Pharma companies on trial for widespread overcharging for drugs

Pharmaceutical companies have always had a profitable business for a combination of reasons – people need their drugs, the money is not being spent by the users, mass production makes unit costs very low and the patent mechanism allows for high pricing.  On top of this they have prospered as western pill-based medicine has become the dominant system of healthcare across the world.  But as the development of effective new drugs has slowed down, and patents have run out, some pharma companies have been significantly overcharging health authorities.  Fortunately over the last few months the Competition and Markets Authority (CMA) has been actively investigating and issuing heavy fines.

A recent case was by a Canadian company, Concordia who, over 10 years, pushed up the price of Liothyronine from 16p a tablet to £9.22, costing the NHS about £100 million.  Liothyronine is important for patients with under active thyroid glands which affects about 2 out of 100 people in the UK.  Without treatment, the condition can lead to depression, tiredness and weight gain.  It’s not Concordia’s first “offence” – they were also found to have worked with Actavis in the UK to inflate the price of hydrocortisone tablets.

Even the larger companies are having their collars fingered by the CMA – Pfizer and its distributor Flynn Pharma were fined £90 million for overpricing an anti-epilepsy drug.  Also GSK and others were fined £45 million over their pricing of paroxetine an anti-depressant.  And the CMA investigations are continuing with at least seven other drug-related investigations in progress, according to the Guardian.

It looks as though the pharma companies had spotted an opportunity for filling the gap in profits caused by their faltering research and development pipelines.  Given that the NHS spends about £16 billion of its annual £120 billion budget on drugs, this is a big area where cost savings can make a big impact.  The National Institute of Clinical Excellence (NICE) does good work on looking at the effectiveness of different drugs but in relation to drug pricing there is a darker side to its work – it sets out a framework that looks at QALYs, or quality-adjusted life years and has concluded that spending up to £20,000 for one extra year of life for a patient  is justified.  But the pharma companies are also acutely aware of this framework and will adjust their prices, often upwards, to fit into this rule.

Another consequence of the “price gouging” as it’s been called – that some of the pharma companies have engaged in – is that it demonstrates a new and worrying attitude to medical need. Pharmaceutical companies use a “charge what you can get away with” principle, which runs contrary to the spirit of the NHS, and indeed the medical profession where most doctors see their job as a vocation rather than an opportunity to take advantage of the needs of others.  Are the pharma companies also risking increased intervention?  Could a Labour Government even consider telling the NHS to manufacture some of its own drugs or might they use these price increases as an excuse to nationalise some of the drugs companies?

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