 10

2003 9 12

Total 129 192

Total drugs approved by FDA 1993-2003 321

Source: www.fda.gov

strategy shored up the industry in the short-term,creating a degree of financial stability; costs werecut and value was added for shareholders. Yet thehoped-for hothouse of new drug developmentnever materialised. In fact it is now argued that,despite the increase in size, merging R&D opera-tions actually reduces innovation and freethinkingpotential. It is now recognised that stability andquality of research deliver the best results.39 It isvery clear that these mergers have not been enough,and now we should consider how best we canencourage the industry to engage in therapeuticinnovation.

Increase investment in research anddevelopmentThose who advise the industry argue that investmentin R&D must increase. PriceWaterhouseCoopersstates that:

To flourish, companies will need to invest more inresearch, understand and demonstrate the value oftheir products… Though these and other changesthat lie ahead are daunting, we believe that therewards both in terms of human health andbusiness success are enormous.40

For the industry to flourish, for it to produce thedrugs we need at prices which can be afforded,change has to happen.

The industry constantly reasserts that it investsheavily in R&D, and that costs of drugs are risingbecause R&D is expensive. Although there is nodoubt that drug development is expensive, theindustry’s assertions on just how expensive it ishave been challenged.

An industry-sponsored study placed the billfor each new drug in the US at $800 million (circa£444 million).41 However, this industry-sponsored estimate can be disputed for a numberof reasons, which would place a more accuratefigure for the cost of each new drug at $240million or closer to £130 million:42

� The industry counts the opportunity cost ofcapital, not actual cash outlays, which it isargued by Public Citizens inflates the estimateby about 50%.

� The industry analysis does not account for theamount that is tax deductible, which in the USis 34%. In the UK an equivalent scheme allows

companies to claim back R&D expenditure inthe form of tax credits. This allows largecompanies to deduct 125% of expenditure onR&D activities when calculating their profitfor tax purposes.43

� The industry-sponsored analysis only looks ata selection of drugs and it coincidentallyseems to have selected ones which were themost expensive to develop.

In the UK the pharmaceutical industry estimatesit spends £3.2 billion on R&D,44 yet this estimatehas also been challenged. Goozner argues that asmuch as half of this expenditure should rightly beconsidered marketing rather than R&D.45 Ifaccurate this would place R&D total expenditureby the industry at closer to £1.5 billion. By 2010this will be exceeded by public spending onhealth research in the UK, which will stand at£1.7 billion.46

On top of this the industry spends heavily onmarketing and advertising. Marcia Angell – formereditor in chief of the New England Journal ofMedicine – points out that the industry spends lessthan half as much on R&D as on marketing andadministration.47 Individual estimates of the phar-maceutical industry’s expenditure on marketingvary – and the limited information publicly availablethrough the annual accounts of the industry meansthat information is scarce. However, Gagnon andLexchin estimate expenditures for marketing drugsin the US in 2004 was at $57.5 billion (circa £32billion) and it is fair to assume that over the last fewyears this will only have increased.48

Executive pay

As in banking, pay and executive remunerationpackages have now reached excessive levels in thepharmaceutical industry. As table 3 shows,despite apparent declining rates of innovation thetop pharmaceutical executives are awardingthemselves huge financial rewards. In February2009 Alistair Darling promised to launch a probeinto excessive remuneration packages in the City– this investigation must be extended to the phar-maceutical industry. Controlling pay and bonusesis essential so that executive rewards and shareoptions do not disfigure the product market asthey did in financial services.

39. PharmaDeals (2007) Synergy orVanity, http://files.pharmaventures.com/mega_mergers.pdf(accessed 1 October 2008).

40. PriceWaterhouseCoopers(2008) Pharma 2020: The Vision:Which Path Will You Take?,www.pwc.com/extweb/pwcpublications.nsf/docid/91BF330647FFA402852572F2005ECC22 (accessed 3September 2008).

41. Tufts Center for the Study ofDrug Development (2001) ‘TuftsCenter for the Study of DrugDevelopment pegs costs of a newprescription medicine at $802million’, http://csdd.tufts.edu/NewsEvents/RecentNews.asp?newsid=6 (accessed 1 September2008).

42. Public Citizen (n.d.) ‘Wouldlower prescription drug pricescurb drug company research &development?’, www.citizen.org/congress/reform/drug_industry/r_d/articles.cfm?ID=7909 (accessed1 September 2008).

43. HM Revenue and Customs,‘Research and Development TaxCredits’, www.hmrc.gov.uk/randd/(accessed 1 September 2008).

44. Kyle, M. (2007) Innovation inthe Pharmaceutical Industry,www.wwz.unibas.ch/wifor/vorlesungen/HS07/Stutzer/Kyle_Innovation_Pharmaceutical_Industry_2007.pdf (accessed 3 September 2008).

45.Goozner, M. (2004) The $800Million Pill.

46. OSCHR (2007) Major Boost forUK Health Research Funding, Officefor Strategic Coordination ofHealth Research, www.nihr.ac.uk/files/pdfs/OSCHR%20Press%20release.pdf.

47. Angell, M. (2004) The TruthAbout the Drug Companies: HowThey Deceive Us and What To DoAbout It, Random House.

48. Gagnon, M.A. and Lexchin, J.(2008) ‘The cost of pushing pills: anew estimate of pharmaceuticalpromotion expenditures in theUnited States’, PLoS Medicine, p.5.


Blockbuster drugs

Increased investment is vital but it must bedesigned to produce therapeutic innovation; theold model of blockbuster drugs is broken. Despitethis the industry maintains its focus on findingthe next big blockbuster – a drug which grossesover $1 billion. Even those within the industryaccept that this model of blockbusters is unsus-tainable. A city analyst argued that ‘For the firsttime in history, the industry will have negativegrowth in 2011’50 and Bain & Co. consultantPreston Henske stated that ‘the blockbusterbusiness model is irreparably broken’.51 Thissearch for the cash cow to carry them through thenext decade is no longer a sustainable model: tomove forward the industry must become moreflexible.

The blockbusters that are currently sustainingthese large companies are being lost as theirpatent life expires. When a drug loses patent, salesof blockbuster drugs can often fall by up to 90%within a year through competition from cheapergeneric versions. Blockbuster drugs account for60% of the $245 billion (circa £136 billion) insales of the ten leading pharmaceuticalcompanies.52 The majority of top earning drugsthat were patented in the 1990s face expirationwithin the next few years, and 80 drugs thatcurrently account for about 25% of drug sales willlose their patent between 2007 and 2011.53

Between 2008 and 2011 $40 billion (circa £22billion) in global sales by the top pharmaceuticalcompanies will be lost.54 See table 4.

It is estimated that to continue as we are,firms would on average need to introduce one

49. Fierce Pharma (2009) ‘Top 15Big Pharma paychecks of 2008’,www.fiercepharma.com/special-reports/top-paychecks-big-pharma(accessed 1 January 2009).

50. Alexis de Rosnay, global co-head of healthcare at LehmanBrothers, quoted in Saigol, L.(2008) ‘A painful prognosis for bigpharma’.

51. Arnst, C. (2004) ‘The waning ofthe blockbuster drug’, BusinessWeek,18 October, www.businessweek.com/magazine/content/04_42/b3904034_mz011.htm.


53. Ibid.

54. Forbes (2006) ‘Drug patentexpiration’.

55. ‘Generics to soothe your drugbudget’ (2008) BusinessWeek,http://images.businessweek.com/ss2008/02/0206_generic_drugs/index_01.htm (accessed 1 September2008).

56. Predicted loss of sales is basedon total annual sales in 2007.


Table 3Top ten executive pay and remuneration packages in the pharmaceutical industry, 200849

CEO Pharmaceutical company Pay ($m) Pay (circa £m)

MilesWhite Abbott 33.4 16.366

Fred Hassan Schering-Plough 30.1 14.749

BillWeldon Johnson & Johnson 25.1 12.299

Bob Essner Wyeth 24.1 11.809

Robert Parkinson Baxter 17.6 8.624

Daniel Vasella Novartis 15.5 7.595

Richard Clark Merck 14.5 7.105

Frank Baldino Cephalon 13.5 6.615

Sidney Taurel Eli Lilly 13.0 6.370

Jeff Kindler Pfizer 12.6 6.174

Table 4 Major patents that expired in 200855

Drug Company Indication Predicted loss Predicted loss Patent lossof sales ($)56 of sales (circa £) date

Fosamax, Merck osteoporosis 3 billion 1.5 billion 6 Feb.

Advair GlaxoSmithKline asthma 6 billion 3 billion 12 Feb.

Serevent GlaxoSmithKline asthma 500 million 251 million 12 Feb.

Sonata Wyeth insomnia 85 million 42.6 million 6 June

Effexor XR Wyeth depression 3.7 billion 1.86 billion 13 June

Lamictal GlaxoSmithKline bipolar disorder 2 billion 1 billion 22 July

Topamax Ortho McNeil epilepsy and migraine 2.5 billion 1.25 billion 26 Sept.

Casodex AstraZeneca prostate cancer 1.2 billion 600 million 1 Oct.

Trusopt Merck glaucoma 700 million 353 million 28 Oct.

new product each year that would sell $4.9million (circa £2.7 million) for each 1–1.5% ithas of the world pharmaceutical market inorder to sustain current levels of growth.Therefore, a company the size ofGlaxoSmithKline would need three to sevennew products each year. Thus the real problembecomes ever more apparent, namely thatresearch productivity is failing and none of themajor companies is close to the target.57

This loss of patents will affect all companies asnone seem free of it.

The ideal product to become a blockbusterdrug is one that can be patented, is used by alarge number of people over a lengthy period oftime, can be priced high in relation to produc-tion costs and has a large western market. It is inthe interests of business to create drugs thatmust be taken over an extended period of timeand it should not be a surprise that anti-psychotics and statins are consistently the best-selling drugs.58 These are the ideal blockbusterdrugs and have dominated R&D trends in mostlarge pharmaceutical companies. However, withthe declining success of this blockbuster modelwe will need to see a decrease in spending onmarketing and advertising and an increase inspending in R&D, looking not just at traditionaldevelopment models, but being much moreflexible.

Me too, me again and me as well

Half of R&D spending by the industry is spenton drugs that add little to the physician’s arma-mentarium; they are so-called me too drugs.59

Although these have limited therapeuticadvancement they do provide product innova-tions that have commercial advantages to thecompanies that produce them. There are thosewho defend me-too drugs, as providing moretherapeutic options and enhancing competi-tion.60 Up to a point they are right; productinnovation can improve drugs and provide adegree of choice. However, this must ultimatelybe about balance, as while to a certain levelproduct innovation can be positive, if taken toofar it consumes R&D investment to thedetriment of therapeutic innovation; itincreases the number of drugs on the market

and ensures that new more expensive drugs arealways being prescribed, regardless of theefficacy of cheaper alternatives. It should notsurprise us that since 1996 less than half of thedrug innovations (NMEs) licensed andproduced in the US have offered therapeuticadvances (see table 2).

The production of me-too drugs takes up vastamounts of R&D investment, and is also using uplarge amounts of public money. A recentextensive study by Morgan et al. in 2005 foundthat in British Columbia 80% of the increase indrug expenditure between 1996 and 2003 wasspent on the use of new, patented drug productsthat did not offer substantial improvements oncheaper alternatives available before 1990. Thereport concluded that:

The rising cost of using these me-too drugs atprices far exceeding those of time tested competi-tors deserves careful scrutiny.62

Morgan et al. went on to argue that because thelist of top 20 drugs in global sales includes newlypatented versions of drugs in long-establishedcategories – namely drugs that were marketedbefore 1990, such as angiotensin-convertingenzyme inhibitors, statins, selective serotoninreuptake inhibitors, and proton pump inhibitors– ‘me-too drugs doubtless dominate spendingtrends in most developed countries’.63 The invest-ment decisions of the pharmaceutical industryare influencing the costs of drugs to the govern-ment and society. The decisions made by theindustry affect not only the shareholders, but alsosociety as a whole.

57. Horrobin, D.F. (2000)‘Innovation in the pharmaceuticalindustry’, Journal of the RoyalSociety of Medicine, 93, pp.341–5.

58. IMS Health (2004).

59. Goozner, M. (2004) The $800Million Pill.

60. See Calfee, J.E. (2000) Prices,Markets and the PharmaceuticalRevolution, American EnterpriseInstitute Press; diMasi, J. andPaquette, C. (2004) ‘Theeconomics of follow-on drugresearch and development trendsin entry rates and the timing ofdevelopment’, Pharmacoeconomics,22 (Suppl. 2), pp.1–14.

61. Hollis, A. (2004) Me-too Drugs:Is There A Problem?, World HealthOrganisation, www.who.int/intellectualproperty/topics/ip/Me-tooDrugs_Hollis1.pdf (accessed15 March 2008).

62. Morgan, S.G. et al. (2005)‘“Breakthrough” drugs and growthin expenditure on prescriptiondrugs in Canada’, British MedicalJournal, 331, pp.815–16.

63. Ibid.


What is a me-too drug?

Me-too drugs – also called ‘follow on’ drugs –are products that largely duplicate the action ofexisting drugs.61 Defined as drugs that havealmost identical clinical outcomes to existingdrugs, me-too drugs provide little additionalvalue in therapeutic terms. For example, we nowhave at least eight different statins, includingMevacor, Lipitor, Zocor, Pravachol, Lesco,Vytorin, Simcor and Crestor.

Where is innovationactually coming from?

The pharmaceutical industry argues that it is theonly body capable of innovation. However, thisargument should be challenged as the currentmodel of innovation is shifting; innovative break-throughs are not coming from the giants of theindustry but are starting in publicly fundedresearch and small bio-tech firms.

The majority of drugs that are therapeuticallyinnovative have their roots in publicly fundedresearch; 70% of NMEs that have entered themarket over the last decade were discovered inpublicly funded science.64 $27 billion (circa £16billion) is spent on publicly funded R&D in theUS each year, this is nearly equal to what thepharmaceutical industry claims it spends onR&D.65 However, UK public investment lagsslightly behind; currently £1.5 billion is investedannually on publicly funded R&D, while theindustry estimates its own spending is £3.2billion.

Innovation and drug development is takingplace very successfully in publicly funded institu-tions in the UK, the US and across Europe. Thisresearch is often used subsequently by theindustry to make vast sums in profit.

Key points� The cost of drugs is growing in the UK,

Europe and the US at a faster rate than that ofGDP.

� Innovation is declining in terms of productinnovation and therapeutic innovation.

� The current industry model is unsustainable.� To ensure useful therapeutic drugs continue

to be developed greater investment in R&D isneeded by the industry.

� Increased public investment in therapeuticinnovation and drug development is alsonecessary.

� Supervision and regulation should be put inplace to ensure therapeutic innovation isprioritised.

Possible solutionsIn February 2007 the Office of Fair Trading(OFT) released a comprehensive review of thePharmaceutical Price Regulation Scheme andcalled for essential reform of the price controls of

drugs, which would begin to address the issue ofescalating drug prices as well as incentivising theproduction of therapeutic advancement overproduct advancement.

The OFT report identified a number of drugswhere prices are significantly out of line withpatient benefits, including treatments for choles-terol, blood pressure and stomach acid. It recom-mended that the current ‘profit-cap- and price-cut’ scheme be replaced with a patient-focussed,value-based pricing scheme, in which the pricesthe NHS pays for medicines reflect the thera-peutic benefits they bring to patients.

This would offer greater value for money forpatients and encourage the right sort of invest-ment for pharmaceutical companies. The OFTestimates that this would free up £500 million peryear of public money, which could be investedelsewhere.

The UK government has recently pushed asimilar, if less radical, proposal, where the industryhas agreed to reduce prices for less effective drugsin the short term with the promise of prices rising ifthe drugs’ efficacy is shown to be greater thanpreviously expected. It is hoped that this schemewill reduce spending on drugs by £390 million in2009, which is certainly a step in the right direction.However, the proposal does not go nearly farenough, as it still focuses on commercial interestsover public health interests. The governmentshould also be looking now at how its pricingsystem could encourage therapeutic innovation.

This is not the only method of regulation.Alternatives are:

� to consider regulating more stringentlythrough the MHRA, as suggested later in thisreport

� to consider suggestions made in 2003 byAnthony Harrison, from the health think-tank the King’s Fund, who argued thatgovernment should take a more active role inrelation to the research agendas of pharma-ceutical companies by setting up a healthresearch and healthcare taskforce, whichwould identify key areas of need.66

As the colossus that is the pharmaceuticalindustry struggles and its innovation and drugdevelopment grinds to a slow and painful halt it ishard to see any other future beyond a dramatic

64. Goozner, M. (2004) The $800Million Pill; United NationsDevelopment Programme (1999)Human Development Report,Oxford University Press.

65. Mcclellan, M.B. (2003)‘Technology and innovation: theireffects on cost growth of health-care’, Statement before the JointEconomic Committee USCongress, 9 July,www.fda.gov/ola/2003/healthcare0709.html (accessed 1 September2008).

66. Harrison, A. (2003) Getting theRight Medicines? Putting PublicInterests at the Heart of Health-related Research, King’s Fund.


decline in drug development. However, to ensurethat drug development and innovation continuesit is necessary to facilitate the growth of academicresearch and small bio-tech firms supported bygovernment-funded clinical trials. This is why itis vital that any saving made through price cutsshould be hypothecated to support our scienceinfrastructure – this would encourage a mixedeconomy where innovation could happen and thedependence on the big pharmaceuticalcompanies and the market could be mitigated.

The pharmaceutical industry is too importantto fail. We cannot allow what could be one of thegreatest of the UK’s achievements to collapse. Wemust learn the lessons of the banking crisis andstep in now, before it is too late.


2. Bias inindustry-sponsoredclinical trials

Evidence suggests that industry influence overclinical trials has resulted in biased science. Whena drug is sold it is not sold alone but as part of apackage of science. The efficacy of the drug isbelieved in because of the science that supports it.However, through systematic bias created inclinical trials inaccurate information is publishedand used as evidence when it comes to licensingdecisions on the safety, efficacy and quality ofdrugs, and this in turn affects prescribingpractices of doctors.

The gold standard of science:randomised controlled trials

Who controls randomisedcontrolled trials?

The vast majority of RCTs are commissioned,conducted and in consequence controlled bypharmaceutical companies, which make higherprofits if the trial reaches favourable conclusions.Trials are often managed by contract research

organisations (CROs). These are often consider-ably cheaper for the company and can also meanthat concealing unfavourable data is easier than ifresearch is conducted through a university. Inpartnership with the sponsoring company, CROsdesign, write and carry out clinical trials. Indeedit should not surprise us when it is said that‘Companies may design studies likely to favortheir products’.70 The drug companies or CROsalso then assess the data, ‘providing the spin...that favors them’.71

Industry influence and bias

Why bias a drugs trial?A lot rides on the results of a company’s drug trials;a large trial published in a major journal has thejournal’s ‘stamp of approval’ and is therefore ahighly valuable commodity. In turn these trials alsoaffect licensing decisions.72 A negative result canpose a financial risk to the company. In the worstcases, the failure of a drug to show efficacy, or toraise safety concerns, can cancel the pipeline. Thuspressure may be exerted by the company to show afavourable outcome and this can result in a bias inthe design, outcome and reporting of industry-sponsored research.73

The failure of drug companies to adhere toethical and clinical principles governing how theyconduct trials and subsequently publish themcould have adverse effects on patients if theyoverestimate the benefits and underestimatepotential harm. Coultas identifies that fabrica-tion, falsification and plagiarism are the tradi-tional criteria for research misconduct, but thatother more subtle behaviour, such as withholdingrelevant clinical trial data, may cause greaterthreats to public safety and trust in the researchenterprise.74

Industry influence creates biasWithin the scientific community it is increasinglyrecognised that the industry’s influence iscreating a bias in RCTs. Richard Horton, editor ofthe Lancet, and Richard Smith, previous editor ofthe British Medical Journal, argue that ‘deliberateslicing and manipulations of trial data canprovide a seriously misleading picture’.75

In the 1980s Elina Hemminki76 revealed biasedunder-publication of industry-sponsored studies

67. Lachin, J.M. (1998) ‘RCTs areconsidered the most reliable formof scientific evidence in healthcarebecause they eliminate spuriouscausality and bias’; Lachin, J.M.,Matts, J.P. and Wei, L.J. (1988)‘Randomization in clinical trials:conclusions and recommendations’,Controlled Clinical Trials, 9(4), 365–74.

68. See also: Jüni, P., Altman, D.G.and Egger, M. (2001) ‘Systematicreviews in healthcare: assessing thequality of controlled clinical trials’,British Medical Journal, 323, pp.42–6;Schulz, K.F., Chalmers, I., Hayes, R.J.and Altman, D.G. (1995) ‘Empiricalevidence of bias: dimensions ofmethodological quality associatedwith estimates of treatment effectsin controlled trials’, Journal of theAmerican Medical Association, 273,pp.408–12; Chalmers, T., Celano, P.,Sacks, H. and Smith, H. (1983) ‘Biasin treatment assignment incontrolled clinical trials’, NewEngland Journal of Medicine, 309,pp.1358–61; Emerson, J.D., Burdick,E., Hoaglin, D.C., Mosteller, F. andChalmers, T.C. (1990) ‘An empiricalstudy of the possible relation oftreatment differences to qualityscores in controlled randomizedclinical trials’, Control Clinical Trials,11, pp.339–52.

69. Wyatt, J. (1991) ‘Use andsources of medical knowledge’,Lancet, 338, pp.1368–73.

70. Bodenheimer, T. (2000) ‘Uneasyalliance – clinical investigators andthe pharmaceutical industry’, NewEngland Journal of Medicine, 342,pp.1284–6.

71. Ibid.

72. Smith, R. (2005) ‘Medicaljournals are an extension of themarketing arm of pharmaceuticalcompanies’, PLoS Medicine, 2(5),www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0020138(accessed 6 July 2009)

73. Bero, L.A. and Rennie, D.(1996) ‘Influences on the quality ofpublished drug studies’, InternationalJournal of Technology Assessment inHealthcare, 12, pp.209–37.

74. Coultas, D. (2007) ‘Ethicalconsiderations in the interpretationand communication of clinical trialresults’, Proceedings of the ATS, 1May, 4(2), pp.194–9; Sleight, P.(2004) ‘Where are clinical trialsgoing?: society and clinical trials’,Journal of Internal Medicine, 255,pp.151–8.

75. Horton, R. and Smith, R. (1999)‘Time to register randomisedtrials’, Lancet, 354, pp.1138–9.

76. Hemminki, E. (1980) ‘Study ofinformation submitted by drugcompanies to licensing authori-ties’, British Medical Journal, 280,p.833–836;.

Randomised controlled trials

The randomised controlled trial (RCT) is thegold standard of evidence-based medicine andthe best route to ensure that unbiasedknowledge is available to judge the safety andefficacy of a drug.67 In consequence it is nosurprise that RCTs are a vital aspect of scientificanalysis of the efficacy and safety of a drug.68

After the thalidomide disaster in the 1960s,regulation was introduced requiring producersof a drug to provide the necessary RCT forlicensing. The body that currently regulates thisin the UK is the MHRA.Additionally, RCTs affecthow doctors practise medicine and as a resultimpact directly on our health.69

as a particular concern. Hemminki found that if aclinical trial had been designed to look foradverse effects of drugs it was far less likely to bepublished than studies that had not looked foradverse drug reaction. This could suggest theadverse drug reactions caused by drugs werebeing covered up in industry-sponsored trials bywithholding them from publication. In 1994Rochon and colleagues studied 57 industry-sponsored trials of non-steroidal anti-inflamma-tory drugs for the treatment of arthritis pain andfound that not one of these published trialsshowed unfavourable results to the industry.77

Again this is highly suggestive of an industry bias.In 1997 a study by Stern and Simes stated that:

This study confirms the evidence of publicationbias found in other studies and identifies delay inpublication as an additional important factor.78

This shows that where unfavourable results werefound, delays in publication were very common;these delays could be seen to be a method ofdamage control by the industry. A further studyin 1997 into the relative efficacy of a treatment forpost-operative vomiting and nausea concludedthat:

A false impression of… efficacy may arise becausea quarter of all relevant published reports areduplicates, and reporting of study results is uncrit-ical.79

This suggests that not only are we seeing a biasedunder-publication of unfavourable trials, but alsointerestingly what appears to be a biased over-publication of favourable trials and uncriticalreporting of the trials methodology and results.

In 1999 Friedberg and colleagues found thatstudies funded by the pharmaceutical industrywere eight times less likely than independentlyfunded research to reach unfavourable qualitativeconclusions and that one in five contained quali-tative over-statements of quantitative results –namely the conclusions were not supported bytheir evidence.80 A further study by Jørgensen etal. in 2006 found:

Industry supported reviews of drugs should beread with caution as they were less transparent,had few reservations about methodological limita-

tions of the included trials, and had morefavourable conclusions than the correspondingCochrane reviews.81

A further study in 2007 into the relationshipbetween the conclusions of meta-analysis and thefinancial sponsorship of the study concluded that:

Meta-analyses on antihypertensive drugs and withfinancial ties to one drug company are… associ-ated with favourable conclusions.82

Epstein (2007) also concludes that differences ininterpretation of results between meta-analysesfunded by drug companies and those that are notraise concerns about the reliability of studiesfunded by the industry.83

This assessment of the methodological quality ofa trial is intricately intertwined with the quality ofthe reporting of trials – the extent to which a reportprovides information about the design, conduct andanalysis of the trial. In 2001 Jüni et al. argued:

77. Rochon., P.A. et al. (1994) ‘Astudy of manufacturer-supportedtrials of non steroidal anti-inflam-matory drugs in the treatment ofarthritis’, Archives of InternalMedicine, 154, pp.157–63.

78. Stern, J.M. and Simes, R.J.(1997) ‘Publication bias: evidenceof delayed publication in a cohortstudy of clinical research projects’,British Medical Journal, 315,pp.640–5.

79. Tramer, M.R., Moore, R.A.,Reynolds, D.J.M. and McQuay, H.J.(1997) ‘A quantitative systematicreview of ondansetron intreatment of established postop-erative nausea and vomiting’,British Medical Journal, 314, p.1008.

80. Friedberg, M. et al. (1999)‘Evaluation of conflict of interestin eco analysis of new drugs usedin oncology’, Journal of theAmerican Medical Association,282(15), pp.1453–7.

81. Jørgensen, A.W. et al. (2006)‘Cochrane reviews compared withindustry supported meta-analysesand other meta-analyses of thesame drugs: systematic review’,British Medical Journal, 333, p.782.

82. Yank, V., Rennie, D. and Bero,L.A. (2007). ‘Financial ties andconcordance between results andconclusions in meta-analyses:retrospective cohort study’, BritishMedical Journal, 335, pp.1202–5.

83. Epstein, R.A. (2007). ‘Influenceof pharmaceutical funding on theconclusions of meta-analyses’.British Medical Journal, 335, p.1167.


What are Cochrane reviews?

A Cochrane review is a review carried out bythe Cochrane Collaboration, which is a not-for-profit, independent organisation formed in1993.It consists of more than 11,500 healthcarespecialists in over 90 countries. They carry outrigorous, systematic reviews of high-qualityclinical trials on the use of conventional andalternative treatments. Their reviews aredeemed to be independent and of a very highquality as they attempt to evaluate and interpretall the research evidence on a topic to helphealth professionals and others make informeddecisions about healthcare. Cochrane reviewsare therefore often used as a point of referenceor a comparison to other trials or reviews,which are deemed less scientifically rigorous.

What is meta-analysis?Meta-analysis is a statistical method ofcombining the results of numerous individualtrials. In combining numerous studies meta-analysis is thought to show the overall efficacyand safety of a drug or medical intervention.

There is ample evidence that many trials aremethodologically weak and increasing evidencethat deficiencies translate into biased findings ofsystematic reviews.84

Fiona Godlee, current editor of the BritishMedical Journal, stated in 2008:

The evidence that industry funding biases thedesign and reporting of clinical research is over-whelming.85

The government must step in to create thenecessary regulatory structure to ensure that thisis no longer allowed to continue.

Key points1 The industry designs, manages, funds and

controls the majority of clinical trials.2 These clinical trials are used to make licensing

decisions and influence prescribing practices.

3 Trials sponsored by the industry have beenshown to contain significant bias in favour ofthe industry sponsor.

Possible solutions� This report recommends a mandatory disclo-

sure of the results from the drug trials similar tothe disclosure that is now mandatory in the USas a result of legislation passed in 2007; infringe-ment of this legislation results in fines, withnaming and shaming of repeat rule breakers. Itcovers all trials, which must be registered withan ethics committee, and demands that all datamust be made available within one year of theend of a trial.87 This report recommends that asimilar scheme should be operated in the UK.

� This report also recommends that a nationalstandards committee should be set up, whichwould assesses the quality of drug trials andaim to put in place a national set of standardsto which all clinical trials need to attain before

84. Jüni, P., Altman, D.G. and Egger,M. (2001) ‘Systematic reviews inhealthcare’.

85. Godlee, F. (2008) ‘Doctors andthe drug industry’, British MedicalJournal, 336, www.bmj.com/cgi/content/full/336/7634/0 (accessed 7July 2009).

86. Feinstein, A.R. (1995) ‘Meta-analysis: statistical alchemy for the21st century’, Journal of ClinicalEpidemiology, 48, pp.71–9.

87. Groves, T. (2008) ‘Mandatorydisclosure of trial results for drugsand devices’, British Medical Journal,336, www.bmj.com/cgi/content/extract/336/7637/170(accessed 7 July 2009).

88. This is an imaginary step-by-stepguide on how bias can be and onoccasion has been created in aclinical drugs trial.

89. Manning, M. (2006)‘Pharmaceutical businessmen branchout to start contract research firm’,Tampa Bay Business Journal,www.bizjournals.com/tampabay/stories/2006 2008/21/story4.html(accessed 1 September 2008).

90. Press Association (2004) ‘SSRIdangers for children suppressed’,Guardian, www.guardian.co.uk/society/2004/apr/23/mentalhealth.medicineandhealth (accessed 1September 2008).

91. Henderson, L. (2000) ‘MoreAMCs finding growth from reform’,CenterWatch Newsletter, 7(6), pp.1,10–13.

92.. In the case of Vioxx there is agrowing body of evidence that high-lights an early awareness of the riskit increases the chances of unevenarrhythmia; the trials were deliber-ately designed to conceal this; seeKrumholz et al. (2007) ‘What havewe learnt from Vioxx?’, BritishMedical Journal, 334, pp.120–3.

93. Krumholz et al. (2007) ‘Whathave we learnt from Vioxx?’

94. Tierney, J.F. and Stewart, L.A.(1999) ‘Investigating patient exclusionbias in meta analysis’, InternationalJournal of Epidemiology, 34, pp.79–87;Hollis, S. and Campbell, F. (1999)‘What is meant by intention to treatanalysis? Survey of publishedrandomised controlled trials’, BritishMedical Journal, 319, pp.670–4;Fergusson, D., Aaron, S.D., Guyatt,G. and Hebert, P. (2002) ‘Post-randomisation exclusions: theintention to treat principle andexcluding patients from analysis’,British Medical Journal, 325, pp.652–4.

95. Tramer, M.R. et al. (1997) ‘Aquantitative systematic review ofondansetron in treatment ofestablished postoperative nauseaand vomiting’, British MedicalJournal, 314, p.1088.

96. Wazana, A. (2000) ‘Physiciansand the pharmaceutical industry: isa gift ever just a gift?’, Journal ofthe American Medical Association,283, pp.373–80.

Bias in industry-sponsored clinical trials | 23

How to bias a drugs trial… and not get caught!88

1. Always contract out your clinical trials to a CRO – they have the added bonus of being cheaper89 and anynegative results can be more easily covered up if the conclusions are not what you wanted them to be.90

CROs have received the lion’s share of clinical trial revenue. In 2000 in the US CROs received 60% ofresearch grants from the industry, compared with 40% for academics.91

2. To make sure that your drugs trial comes up with favourable results ensure a subtle bias in selection,detection or attrition:� Selection bias – make sure you have an uneven allocation of participants in each of your comparison

groups. Perhaps you could screen out any individuals with a history of a disease that means that evenif your drug increases the risk it is much less likely to show up and can therefore easily be understatedin your conclusion!92

� Detection bias – make sure you have a biased assessment of outcome, for example, if you are worriedthat your new drug may cause arrhythmia, simply make sure you don’t have a cardiologist on hand.93

� Attrition bias – biased occurrences and handling of deviations from protocol. In all trials a certain numberof patients will not complete a trial; if this number is less than 5% there is little to worry about, however,if it is more than 20% we should be concerned.This drop-out rate is often ignored or underestimated inreporting of trials this can gives a more favourable result for the trial than is entirely accurate.94

3. Even once your trial has been completed you can still act to create bias. If the results don’t say what youwant, you have two options: cover-up the results toensure the report does not get published95 If it saysonly mediocre things, have a conclusion that says nice things and get it published anyway.96

4. Once this process is completed try and get your study published in a major journal and ensure that this publi-cation is reprinted and sent out to GPs and other opinion leaders.That way the maximum number of peoplewill hear about it.Also fingers crossed your study will be included multiple times in any meta-analysis!

licensing or publication. Truly independenttrials are only possible post-licensing as aresult of the right to commercial secrecy.However, the costs of post-licensing trials aremassively prohibitive unless they aresupported by the company. Therefore, stepsshould be made to allow post-licensingclinical trials by independent bodies, but alsogreater transparency in industry-sponsoredones. To do this, academic involvement in thedesign and assessment of trials is paramount.

� This report would also support proposalssuch as those put forward by John Abrahamfor independently conducted research trials.Such trials could be paid for by an industrylevy and would be transparent and availablefor scientific scrutiny throughout.97 By thetime a drug or pharmaceutical product hasreached phase 3 trials it has already beengranted patent rights, as such independentphase 3 trials would not be commerciallydamaging for the industry, but they wouldallow a greater degree of transparency.

97. Abraham, J. and Lawton Smith,H., eds (2003) Regulation of thePharmaceutical Industry, Palgrave;Abraham, J. and Sheppard, J. (1999)The Therapeutic Nightmare: the BattleOver the World’s most ControversialSleeping Pill, Earthscan


3.The medicalprofession and thepharmaceutical industry

Because of the shareholder structure of mostpharmaceutical companies they are required toincrease their market share. One obvious way ofdoing this is by influencing the prescribers ofmedicine: doctors, nurses and pharmacists.However, the prescribers of medicine’s mainpriority is to improve the health of their patients;this can result in a conflict of interests. As a resultthe relationship between health professionals,particularly doctors, and the industry can beproblematic for the independence of the medicalprofession. Also attempts to influence prescribingpractices are diverting attention and investmentaway from therapeutic innovation and towardsincreasing market share through biasingprescribing practices.

The drugs that each of us takes are trusted,not because we as individuals know or under-stand the complex chemical processes that areinvolved as we swallow the pill, but oftenbecause we simply trust in the independent andunbiased information provided to us by ourdoctor, nurse or pharmacist. Years of medicaltraining and continuing postgraduate educationare designed to ensure that these professionalgroups of people can provide us with the infor-mation and treatment that we need. In thisparadigm the individual depends on the medicalprofession, and any publicly available informa-tion through the NHS, for unbiased informationon treatments. However, within this dependencya different story is also apparent, a story inwhich the information the doctors have isactually biased, and the growing influence of theindustry over doctors has resulted in non-rational prescribing practices, which are poten-tially damaging the curative potential of ourhealth service.

The industry influence can be either subtle anddiscreet, or explicit. The higher level of independ-ence for doctors in the US in prescribing practicesmakes industry influence more explicit there. Inthe UK the mass purchasing power of the NHS

has empowered society, and as a result industryinfluence, although still apparent, is certainly lessexplicit.

In the UK and the US doctors’ interaction withpharmaceutical representatives begins in medicalschool. According to a study in the US in 2000 byWazana, this contact continues at a rate of aboutfour times per month for the rest of their career.98 Ina study by Campbell et al. in 2007, 94% of physi-cians in the US reported having a relationship withthe industry: more than a third received reimburse-ment for costs associated with meetings or contin-uing medical education, and more than a quarter(28%) received payments for consulting, givinglectures or enrolling patients in trials.99 Thesemeetings, attendance at lunches, and even gifts offree pens are associated with increased prescriptionrates of the sponsor’s medication. This degree ofcontact led Wazana to conclude:

The present extent of physician-industry interac-tions appears to affect prescribing and profes-sional behaviour and should be further addressedat the level of policy and education.100

In his book Overdosed America JohnAbramson101 points to the dominance of theindustry in relation to prescribing practices andits role in the current crisis in the medical system.Indeed the growing body of evidence on theimpact of the pharmaceutical industry on themedical profession led Jerry Kassirer, formereditor of the New England Journal of Medicine, toargue that the pharmaceutical industry has‘deflected the moral compasses’ of many doctorsand health professionals.102

It is clear that the industry recognises the salespotential gained through contact with doctors. Aninternal study carried out by Merck & Co. in the USestimated that the ‘return on investment’ especiallyfrom doctor-led discussion groups was significant.The study goes on to show that doctors whoattended a lecture given by another doctor wrote anadditional $623.55 (circa £353) worth of prescrip-tions for the painkiller Vioxx over a 12-monthperiod compared with doctors who didn’t attend.Doctors who participated in the more intimatediscussions wrote an additional $717.53 (circa £405)worth of prescriptions for Vioxx.103

It is fair to suggest that industry influence inthe UK is less significant than in the US, yet we

98. Wazana, A. (2000) ‘Physiciansand the pharmaceutical industry: isa gift ever just a gift?’, Journal ofthe American Medical Association,283, pp.373–80.

99. Campbell, E.G. et al. (2007) ‘Anational survey ofphysician–industry relationships’,New England Journal of Medicine,356, pp.1742–50.

98. Wazana, A. (2000) ‘Physiciansand the pharmaceutical industry: isa gift ever just a gift?’

101. Abramson, J (2004)Overdosed America: The BrokenPromise of American MedicineHarper Collins

102. Kassirer, J.P. (2004) On theTake: How Medicine’s ComplicityWith Big Business Can EndangerYour Health. Oxford UniversityPress.

103. Hensley, S. and Martinez, B.(2005) ‘To sell their drugs,companies increasingly rely ondoctors’, Wall Street Journal,http://online.wsj.com/article/SB112138815452186385.html?mod=todays_us_page_one (accessed 1September 2008).

should see the situation in the US as a warning ofthe potential route if regulation in this arearelaxes.

However, this does not mean that the UK isfree from industry bias. The pharmaceuticalindustry is heavily relied upon for information byGPs and is argued to be the first port of call indecision making; while GPs are aware of thepossible bias they generally considered informa-tion provided by the drugs industry factuallyaccurate.104 The 2007 National Audit Officereport found that ‘it was difficult for GPs toassimilate all the information they received onprescribing’.105 This difficulty could in turn exac-erbate industry influence.

In the UK the pharmaceutical industrysponsors over two-thirds of all medical postgrad-uate education and information.106 The annualmarketing budget by the industry for medicaleducation is estimated to be £1.65 billion in theUK; this is just under half the total amount spentby the industry on R&D in the UK. TheDepartment of Health spends the equivalent ofjust 0.3% (£4.95 million) of this on publishingindependent information on prescribingpractices.107 In an increasingly complex health-care system we must recognise the potentiallydamaging influence and power of a few pharma-ceutical companies, which encourage increasedspending on drugs that may have a cheapergeneric alternative and on drug therapies overalternative therapies.

At this stage it is important to mention thatalthough society depends on the industry fordrugs and the information on them, increasinglythere are alternative sources of information. Inthe UK, for example, we now have the ‘map ofmedicines’, which provides guidance for doctorson best prescribing practice. We also have a bodyof NICE guidelines, which can assist doctors inprescribing decisions. These are vital sources ofinformation; however, they are not enough tocombat the influence of the pharmaceuticalindustry and we should therefore think seriouslyabout how we can limit this influence.

It is not inaccurate to suggest that doctors andother medical professionals are influenced by theindustry. Intelligence and education do notprotect people from being misled. Invisible biasaffects us all, and marketing and advertising arepowerful tools.108 But with the apparent decline in

innovation and the growing cost of drugs weshould certainly ask whether it is right that suchan industry rather than an independenteducation is influencing our health decisions.

There are many possibilities in terms of policysolutions, but what is not in doubt is the realitythat there is a conflict of interests betweendoctors’ commitment to patient care and thedesire of pharmaceutical companies and theirrepresentatives to sell their products. Indeed asinternational expert Harvard professor DavidBlumenthal asks, ‘Why would for-profitcompanies… pour more than a billion dollars ayear into continuing medical education withoutthe expectation of gaining anything from it?’109

This poses a significant challenge and govern-ment must work with the medical profession tolimit it.110

Key points1 There is a significant degree of contact

between the pharmaceutical industry andmedical professionals.

2 The pharmaceutical industry invests heavilyin influencing doctors.

3 There is a conflict of interest between doctors’need to treat patients, and the pharmaceuticalindustry’s desire to sell their drugs.

4 Influence by the pharmaceutical industry canalter the prescribing habits of doctors; thiscould result in increased costs to the NHS andunnecessary risks to the patient.

Possible solutionsThese are some alternative methods of ensuringnon-biased prescribing practices:

� The ‘no free lunch pledge’111 states: ‘I amcommitted to practising medicine in theinterests of my patients and on the basis of thebest available evidence, rather than on thebasis of promotion.’ This is an interestingscheme and has huge potential; it is beingtaken seriously by many doctors in the UK asmany doctors’ surgeries no longer allow phar-maceutical representatives to visit.

� Peter Mansfield from HealthySkepticism, agroup critical of pharmaceutical marketing,suggests that medical education could befunded by the taxpayer through a system ofcompetitive grants.112

104. Dobson, R. (2003)‘Pharmaceutical industry is the maininfluence in GP prescribing’, BritishMedical Journal, 326, p.301.

105. National Audit Office (2007)Prescribing Costs in Primary Care,www.nao.org.uk/pn/06-07/0607454.htm (accessed 8September 2008).

106. Moynihan, R. et al. (2002)‘Selling sickness’, British MedicalJournal, 324, pp.886–91.

107. BMJ (2005) ‘The influence ofbig pharma’, editorial, British MedicalJournal, 330, pp.855–6, www.bmj.com/cgi/content/full/bmj%3B330/7496/855 (accessed 8 January 2009).

108. Mansfield, P.R. (2007) ‘Is itinsulting to suggest that healthprofessionals are influenced by drugpromotion?’, www.healthyskepticism.org/news/2007/May.php(accessed 3 September 2008).

109. Moynihan. R. (2008) ‘Doctors’education: the invisible influence ofdrug company sponsorship’, BritishMedical Journal, 336, pp.416–17.

110. For further information seeBrennan, T.A. et al. (2006) ‘Healthindustry practices that createconflicts of interest: a policyproposal for academic medicalcenters’, Journal of the AmericanMedical Association, 295, pp.429–33;Chren, M.M. and Landefeld, C.S.(1994) ‘Physicians’ behavior andtheir interactions with drugcompanies: a controlled study ofphysicians who requested additionsto a hospital drug formulary’, Journalof the American Medical Association,271, pp.684–9; Steinman, M.A. et al.(2007) ‘Characteristics and impactof drug detailing for gabapentin’,PLoS Medicine, 4, p.e134; Bekelman,J.E., Li, Y. and Gross, C.P. (2003)‘Scope and impact of financialconflicts of interest in biomedicalresearch: a systematic review’,Journal of the American MedicalAssociation, 289, pp.454–65; Zipkin,D.A. and Steinman, M.A. (2005)‘Interactions between pharmaceu-tical representatives and doctors intraining: a thematic review’, Journalof General Internal Medicine, 20,pp.777–86; Steinman, M.A., Shlipak,M.G. and McPhee, S.J. (2001) ‘Ofprinciples and pens: attitudes andpractices of medicine housestafftoward pharmaceutical industrypromotions’, American Journal ofMedicine, 110, pp.551–7; Katz, D.,Caplan, A.L. and Merz, J.F. (2003)‘All gifts large and small: toward anunderstanding of the ethics of phar-maceutical industry gift-giving’,American Journal of Bioethics, 3,pp.39–46.

111. For further information on NoFree Lunch see www.nofreelunch.org/.

112. See www.healthyskepticism.org/fora/index.php?s=b8b779d63ad2f05e3d149ff9dc69694a(accessed 1 September 2008).


� Doctors could also be encouraged to makepublicly available information on all visits andgifts from the industry – on the internet andat doctors’ surgeries – to ensure patients areaware of any possible bias.

� Doctors could be encouraged to seek outalternative sources of information and begiven a budget to purchase it.

� Finally, trainee doctors should receive infor-mation and training on pharmaceuticalcompany representatives and how they exertinfluence. Further to this point steps could bemade to keep pharmaceutical representativesout of training hospitals and universities.

The medical profession and the pharmaceutical industry | 27

4.The pharmaceuticalindustry and the public

The pharmaceutical industry’s influence withinthe public sphere does not end with doctors;pharmaceutical companies are also highly activein influencing the general public. Each company’sfocus varies internationally and depending on theclassification of the drug. In the US, direct toconsumer advertising (DTCA) is allowed for alldrugs and expenditure by the pharmaceuticalindustry on marketing, and advertising is muchhigher than in the UK. In the UK, DTCA is onlylegal for over the counter medicines – which donot require a prescription – and as a result thereis a significant focus by the industry on targetingpatient groups.

This influence could create a bias in favour ofspecific patented drug treatments over othercheaper and even safer alternatives; it could alsoencourage drug treatment over other perhapslower risk treatments, with fewer side effects, andcould result in bias towards drugs which are moreexpensive or untested. This can be costly forpatients and society; it can be unsafe for thoseencouraged to take unnecessary risk on drugswhich may not have been rigorously tested – as isshown in the discussion on clinical trials – and itcreates intense tension between patient groupsand the government.

Marketing to the general public is big businessfor the industry and can prove highly lucrative. Ifyou take the example of Schering Plough’s block-buster Clarityn – a hayfever remedy – you can seethe appeal of marketing for the companies. In1998 Schering Plough spent $186 million (circa£109 million) promoting Clarityn, and as a resultrealised a half a billion dollar increase in salesyear on year to achieve annual sales of $1.9 billion(circa £1.14 billion) in 1999.113 Further, afterDTCA regulation was relaxed in the US at the endof the 1980s, pharmaceutical companies’spending on DTCA grew rapidly during the1990s, reaching $2.47 billion (circa £1.7 billion)in 2000.114 The level of investment by the USpharmaceutical industry suggests they have aconsiderable effect on sales.115 Information on theefficacy of DTCA and its role in pharmaceutical

marketing is limited. However, in a survey of USexecutives from pharmaceutical and biotech-nology firms, 75% of respondents cited patienteducation as the top ranked marketing activitynecessary to improve sales figure of any drug.116 Itis important for patients to be informed ofpotential efficacy of drugs. However, the biascreated through what can be described asexcessive influence can create, or exacerbate, biasin favour of certain drugs and drug treatmentsmore generally, and may not be in patients’ bestinterest.

Patient groups

In the UK, because of the relatively stringentregulation of DTCA, the focus of pharmaceuticalmarketing rests with patient groups. There areover 2,000 patient or advocacy groups in the UK,and they provide invaluable information andsupport for their members. They are in somecases the only voices for vulnerable people in theface of illness, disability and discrimination.However, worryingly, these groups, whoseexistence in some cases is very hand to mouth,desperate for funding in order to continue to existand support their members, are accepting phar-maceutical industry funding. For the companythese ‘strong ties can advance corporate goals andbrand objectives’117 and for the patient group theycan limit both perceived and actual independenceand objectivity.

Pharmaceutical industry sponsorship ofpatient groups is widespread. Ball et al.examined websites of 69 patient groups for tenchronic conditions; 37 (54%) disclosed fundingsources, 31 of which received industryfunding.118 Of the groups that disclosedfinancial information, 83% had receivedfunding from the industry. This suggests that alarge proportion of patient groups are receivingsome funding from the industry. This fundingcan in some cases be a small proportion of theirbudget. However, Paul Flynn MP, in evidencegiven to the Health Select Committee, arguedthat for some patient groups pharmaceuticalcompany funding actually represents muchlarger percentages of their funding, up to 80%in some cases.119 For example, in 2007GlaxoSmithKline, one of the largest UK phar-

113. Maguire, P. (1999) ‘Howdirect to consumer advertising isputting the squeeze on physicians’,American Society of InternalMedicine Observer, March.

114. Fairfield, C.T. (2001) ‘USleading products by DTC spend,January 2000–December 2000’,IMS Health, www.imshealth.com/public/structure/dispcontent/1,2779,12031203143221,00.html(accessed 1 September 2008).

115. Mintzes, B. et al. (2002)‘Influence of direct to consumerpharmaceutical advertising andpatients’ requests on prescribingdecisions: two site cross sectionalsurvey’, British Medical Journal, 324,pp.278–9.

116. Abraham, J. and Davis, C.(2007) ‘Interpellative sociology ofpharmaceuticals: problems andchallenges for innovation andregulation in the 21st century’,Technology Analysis and StrategicManagement, 19, pp.387–402.

117. Durand, M. (2006) Pharma’sAdvocacy Dance.

118. Ball, D.E., Tisocki, K. andHerxheimer, A. (2006)‘Advertising and disclosure offunding on patient organisationwebsites: a cross-sectional survey’,BMC Public Health, 6, p.201.

119. Health – Minutes ofEvidence, www.publications.parliament.uk/pa/cm200405/cmselect/cmhealth/42/4112501.htm (accessed 1 September 2008);Evidence from Paul Flynn given toHouse of Commons Health SelectCommittee, www.publications.parliament.uk/pa/cm200405/cmselect/cmhealth/42/4112505.htm (accessed 1 September 2008).

maceutical companies, provided financialsupport to 55 patient groups in the UK, with atotal investment of £2.36 million.120 For someorganisations this was a very minimal amountof their total budget, but in some cases itequalled up to 25% of an organisation’s budget.This influence could be seen to affect suchorganisations’ behaviour directly or indirectly.

This bias can create tension between govern-ment bodies such as NICE and patient groups, asa report by the Independent argued.121 The reportstated that key organisations which have beenactive in attacking NICE had been sponsored bythe pharmaceutical industry.

The case is similar in Europe. A study byKirsten Schubert and Gerd Glaeske at BremenUniversity showed the influence of the pharma-ceutical industry over patient groups. The reportshowed that in 2005 health insurance companieswere the main sponsors of patients’ groups inGermany, spending a total of €28 million (circa£19 million). However, the report argues thatpharmaceutical companies are increasinglymoving in to the area. Schubert stated,‘Pharmaceutical firms have recognized thatpatient groups have a large influence’ and that‘members are often not aware of the involvementof the pharmaceutical industry’. The authors ofthe study recommend that all sponsorship bemade transparent.122

Key points1 Pharmaceutical companies invest large

amounts of money in influencing the generalpublic.

2 This can be done in a number of ways, themost concerning of which in the UK is thesponsoring of patient groups.

3 This can at worst create bias or at best theimpression of bias and can limit the inde-pendence of the group.

Possible solutions� Independent monitoring bodies could be

established to police marketing codes ofpractice and award real penalties.

� Increased attention could be paid to the spon-sorship of patient groups, with a focus ondecreasing pharmaceutical company funding.

� Additional funding could be provided topatient groups from the government for

educational purposes and to gain inde-pendent information. This would provide agreat opportunity to encourage a closerengagement between patient groups and theNHS as a form of co-production.123

� Pharmaceutical industry funding could bepooled in the form of a Blind Trust and thisfunding could then be provided to organisa-tions independent of industry influence.

120. GlaxoSmithKline,www.gsk.com/responsibility/cr_issues/patient-groups/uk-patient-organisations.htm (accessed 1September 2008).

121. Laurence, J. (2008) ‘Drugfirms bankroll attacks on NHS’,Independent,www.independent.co.uk/life-style/health-and-wellbeing/health-news/drug-firms-bankroll-attacks-on-nhs-947316.html (accessed 1September 2008).

122. Quoted in Tuffs, A. (2006)‘Sponsorship of patients’ groupsby drug companies should bemade transparent’, British MedicalJournal, 333, p.1238; Abraham, J.and Davis, C. (2007) ‘Interpellativesociology of pharmaceuticals’.

123. Gannon, Z. and Lawson, N(2008) Co-production, Compass.

The pharmaceutical industry and the public | 29

5.The humanconsequences ofmarket failure in thepharmaceutical industry

This report so far has looked at the behaviour of thepharmaceutical industry in what is in many ways alargely theoretical stance; what follows are four casestudies where bias in science and ineffective regula-tion have had human consequences. These areintended to illustrate the issues that insufficientregulation can contribute towards creating.

The happy pill – SSRI drugsThe first of the selective serotonin reuptakeinhibitors – SSRI drugs – was Zimelidine.Zimelidine was developed in the early 1980s for theSwedish company Astra AB. It was first sold in 1982,by 1983 it had been banned worldwide due toserious and fatal cases of central and peripheralneuropathy known as Guillain-Barré syndrome andsuicide ideation, particularly in younger people.124

This was not the end of SSRI drugs, as they arenow prescribed to 54 million people worldwide.SSRIs include Ciprmil, Dutonin, Efexor, Faverin,Lustral, Seroxat and – perhaps the most famous –Prozac. Prozac was first marketed by Eli Lilly in1987 as a new, safe anti-depressant, and by 1999 itwas providing Eli Lilly with more than 25% of its$10 billion revenue.

Eli Lilly cranked up its marketing machine atalmost the perfect moment, as previous treat-ments for depression had been deemed

dangerous and addictive; Prozac was marketed asan safe alternative. It was seen as the wonderdrug, and appeared across the media and evenfeatured on programmes like the The JerrySpringer Show as the answer to our prayers. Theday it was launched, patients were already askingfor it by name.125 It was, if not a medical miracle,certainly a marketing one.

During the 1990s and into this century theprescribing rates for Prozac and other SSRIs havegrown. In the UK between 1992 and 2001 thenumber of prescriptions of SSRIs for under-18sincreased tenfold, although no SSRIs werelicensed for use in children. In 2003, the NHSwarned against using all SSRIs in under-18sexcept Prozac, after studies showed theyperformed no better than a placebo, and camewith disturbing side effects, the most worrying ofwhich is suicide ideation.

While the number of prescriptions for SSRIsincluding Prozac booms, the science behind thiswonder drug is increasingly challenged. Prozac isbased on a theory that emotions are governed byserotonin levels. Thus the basic principle ofProzac is that by targeting serotonin levelsemotions could be managed. This view ofemotions is at best highly simplistic and at worstwrong, as numerous competing factors contributeto depression, including family history, life expe-rience, hormone levels and diet.

The science may be dubious but the side effectsare increasingly becoming clear and on 2February 2004 a panel of scientific advisers of theUS Food and Drug Administration urged theagency to warn that new anti-depressants mayincrease the risk of suicidal thinking or behaviouramong children and teenagers.126

124. NCBI Zimeldine – SubstanceSummary, http://pubchem.ncbi.nlm.nih.gov/summary/summary.cgi?sid=182628 (accessed 6 July2009).

125. Moore, A. (2007) ‘EternalSunshine’, Guardian, www.guardian.co.uk/society/2007/may/13/socialcare.medicineandhealth(accessed 1 September 2008).

126. Moynihan, R. (2004) ‘FDAadvisory panel calls for suicidewarnings over new anti-depres-sants’, British Medical Journal, 328,p.30, www.bmj.com/cgi/content/full/328/7435/303-a?maxtoshow=&HITS=60&hits=60&RESULTFORMAT=&fulltext=prozac&searchid=1&FIRSTINDEX=20&resourcetype=HWCIT(accessed 1 September 2008).

The consequences

By 2008 it was increasingly recognised that SSRIdrugs not only were potentially damaging individu-ally through adverse side effects, but that SSRIs arenot in most cases any better than a placebo. In ameta-analysis of all trials published and previouslyunpublished by the industry, which compared theeffect on patients taking the drugs with those givena placebo or sugar pill, it showed all patientsimproved but that, except in cases of severe clinicaldepression, those on a placebo improved just asmuch as those taking the drug.127

Prozac brought depression out of the closet andmany people would swear that it helped themthrough difficult times, but this step forward forsocietal acceptance of depression was not the onlystory in town. It is now thought that althoughProzac and other SSRIs are heralded by many aswonder drugs this should be questioned, first,because of the dubious scientific theory behindthem, second, because of the adverse reactionsthey cause and finally because it is increasinglyclear that, except in the most severe cases ofdepression, taking an SSRI is no better thantaking a sugar pill. Not only is prescribing SSRIshugely costly, but it also has serious human impli-cations.

Vioxx – a drug disasterVioxx (Rofecoxib) was introduced and marketedby the drugs company Merck in 1999128 as aneffective and safer alternative to previous non-steroidal anti-inflammatory drugs for thetreatment of the pain associated withosteoarthritis.129 Six years later it was removedfrom the market worldwide when it was recog-nised that it significantly increased the risk ofcardiovascular incidents. It was described by DrDavid Graham in the US Senate as the ‘singlegreatest drug safety catastrophe in the history ofthis country or the history of the world’.130

Prior to approval, none of Merck’s clinical trialslooked specifically into cardiovascular risk, yetDr Gurkipal Singh, adjunct clinical professor ofmedicine at Stanford University, testified that asearly as November 1996 Merck scientists ‘wereseriously discussing a potential [heart attack] riskof Vioxx’.131

The subsequent trials that were conductedwere arguably designed to ensure that this risk ofcardiovascular events was not evaluated. Allinitial nine studies that were used when Merck

applied for licensing of Vioxx to the Food andDrug Administration (FDA) in 1998 were carriedout over short periods of time and enrolledpatients with an already low risk of cardiovasculardisease, offering further potential to conceal thepotential risk.132

In January 1999 Merck launched its biggeststudy on Vioxx, using 8,000 patients. Merckhoped to prove that there were fewer gastro-intes-tinal effects in Vioxx than in its closestcompetitor Naproxen;133 this study was known asVIGOR. The first results were disclosed inNovember 1999: one group of patients was 79%more likely to be at risk of ‘death or seriouscardiovascular event’;134 however, the study hadomitted three heart attacks and so the risk ofcardiovascular problems to patients taking Vioxxwas five times, not four times, that ofNaproxen.135 Furthermore, data from an interimanalysis had different termination dates forcardiovascular and gastrointestinal events andmissed out three more myocardial infarctions,distorting the cardiovascular data further still.136

Following the findings, in 2001 the FDA in theUS warned Merck in a letter that the promotionof minimised cardiovascular risks ‘misrepresentsthe safety profile of Vioxx’.137 This was thenfollowed with the FDA updating warning labels toinclude the VIGOR results in 2002.

Merck’s next study, ‘APPROVe’, finally broughtthe end of Vioxx in September 2004. The reportfound that if patients took the drug for longerthan 18 months, risk of cardiovascular problemsincluding heart attack were doubled.138 The inad-equacies of methodology, peer review and criticalreview of data, and biased presentation of theresults, allowed Vioxx not just to make it tomarket but subsequently to stay on the market forfive years.139 From launch to being taken off themarket 107 million prescriptions for the drugwere made and ‘88 000 to 139 000 Americans hadheart attacks and strokes as a result of takingrofecoxib (Vioxx)’.140 The subsequent 27,000claims, representing 47,000 plaintiffs, were origi-nally all contested by Merck, which feared apotential $25 billion liability.141 However, it even-tually settled in 2007 on a $4.85 billion payout. Inthe process it also worked up $1.2 billion in legalcosts.142 More recently Florida’s Attorney Generalhas filed a lawsuit against Merck & Co., this timefor deceptive marketing and promotion of Vioxx.

127. Kirsch, I. et al. (2008) ‘Initialseverity and antidepressantbenefits: a meta-analysis of datasubmitted to the food and drugsadministration’, PLoS Medicine,http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371%2Fjournal.pmed.0050045 (accessed 1 September2008).

128. MSNBC (n.d.) ‘The rise andfall of Vioxx’, www.msnbc.msn.com/id/9911524/ (accessed 31 July2008).

129. Harlan et al. (2007) ‘Whathave we learnt from Vioxx?’, 334,pp.120–3, British Medical Journal,www.bmj.com/cgi/reprint/334/7585/120?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&fulltext=vioxx+story&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT(accessed 8 January 2009).

130. Lenzer, J. (2004) ‘FDA isincapable of protecting US“against another Vioxx”’, BritishMedical Journal, 329, p.1253,http://bmj.com/cgi/content/full/329/7477/1253 (accessed 1September 2008).

131. Quoted in Harlan et al.(2007) ‘What have we learnt fromVioxx?’

132. Ibid.

133. Ibid.

134. Ibid.

135. Tanne, J. (2005) ‘Journal criti-cises Vioxx study for omittingthree heart attacks’, British MedicalJournal, 331, p.1423, www.bmj.com/cgi/reprint/331/7530/1423.pdf(accessed 1 September 2008).

136. Harlan et al. (2007) ‘Whathave we learnt from Vioxx?’

137. MSNBC (n.d.) ‘The rise andfall of Vioxx’.

138. Ibid.


140. Lenzer, J. (2004) ‘FDA isincapable of protecting US“against another Vioxx”’.


142. Feircepharma (2007) ‘Mercksettling Vioxx case for $4.85billion’, www.fiercepharma.com/story/merck-settling-vioxx-claims-4-85b/2007-11-09?utm_medium=nl&utm_source=internal&cmp-id=EMC-NL-FH&dest=FP(accessed 9 January 2009).

The human consequences of market failure in the pharmaceutical industry | 31

The suit claims that Merck failed repeatedly todisclose the drug’s adverse effects, while offeringit to the state’s Medicaid program as a safepainkiller; this was in direct violation of the state’sDeceptive and Unfair Practices Act.143

The most recent suit also alleges that Mercktried to intimidate physicians and researcherswho questioned the safety of Vioxx, and may havemisrepresented or concealed published evidence,including its own, showing possible harmfuleffects. In the UK, under pressure from USlobbying firms government ministers havebacked down from supporting UK citizens whotook Vioxx from filing law suits against Merck,despite an earlier pledge of support, and despitethe conclusion of the trial in US.144 This is sugges-tive of bias created in science through overtindustry influence, which subsequently hadsignificant effects in terms of human health –these claims continue to be denied by thedrugmaker.

Baycol – avoidable casualties?Baycol, also know as Lipobay, was first licensed in1998 as an anti-cholesterol drug produced by theGerman drugs firm Bayer. It was seen as animmediate success as millions of peopleworldwide switched from using other statin drugsto Baycol. However, Baycol users soon began tocomplain of adverse effects, including rhabdomy-olysis, a deterioration in muscle tissue, which canlead to kidney failure, paralysis and death.

Bayer rejected these complaints and claimed thatpatients were taking Baycol in doses not consistentwith Baycol’s product labelling and sent out a letterto doctors recommending that they monitor theirpatients’ doses more closely, and Baycol labels werechanged to reflect the dangers of mixing Baycolwith other drugs.145 However, by August 2001 it wasoverwhelmingly clear that muscle deterioration orrhabdomyolysis occurred ten times more oftenwith Baycol than with other statins.146 In August2001 Bayer announced the Baycol had been linkedto 52 deaths.147 This resulted in a recall of the drugworldwide.

This has not only been damaging for publichealth but also for the company as in response tothis recall more than 12,000 Baycol lawsuits werefiled. The company approached the litigation bysettling the most serious cases; so far, Bayer hassettled 2,312 Baycol cases for $872 million.148

With a more rigourous clinical trial and moreeffective regulation of adverse effects post-licensing this problem could have been avoided;instead the drug stayed on the market for threeyears. The potentially devastating impact of thison the company that brought Asprin to themarket over 100 years ago is part of the worryingstory – the impact that poor regulation can haveon companies.

Ritalin and Concerta – drugs for childrenRitalin and Concerta are amphetamines whoseactive ingredient is methylphenidate. These twodrugs are prescribed to millions of childrenacross the globe to treat a condition known asAttention Deficit Hyperactivity Disorder(ADHD).

Initially the drug was welcomed by scientistswho were carrying out an extensive trial knownas the ‘Multimodal Treatment Study of Childrenwith ADHD’. They concluded in 1999 that, afterone year, medication worked better than behav-ioural therapy for ADHD. This finding influ-enced medical practice on both sides of theAtlantic and prescription rates in the UK havesince tripled. Ritalin and Concerta wereprescribed to around 55,000 children in 2006(nearly 1% of children) – at a cost of £28 millionto the NHS.149 In the US the figures are muchhigher, with an estimated 10% of children onRitalin.150

However, in 2007 the study’s co-author,Professor William Pelham of the University ofBuffalo, stated that the beneficial impact of themedications were exaggerated in the first study andthe idea that if children were medicated longerthey would have better outcomes was not the case.Professor Pelham, who led the study, stated that inthe long run there are ‘no beneficial effects’ ofmedication.151 This raises again the concerns ofopponents about the incomplete understanding ofthe biological basis for prescribing productscontaining methylphenidate.

It is also increasingly clear that there are sideeffects associated with a prolonged use of thedrug, particularly stunted growth; children whotake Ritalin for more than three years can be up toan inch shorter than their counterparts and 4.4pounds lighter.152 More worrying is that Ritalinand other products containing the active ingre-dient have now also been linked to eight deaths in

143. SFBJ (2008) ‘State suesMerck for deceptive marketing ofVioxx’, editorial, SOUTH FloridaBusiness Journal, www.bizjournals.com/southflorida/stories/2008/09/29/daily21.html?b=1222660800^1709231&brthrs=1 (accessed 1September 2008).

144. Evans, R. and Bosely, S.(2009) ‘Ministers dropped Vioxxprotest after lobbying from USdrug firm’, Guardian, www.guardian.co.uk/business/2009/may/04/merck-vioxx-campaign-parlia-ment (accessed 8 May 2009).

145. Baycol FYI (n.d.) ‘The Baycolrecall – how a lawyer can helpwith a baycol lawsuit’, www.baycolfyi.com/ (accessed 1September 2008).

146. Ibid.

147. CNN.com (2001) ‘Baycollinked to 52 deaths’, http://edition.cnn.com/2001/BUSINESS2008/13/bayer/ (accessed 1September 2008).

148. Defective Drugs (2004)‘Bayer’s Baycol problemscontinue’, www.adrugrecall.com/newsletter/jun04/bayer-baycol.html (accessed 1September 2008).

149. Stratton, A. (2007) ‘Ritalin ofno long-term benefit, study finds’,Guardian, www.guardian.co.uk/news/2007/nov/12/uknews.health(accessed 1 September 2008)

150. Laurance, J. (2008) ‘Ritalinover-prescribed to children’,Independent, www.independent.co.uk/life-style/health-and-wellbeing/health-news/ritalin-overprescribed-to-children-940308.html

151. News-Medical.Net (2008)‘Long term use of Ritalin ineffec-tive and may stunt childrensgrowth’, editorial, www.news-medical.net/?id=32452 (accessed 1September 2008).

152. DeNoon, D. (2007) ‘Study:Ritalin stunts growth’, CBS News,www.cbsnews.com/stories/2007/07/20/health/webmd/main3082458.shtml (accessed 1 September2008).


children in the UK.153 Although these represent atiny percentage of the actual number of childrenprescribed Ritalin, it must be questioned whetherwe wish to continue prescribing to 1 in 100 of ourchildren a drug with questioned levels of efficacyand significant potential side effects, especiallygiven there are safer alternatives in the form oftalking therapy, diet and exercise.

153. See MHRA (2006),www.mhra.gov.uk/home/groups/es-foi/documents/oidisclosure/con2023292.pdf (accessed 1September 2008).

The human consequences of market failure in the pharmaceutical industry | 33

6.Why is thepharmaceutical industrygetting away with it?

It is no coincidence that the growth of thecolossus that is the pharmaceutical industrycoincided with the election of Margaret Thatcherin 1979 in the UK, and Ronald Reagan in 1980 inthe US. With these two uniquely determined andideologically neo-liberal administrations came anew pro-market belief. Vast wealth and profitwere symbols of an industry functioning effec-tively, almost irrespective of therapeutic orproduct innovation.

The Thacherite neo-liberalism that dominatedUK and international politics in the 1980scontinued under New Labour in regard to itstreatment and regulation of a number of keysectors – most notably finance, public services andpharmaceuticals. While progress was made earlyon under the Labour government with interven-tions like NICE – providing guidance and infor-mation – the underlying principle that marketsserve the public interest held sway. The pharma-ceutical industry has benefited, in terms of marketgrowth, from this political ideology and as a resultit has dominated discourses of medicine; however,it is now failing. This government accepted unchal-lenged the perspective that markets could solve ourills; regulatory reform was never deemed a priorityand discussion on it fell silent. Blair promised toprotect the industry and he seemed happy to allowmarket forces to determine health. The checks andbalances that are necessary to ensure that the profitmotive also encourages therapeutic innovation arenot there, allowing the situation to continue, rela-tively unrestrained.

When looking at this regulatory structure thereare a number of issues to consider, most notablywithin the MHRA (for a discussion on thecurrent regulation see appendix 2).

The Medicines and Healthcare productsRegulatory Agency

Bodies such as the Medicines and Healthcareproducts Regulatory Agency (MHRA) arecommonly set up in response to a public outcry.When such a regulatory group is created to defendthe interests of the public against the excesses of anindustry this is the start of a life cycle. At this pointthe regulatory authority is commonly adversarialtowards the industry it is regulating. However, overtime the regulatory authority becomes more closelyaligned to the industry and begins to representindustry desires over the needs over the public.

While efforts have been made to ensure itstransparency in the MHRA – for example mostrecently through ensuring employees’ families donot have shares in or relations with companiesregulated by the MHRA – these efforts have failedto address inherent problems in the originalstructure of the agency.

First, the MHRA is funded through licensing feesfrom the pharmaceutical industry. It is arguable thatthis is common in other industries, but what isunusual is that the MHRA is also in competition forlicensing fees with other bodies across Europe,specifically the European Medicines Agency(EMEA), which offers pan-European licensing. Thishas created a situation where the prosperity andinstitutional viability of the regulatory agencydepends on its ability to attract fees from the phar-maceutical industry, not on its ability to meet publicneeds for safe, effective medicines.

As it is the role of the MHRA to act in thepublic interest this pressure from the industrycould be seen as damaging to its independenceand integrity. This can be demonstrated in thepressure placed on the MHRA to speed up thelicensing process. In 2003 the time from applica-tion to the granting of a licence of a newmolecular entity was approximately 70 workingdays, iby 2005 a response could usually beexpected in approximately 30 working days.154

Second, the information seen by the MHRA isalmost wholly industry-sponsored trials, so it

154.House of Commons HealthCommittee (2005) The Influence ofthe Pharmaceutical Industry.

‘This government accepted unchallenged the perspective

that markets could solve our ills; regulatory reform was

never deemed a priority and discussion on it fell silent’

could be argued that the information that isassessed by the regulator is already biased, as hasbeen demonstrated in the discussion of clinicaltrials. The MHRA has rigorous standards forensuring that the trials it assesses are of a highquality, however, it is argued that irrespective ofthe quality of the trial bias is still very apparent.155

Third, there is no pressure from the MHRA orrequirement for the companies to demonstratethat their drug is therapeutically more effectivethan medicines currently available. Companiesare not required to undertake comparative drugstesting nor are they required to demonstratemedical need. This could be seen to becontributing to the growth of me-too drugs.

Fourth, it is also the role of the MHRA toregulate medicines post-licence. However, asfunding for the MHRA comes from licensingfees, the MHRA has limited incentive and limitedfunds to regulate post-licensed medicines effec-tively. Post-licensing surveillance of drugs isnotoriously problematic, with the widely recog-nised gross under-reporting in the yellow cardsystem (see appendix 2).

With a more rigorous regulatory structurethese problems could be reduced or eliminated.

The MHRA in recent years has made signifi-cant progress; however, there are still issues toaddress and pitfalls to be avoided. This reportadvocates a number of steps necessary to ensuresafe and effective medicines make it to market:

� The MHRA should carry out random testingof the raw data provided by the industry.

� All clinical trials for any drug licensedglobally should be registered before the trialsstart, ideally on an international register, but aregister could also work on a national level.This report would also argue that on registra-tion the design of the trial should be madeavailable to the scientific community forscrutiny. Although this report is aware thatthis may be seen as commercially problem-atic, most drugs have already completed apatenting process by phase 2 clinical trials, sotransparency in phase 3 clinical trials wouldnot be commercially difficult.

� The clinical trials necessary for licensingshould include information on comparativeefficacy. This would need to be a mandatoryrequirement on drug companies applying for

a licence to continue testing into phase 4clinical trials looking for efficacy of drugs andlong-term effects of drugs in communities.

� Additional funding could be provided for theMHRA from the Department of Health; thismoney should be ring fenced for post-licensing surveillance. We could considerincreasing government funding of the MHRAto at least 60% of the total money it receives toreduce industry influence.

� Competition between regulatory bodies inEurope should be reduced, for examplethrough greater engagement in pan-Europeanregulation and licensing.

The Pharmaceutical PriceRegulation Scheme

The current Pharmaceutical Price RegulationScheme (PPRS) is recognised internationally as amethod of ensuring a fairer price, but in a recentOffice of Fair Trading report it came under fire;the report argued that there is a major question asto whether value for money is being secured.156

There are a series of inherent problems in thescheme:

� The effect of the price cut secured every fiveyears reduces over time as drugs that havebeen subject to a cut are replaced by newdrugs at uncontrolled prices.

� The effect of the cut on hospital prices is notclear, as the PPRS affects list prices rather thanthe transaction prices at which hospitalspurchase.

� The PPRS does not provide the incentives forcost in relation to therapeutic efficacy.

� The PPRS is linked to the profits of a drug notits efficacy.

Although this report welcomes the price cutsguaranteed through the PPRS we would supportthe OFT’s proposals to replace the PPRS with avalue-based system. This would cut costs in theshort term but more importantly incentivise ther-apeutic innovation in the pharmaceuticalindustry in the longer term. With appropriateinvestment of the estimated £500 million perannum savings there could be much greatersupport for public research.

155. Smith, R. (2005) ‘Medicaljournals are an extension of themarketing arm of pharmaceuticalcompanies’, PLoS Medicine, 2(5),www.aliveandwell.org/docs/richard_smith_medical_journals.pdf(accessed 7 July 2009).

156. Office of Fair Trading (2007)The Pharmaceutical Price RegulationScheme: An OFT Market Study,www.oft.gov.uk/shared_oft/reports/comp_policy/oft885.pdf(accessed 20 July 2008).

Why is the pharmaceutical industry getting away with it? | 35

The National Institute forClinical Excellence

For the NHS, as with any healthcare system, inde-pendent information on efficacy is essential, andthe National Institute for Clinical Excellence(NICE) has provided this to a high standard overthe last ten years. It has ensured that the bestknowledge on medical technologies and proce-dures is available to the general public and medicalprofessionals. This is not to say it is perfect, butdespite the problems discussed below it must berecognised that NICE has had an essential role inimproving the body of knowledge available.

The major obstacle for NICE is that in practiceits guidelines are not always instigated quicklyenough or universally. This has caused seriousacrimony between NICE and patient groups keento see a specific medicine available on the NHS.More worryingly, however, it has no power toenforce its suggestions and even lacks the powerto be allowed to see all the relevant information.

Increasingly there is criticism of NICE’sdecisions by patient and professional groups aswell as the industry, specifically because of theslow release of data and the perceived unfairnessof its decisions.157 Furthermore, NICE’s decision-making process is often far from transparent.

Perhaps the most important function for NICEis its ability to assess efficacy and cost. It is the lastbarrier against the industry crippling the NHSthrough excessive prices, yet it is also crippled bylack of funding and lack of power to enforce itsdecisions.

This report therefore recommends that:

� there should be an increase in NICE fundingto support its research into public healthguidelines

� NICE should be granted access to all datagiven to the MHRA for licensing; currentlyNICE often struggles to make accuratedecisions because it does not have access to allthe relevant information

� NICE should assess the quality of informationit receives, specifically the clinical trial data

� there should far greater transparency of itsdecision-making process.

The current model is not sustainable; industryand government, nationally and internationally,

should engage a new model of innovation. Drugdevelopment can be more effective throughimproved supervision, the creation of a moremixed economy and additional funding for inde-pendently supported research, and we can hopethat health innovations will follow.

157. House of Commons HealthSelect Committee (2007) NationalInstitute for Health and ClinicalExcellence, first report of session2007-08, vol. 1, Stationery Office.


7. Policyrecommendations

To make drug development innovative and humane,and improve the productivity of the pharmaceuticalindustry, there can be no doubt in anyone’s mindthat – as in the banking sector – reforms and regu-lations must be enacted on an international level.These companies are truly international entities,with markets and production lines that stretchacross the globe. Diseases and disabilities thatplague one country are not limited by nationalborders. Our response to these diseases and ourregulation of these companies must be international.

The nation state is in many ways victim to thewhims of these firms, dependent on them for thevaluable export trade and in Britain for theknowledge economy. The ever apparent threat of acompany moving abroad is commonly seen as areason to retain light regulation (see appendix 1).This report would therefore strongly lend itssupport to an improved regulatory and supervisionstructure on an international level and wouldencourage a harmonisation of the European regula-tory systems.

There are obstacles and powerful resistance toany reform of pharmaceutical industry practices– most notably from the trade bodies and theindustry itself – but if it is the fundamentalpurpose of the pharmaceutical industry toproduce therapeutic innovation and improvehealth, then action is clearly needed. Westerngovernments and healthcare systems across theworld risk bankruptcy with the escalating cost ofdrugs. The drugs the industry is creating offerincreasingly minimal therapeutic rewards, andthe industry is facing decline and perhaps evencollapse. To ensure drug development continuesand is successful in the future, effective regulationof the industry must focus on effective incentivi-sation for therapeutic innovation. However, thismust go hand in hand with greater support forpublicly funded independent research.

Throughout this report policy solutions havebeen suggested for long and short term reform.Further to these suggestions this report advocatesfive priority proposals essential for an improvednational system, as discussed below.

Policy 1: Make a greater investment inpublicly funded science

Hypothecate any savings made on the UK drugsbill with an additional £1 billion of funding forpublicly supported science research by 2010-11,increasing the total funding from £1.7 billion to£2.7 billion each year. This money could be raisedthrough the savings made from introducing avalue-based pricing system, estimated to be £500million per annum. While much can be made ofAlan Johnson’s achievements in price cutting,158

this report argues that this still fails to incentivisetherapeutic innovation actively. Therefore thereport suggests that beyond the obviousarguments for price cuts the most pressing issueat this time is the cost of drugs in relation to theirrelative therapeutic efficacy. This report supportsthe Office of Fair Trading’s proposals forreforming the PPRS. This would link therapeuticefficacy to price; in the short term it would reducethe NHS bill, and in the long term it wouldprovide the right incentive for drug company’sR&D investments. This would be a step towardsensuring efficacy and therapeutic innovation.

In recent years the government has taken stepsto ensure that the UK remains at the forefront ofdrug development by increasing funding onhealth research; this funding is estimated to standat £1.7 billion by 2010-11. This report wouldsupport ring-fencing the estimated saving madethrough the introduction of a value-based pricingsystem, which by 2010 could be £1 billion, basedon estimated savings of £500 million per annum,assuming the scheme was introduced in 2009.These ring-fenced savings could be invested ingreater publicly funded health research. Thiswould effectively increase public funding forhealth research by 60% and put total governmentspending on health research at £2.7 billion –nearly equal to the industry’s estimated invest-ments in R&D. The government must now takeaction to guarantee that therapeutic innovation

158. BBC (2008) ‘NHS drug coststo be renegotiated’, http://news.bbc.co.uk/1/hi/health/6927814.stm (accessed 6 July 2009).

‘This report would support ring-fencing the estimated

saving made through the introduction of a value-based

pricing system’

continues by investing in publicly sponsoredresearch. This not only improves the scientificbase, and our potential to make therapeuticbreakthroughs, but can encourage the pharma-ceutical industry to invest in the UK.

Policy 2: Make clinical trials open topublic scrutiny

Independent scientific information is essential forthe future of modern healthcare and the future ofthe pharmaceutical industry. For this reason it isessential that all phase 3 trials be carried out inde-pendent from the industry. These could befunded through an industry levy. This proposalwas initially put forward by Professor JohnAbraham from Sussex University and HelenLawton Smith in their book Regulation of thePharmaceutical Industry,159 as it would ensureindependence and allow greater scrutiny andaccessibility to the necessary clinical trial data.Further, any trial used for licensing must havebeen registered before it was started, as iscurrently the case in the US.

Policy 3: Educate doctors throughpublic fundingFor doctors, independence, transparency andfreedom from bias are essential. This report hashighlighted how this is impossible because ofindustry funding and influence. This reportwould therefore support there being greaterinvestment in independent education for doctorsand other medical professionals. The currentspending by government on information fordoctors stands at about £5 million. This reportargues that this figure needs to increase to £10million, as doctors currently struggle to deal withoften conflicting advice. The report would alsosupport other measures to limit industryinfluence, such as banning or limiting industrycontact with doctors.

Policy 4: Review progress made since2005 Health Select Committee report

The 2005 Health Select Committee report was thelargest of its kind.160 Enacted over eight months it

explored the reality of the pharmaceuticalindustry and proposed a series of sensible policyproposals, including strengthening the power ofthe MHRA, a curb on the intensive marketing bythe industry, and an adoption of a national drugspolicy. However, for this report to be mosteffective a review of the progress that has beenmade since its publication is essential andtherefore this report would lend support to such areview.

Policy 5: Control pay and bonuses

Control pay and bonuses so that executiverewards and share options do not disfigure theproduct market as they did in financial services.Compass will be calling on the government toestablish a pay commission to adjudicate on payin key industries such as the pharmaceuticalindustry and the financial sector.

159. Abraham, J. and LawtonSmith, H., eds (2003) Regulation ofthe Pharmaceutical Industry.

160. House of Commons HealthSelect Committee (2005) TheInfluence of the PharmaceuticalIndustry.


Conclusion

This report has traced the history of the pharma-ceutical industry. It tracked its rise as a symbol ofnew capitalism, and the power of the market toinnovate. It looked at its successes and failures.The report is a story of an industry and a story ofchanging times in which the truths of the past arecalled into question. While the report is in no wayconclusive, or definitive it has challenged ourunderstanding of the industry and shown thatalthough its socioeconomic contribution to oureconomy remains strong, its contribution to ourability to fight disease and disability is shrinking.It is clear that if this story continues unchecked itwill not have a happy ending.

The products sold by the industry are anessential part of modern day healthcare, but whatwe really need now are essential drugs and thera-peutic innovations at prices we can afford. This iswithin the industry’s and society’s capabilities butthe industry is failing to produce them. Thegovernment hoped to enlist the powerful force ofthe quest for profit to improve drugs develop-ment, but failed to regulate it effectively to ensurethat health needs were met. The industry’s legalresponsibility to maximise shareholder value, tocompete on the stock exchange, in the short termwill eventually be its downfall, unless appropriateregulation is put in place. Declining trust andinnovation show that this model is unsustainable.Simultaneously, the rising costs will damage thehealthcare potential of the NHS and othersystems across the globe – evidence of this canalready be seen in the impending collapse ofMedicare and Medicaid in the US.

The picture the industry painted of itself wasone of innovation, science and the promotion ofhealth – certainly at a cost, but that cost wasdeemed to be necessary. What this report hasshown is that the industry’s image should be chal-lenged.

In expecting these companies, this industry, toact charitably we fail to grasp the fact that we havecreated a market in health where investment isnot decided by need, but by profitability. Thisreport explored where this has led us, it looked atthe current state of the industry and proposed anumber of policy solutions to a number of

concerning problems. What is overwhelminglyclear is that the current situation cannot beallowed to continue. It must now be a priority toput in place the necessary structures, incentivesand regulations to ensure that it is not just profitthat determines the actions of this industry buttherapeutic innovation.

In the midst of a recession, with many areas ofour economy struggling, the pharmaceuticalindustry needs to be saved from itself. Just likefinancial services, if markets are left too free fortoo long then eventually they self destruct. Thiscannot be allowed to happen in the market for thecreation of drugs. Indeed, the myth of the freemarket – given the levels of public investment –needs to be quashed. If Britain is to have a strongpharmaceutical industry that delivers socialbenefit in the future, it is incumbent on politi-cians and the regulatory regimes to intervene nowto ensure productivity and innovation accelerateat least as fast as pay and profits.

‘Just like financial services, if markets are left too free for

too long then eventually they self destruct.This cannot

be allowed to happen in the market for the creation of

drugs’

Appendix 1Will the pharmaceuticalindustry leave the UK?

Talk of altering regulatory structure is commonlyfollowed by threats that the industry will jumpship and move its valuable R&D investmentselsewhere. The Office of Fair Trading report in2007 suggested that this threat is unlikely to becarried out and that there were five key factorsthat affect location of R&D investment:

� a highly skilled workforce with relevant scien-tific qualifications

� the presence of opinion leaders in the medicalfield

� access to high-quality clinical trials infra-structure

� existing R&D activity, including public sectorR&D

� historical and cultural factors.161

Based on these key areas it is clear that the UK isand will remain a very favourable environmentfor investment, for the following reasons.

First, the UK has a highly skilled workforce.Britain, geographically and logistically, is wellpositioned to attract the right employees and toaccess its key markets, the US and the EU.162 Witha strong university structure it is a highly compet-itive environment. For example, AstraZeneca hasover 2,000 highly qualified UK staff working in itseight key sites dedicated to research, clinical trialsand manufacturing. This represents not only asignificant supply of highly skilled workers butalso billions in sunk costs.163 The other largeinvestor in UK pharmaceutical R&D isGlaxoSmithKline, which employs almost 8,000highly qualified research staff.164

With the growth of the emerging markets ofIndia and China it is increasingly feared that thepharmaceutical industry will move abroad, andindeed in terms of clinical trials India is attrac-tive. GlaxoSmithKline has already moved a thirdof its trials there. However, it is argued that anyfull-scale move is highly unlikely given that

spending on science is too low and any innova-tion is unorganised.165 Further, as only 10% ofIndian graduates are qualified to the same level astheir western counterparts,166 there are significantissues with the economic and business set-up, soIndia is not as attractive as the west. The WorldBank states that India is only the 134th ‘easiest’country in the world to do business in,167 andaccording to Bound (2007) corruption is still rifeand the infrastructure is the burden of the privatesector168 rather than centrally funded by publicspending. All of this ensures that the UK willremain a highly preferable space for investment.

Second, the presence of opinion leaders in themedical field. The UK has a strong history ofpharmaceutical R&D and a strong history ofscientific innovation. It has world-leading univer-sities, including Oxford, Cambridge, LSE andImperial College London. With these world-leading universities are world-leading experts inpharmacology and medicine.

Third, access to high-quality clinical trialsinfrastructure. Perhaps one of the first areas tomove out of the UK if R&D investment is locatedelsewhere would be clinical trials; the UK issecond only to the US for the cost of R&D.Although the US previously had relatively lowlevels of regulations, which would attract drugmakers, regulation of the US industry is changingthe appeal of conducting clinical trials there.Following the errors of Vioxx, found to increasecardio-vascular risks to users,169 the FDA hasstrengthened the standards of research presentedto adjudicate a drug’s suitability.170 High levels ofregulation in clinical trials are essential andcostly, but this is balanced in the UK by greateraccess for the pharmaceutical industry to NHSpatients for clinical trials.

Fourth, existing R&D activity, including publicsector R&D. Casper and Matraves argue thatinstitutional start-ups, including the smallbiotech firms we see growing in and aroundBritish universities and research, foster innova-tion and ‘encourage rapid responses to changes inthe competitive environment’.171 These start-upsare making ‘radical innovations’172 and thisexisting R&D activity is highly attractive to thepharmaceutical industry. Furthermore, any

161. Office of Fair Trading (2007)The Pharmaceutical Price RegulationScheme: An OFT Market Study.

162. Hawkes, A. (2008)‘Companies leaving the UK: whatwill we lose?’, Accountancy Age,www.accountancyage.com/accountancyage/comment/2216638/companies-leaving-uk-lose (accessed 19August 2008).

163. AstraZeneca (2006) TheEconomic Contribution ofAstraZeneca to the UK and itsRegions, www.astrazeneca.co.uk/documents/AstraZeneca-Ecoal-09-08-06.pdf (accessed 19August 2008).

164. GlaxoSmithKline (2004)press release, 14 March,www.gsk.com/press_archive/press2004/press_03162004.htm(accessed 28 August 2008).

165. Bound, K. (2007) India: TheUneven Innovator, Demos.

166. Ibid., p.21

167. Ibid., p.57.

168. Ibid., p.58.

169. MSNBC (n.d.) The rise andfall of Vioxx.

170. FDA (2008) Federal Register,73(82), 28 April, Rules andRegulations, www.fda.gov/Cber/rules/forclinstud.pdf(accessed 1 September 2008).

171. Casper, S. and Matraves, C.(2003) ‘Institution frameworksand innovation in the German andUK pharmaceutical industry’,Research Policy, 32, p.1872.

172. Ibid., p.1867.

perceived damage done to the industry throughchanges in regulation would be more than offsetby investments into publicly funded research.

Again, the difference between western marketsand the emerging markets is clear; China isexpanding its R&D spending and we are alsoseeing the return of students with valuable linksto Europe and the US.173 However, in Chinawestern companies often ‘exist more on paperthan in reality’, as Chinese authorities, cautiousover their presence, are not friendly to any full-scale moves.174 That said, investment in specificareas is taking place. In 2007 GlaxoSmithKlineestablished its first ‘fully integrated researchinstitute in China’175 and Novartis has spent $100million in biomedical science research units.176

However, the lack of democratic ownershipover innovation presents massive risks to corpo-rations that have to stay onside with the Chinesegovernment. As in India, basic issues remain withthe quality of China’s graduates, scientists, infra-structure and universities, while leading researchcentres are becoming established seeing invest-ment by giants such as Novartis going beyondthese centres ‘standards plummet’.177

Fifth, historical and cultural factors. Thecompanies that currently invest in the UK havetheir roots here and are intimately connected withUK institutions. For example, GlaxoSmithKline iswell entrenched, and champions its involvementwith Imperial College London and works withthem on ‘450 PhD studentships and more than200 postdoctoral research collaborations’.GlaxoSmithKline describes the importance ofbeing able to work with Imperial, and sees theUniversity as ‘a world leading science-baseduniversity whose reputation for excellence inteaching and research… [is] underpinned by adynamic enterprise culture’.

No one can know ultimately whether acompany or industry will stay or go. Eachcompany will always weigh up the positives andnegatives; it will decide whether or not one area ismore favourable than another. However, as thissection has shown, in terms of leading experts,skilled workers and existing R&D infrastructuresthe UK remains a favourable environment forR&D. Furthermore, the suggested reforms thatthis report has put forward can only improve theUK as a site of investment. But also it makes clear

that for regulation to be effective, because of thegeographic mobility of the pharmaceuticalindustry it must ultimately be internationallyharmonised.

173. Wilsdon, J. and Keeley, J.(2007) China: The Next ScienceSuperpower, 174. Ibid., p.39.

175. GlaxoSmithKline (2007)Annual Report 2007,www.gsk.com/investors/reps07/annual-report-2007.pdf (accessed 19August 2008).

176. Science (2006) ‘Novartisinvests $100 million in Shanghai’,editorial, Science, 314, p.1064.

177. Wilsdon, J. and Keeley, J.(2007) China, p.60.

Appendix 1 | 41

Appendix 2Existing regulation

Pharmaceutical regulation is complex and thereare numerous policies and bodies that caninfluence the behaviour of the pharmaceuticalindustry. To assist in the understanding of thisreport here is a short discussion on the threecentral ones; the MHRA, NICE and the PPRS.

The Medicines and Healthcare ProductsRegulatory Agency

Created in April 2003 the MHRA replaced theMedicines Control Agency (MCA) as the UK’slicensing authority. The MHRA is an executiveagency of the Department of Health and respon-sible for regulating and licensing pharmaceuticalproducts in the UK. Since 1989 licensing and post-licensing monitoring of medicines has increasinglybeen funded through licensing fees from individualpharmaceutical companies as part of a Thatcheritemove to privatise the civil service. Licensingdecisions are based on clinical trial data providedby the manufacturers of the drug on the safety,quality and efficacy of their product under theMedicines Act 1968. The MHRA is also responsiblefor regulating medicines post-licensing; this iscarried out through the yellow card system inwhich adverse reactions to medicines are reportedto the MHRA by doctors, nurses, pharmacists andmost recently patients themselves.

The MHRA was originally dogged withcontroversy over its lack of transparency and anoverly close relationship with the pharmaceuticalindustry. However, over the last few years it hasstriven to increase transparency and openness.For example, since November 2005 staff andimmediate members of their families have nolonger been allowed any financial or otherinterests in the industry to ensure unbiased eval-uations. The MHRA is aware that there are limitsto its current framework and has announced areview, which will be reported in 2009. Yet withthe international nature of the industry, theMHRA’s ability to regulate appropriately islimited by the European context.

Regulation in the UK always sits within aEuropean regulatory context and for pharmaceu-ticals this is controlled by the Commissioner forEnterprise and the Commissioner for Health andConsumer Behaviour. Although these twodepartments rarely see eye to eye, the most inter-esting feature of this is the European MedicinesEvaluation Agency (EMEA). The EMEA offeredthe possibility of a pan-European drug productlicence from January 1995. This meant that for adrug to be licensed in the UK it is not alwaysnecessary to go through the MHRA. When apharmaceutical product gets a pan-Europeanproduct licence; the UK government has lessability to manage which products can come ontothe UK market. NICE has partially counteractedthis through its role in reviewing the merits ofdrugs on clinical and economic grounds andhelps decide whether or not the product shouldbe available to patients through the NHS.

The National Institute ofClinical Excellence

In 2009 NICE has been the subject of muchcontroversy; it is increasingly presented as arationing body and attacked by its opponents.However, at its inauguration in 1999 NICE wasgenerally welcomed as a highly positive interven-tion.178 Globally healthcare systems havestruggled with a deficit of clear advice about costand clinical effectiveness.179 The NHS is perpetu-ally confronted with numerous, and often contra-dictory, pieces of advice on the use of drugs andother medical technologies. Before NICE therewas no consensus, advice or guidance on newdrugs that entered the market other than thatprovided by the industry.180 There was also asignificant deficit of independent information onthe relative efficacy of drugs – how effective adrug is in relation to other available drugs.

The Pharmaceutical PriceRegulation Scheme

The PPRS was introduced in 1957 and isgenerally reassessed every five years. It wasdesigned to limit the cost of drugs through profitand price controls. It was originally constructed

178. Walley, T., Earl-Slater, A.,Haycox, A. and Bagust, A. (2000)‘An integrated national pharma-ceutical policy for the UnitedKingdom?’, British Medical Journal,321, pp.1523–6.

179. House of Commons HealthSelect Committee (2007) NationalInstitute for Health and ClinicalExcellence.

180. Dent, T.H.S. and Adler, M.(2002) ‘From guidance to practice:why NICE is not enough’, BritishMedical Journal, 324, pp.842–5.

to ensure value for money for the NHS as well asproviding the necessary long-term incentives forthe pharmaceutical industry to invest in new anduseful drugs for the future.

Without this sort of price regulation drugcompanies can increase the price of their drugsunchecked. An example in the US is that the priceof Schering-Plough’s top-selling allergy pillClaritin was raised 13 times over five years beforeits patent ran out; this was a cumulative increaseof more than 50% and was over four times therate of general inflation.181

Price controls are necessary to ensure value formoney and that the cost of drugs does notbankrupt the NHS. Annually the NHS spendsnearly £11 billion a year on pharmaceutical treat-ments, £8 billion of which is on branded drugs.182

The PPRS is currently the only effective methodof ensuring price controls on the money spent onbranded drugs in the UK.

At a basic level the PPRS has always functionedin two ways:183

� Through price controls: these allowcompanies to set the initial price for any newactive substances but impose restrictions onsubsequent price increases. Price controls arecombined with price cuts, which are agreedthrough renegotiations with the Departmentof Health. Once price cuts are negotiated eachcompany is given flexibility in deciding whichof its products to target in cutting prices; thissystem is called price modulation.

� Through profit controls: these set out amaximum level of profits that a company mayearn from supplying branded drugs to theNHS. When this level is exceeded companiesare required to repay any excess profits to theDepartment of Health. The profit controlsalso allow companies to increase prices if theirprofits fall below a given minimum.

The Department has published data on the profitsrepaid for the period 1992 to 1999 in its depart-mental reports to parliament (table 5).

In 1999 the basic structure of the PPRSchanged: companies were allowed a greatermargin for error in the profit controls so lessmoney was refunded for excessive profits. At thesame time the Department of Health introducedprice cuts to the amount it was paying for certain

drugs from the industry. This changed the mainfocus of the PPRS to price reductions; in 1999 itmade a reduction of 4.5% and in 2005 a reductionof 7%. It is argued that these reductions havedelivered a greater level of saving than repay-ments of excess profits. For the NHS, PPRS pricecuts have delivered savings in primary care; theseamounted to about £450 million in the UK in2005.184 However, year on year these savings arelost as the medicines covered by the price cuts arereplaced by newer, more expensive medicines.

181. For further information onthe burden of rising drug prices,see Families USA (2003) ‘Out-of-bounds: rising prescription drugprices for seniors’,www.familiesusa.org/site/PageServer?pagename=Publications_Reports (accessed 1 September 2008).

182. Office of Fair Trading (2007)The Pharmaceutical Price RegulationScheme: An OFT Market Study.

183. Ibid.

184. Ibid.

Appendix 2 | 43

Table 5Total refunds from profit controls to the

NHS, 1992–1999

Year Total refunded (£m)

1992 £25.4

1993 £15.8

1994 £34.3

1995 £14.5

1996 £15.5

1997 £12.2

1998 £7.2

1999 £16.6

Glossary of acronyms

ABPI Association of the British Pharmaceutical IndustryADHD Attention Deficit Hyper Activity DisorderBMJ British Medical JournalCRO contract research organisationsCSM Committee on the Safety of MedicinesDTCA direct to consumer advertisingEMEA European Medicines AgencyFDA Food and Drugs AdministrationMHRA Medicines and Healthcare products Regulatory AuthorityNHS National Health ServiceNME new molecular entityNICE National Institute of Clinical ExcellenceOFT Office of Fair TradingPPRS Pharmaceutical Price Regulation SchemeRCT randomised controlled trialR&D research and developmentSSRI selective serotonin reuptake inhibitor

Drugs for people,not just for profit


Southbank House, Black Prince Road, London SE1 7SJT: +44 (0) 20 7463 0632 | [email protected]

www.compassonline.org.uk

A BITTERPILLTO

SWALLOW

“The Compass report is a timely and important critical examination of the appropriaterole for the pharmaceutical industry in our society and in contributing to publichealth. It poses significant challenges to the industry, the UK government, the medicalprofession and patient organizations about how pharmaceuticals can meet the needsof UK citizens and the NHS more effectively.”

Professor JohnAbraham,University of Sussex, and ExpertAdvisor to theHouse of Commons Health Select Committee.

“This is an impressive report, which addresses high priority issues for the Britishpharmaceutical industry, the NHS, and government policy for health and industrialdevelopment. It asks hard questions and puts forward challenging policy proposalswhich deserve serious consideration.”

Professor RichardAshcroft,Queen Mary University London

“This sober and well documented report must be read by all health policy makers,medical practitioners, persons working in the pharmaceuticals industry, public policycommentators - and indeed anyone who cares about their own health.While over-reliance on pharmaceuticals is one of the problems produced by the power of theindustry, we still need a growing supply of effective, safe, properly tested, andinnovative medicines.This report shows that, as the sector is currently structured andregulated, it is under-achieving on all these points.Action is urgent needed before wehave a full crisis on our hands.”

Professor Colin Crouch,University ofWarwick Business School

“Free markets work well for shoes and toothbrushes, but for life saving drugs we needpeople to come before profits. But the deregulation of the pharmaceutical market isfailing not just people but profitability too. Something has to be done. Jon Cruddas andZoe Gannon’s report tells us what is wrong and more importantly tells us how we canstart to put it right. This is an area where government intervention would be timely,productive and popular. Otherwise the pharmaceutical industry could drag down theeconomy just like the deregulated banks did.”

Neal Lawson,Chair of Compass

a bitter pill to swallow

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