Healthy Skepticism Library item: 1523

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Big Pharma:The benefits of hypertension: Growing pressure on pharmaceutical firms is a force for good
The Economist 2003 Dec 4

Full text:

FIRMS today fall from grace with the alarming ease of wayward bishops; few industries, however, have tumbled as far, as fast and on as many fronts as drugmakers. Only five years ago, big firms were celebrated as the purveyors of exciting new medicines, such as Viagra, and even more stimulating earnings growth.

Today, firms are seen by many as more profiteering than profit-making. Companies are castigated for spending billions on research and development, only to deliver too many “me too” drugs and too few genuinely new ones. Comparable sums spent on sales and marketing-particularly on direct-to-consumer advertising in America-are lambasted for corrupting doctors and creating demand on the back of fancy publicity rather than legitimate medical need or product superiority. Efforts to fend off lower-cost competition from manufacturers of generic drugs through patent lawsuits leave companies accused of driving up the drugs bill in rich countries and depriving millions of life-saving medicines in poor ones. The shares of most big drug firms now trade at a discount to the market, as promises of bright times ahead are marred by risk.

To be sure, pharma companies come in for criticism not just because they are more profitable than those in other sectors but because they are profitable in a field, medicine, where money makes people uneasy. And not only are drug companies profitable, but also visible: in America, rising hospital and physician costs are as much to blame for soaring insurance premiums as pharmaceuticals, but it is drugs which are the most obvious recurring expense and the one that consumers are asked, at least in part, to shoulder directly. Firms are caught between shareholders, who fear drug prices will fall, and consumers, who complain about their rise.

Some of the pain which big firms now feel is undoubtedly self-inflicted. Firms were slow to recognise the gathering storm around the lack of access to life-saving drugs in the developing world. Their public relations on most other issues remains pretty clumsy too, and their promises to investors have been overblown.

And yet it is also true that producing new drugs today has become a more complicated, costly and risky business than before and many firms now face a couple of years during which they will have relatively few new products coming to market. For example, using the human genome to identify promising new treatments is proving a much more difficult scientific task than many had predicted, and it will be many years before the promised flood of new drugs occurs.

Current pressures on pharmaceutical firms are forcing a long-overdue examination of how they organise research and development and these changes could cut the cost, in time and money, of R&D and eventually boost output (see article). GlaxoSmithKline, the world’s second-largest company, this week showed early signs that such root-and-branch re-engineering is starting to bear fruit. The final step drug firms will need to take is to prove that the drugs they produce really do justify the prices charged, in conferring appreciable benefits compared with existing therapies.

No quick fix

Drug firms cannot be expected to achieve this on their own. Like all firms, they respond to incentives, and only more intelligent behaviour by regulators and customers alike-whether the public-heath systems of Europe and elsewhere or the public and private insurance schemes of America-can provide the correct signals.

Currently, many drug prices in America, for example, are set largely by what other drugs in the same class cost and how much others are paying. What prices should be based on is a rigorous assessment of the benefit, measured across various parameters, which a new drug brings to individual consumers and society more broadly, above and beyond existing treatments. Admittedly, this is no easy task. But it is not impossible. Some countries in Europe, for example, have set up independent agencies to undertake such cost-benefit analysis.

However, governments often use such analyses solely to beat down prices, and are unwilling to reward genuine innovation when they find it by paying higher prices for better drugs. America, on the other hand, tends to pay for novelty without systematically assessing its value. Both European and American customers of the industry need to change. Companies are understandably wary of throwing lots of money into comparative trials only to show that their new medicine is not much better than a rival’s. And yet governments should encourage such trials, occasionally by providing direct financial assistance for them, but more often by promising to pay more for drugs which are significantly and demonstrably better