Major drug companies
facing job losses
For years it has been known that drug companies have a very, very close relationship with Doctors and the NHS.
Some would have said too close, especially those cancer patients who suffered from drug side effects and found doctors surprisingly unhelpful.
- But there were advantages. Drug companies needed help from NHS to run clinical trials.
- Patients who took part in clinical trials were told that they had much better chances.
- And the end result was cancer survival rates generally improved.
In the ’80s and ’90s, people and politicians began to talk openly about cancer. Drug companies realised there were billions to be made in producing drugs that helped prolong the life of cancer patients, and started to invest heavily in research and trials, searching for the holy grail of cancer treatment.
Drug companies became the darlings of the stock market. Yes, the initial outlay was stupendous. But, if a pharmaceutical manufacturer came up with a drug that could be prescribed to treat cancer and prolong life, this was almost a licence to print money. Don’t knock it though – if you have a company pension it was probably a big investor in drug company shares, seen as ‘blue chip’ investments.
But now there is a new problem looming: cheap Generic Drugs.
Rise of Generic Drugs
A generic drug is a drug defined as “a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use.
A generic drug must contain the same active ingredients as the original formulation. According to the U.S. Food and Drug Administration (FDA), generic drugs are identical or within an acceptable bioequivalent range to the brand-name counterpart with respect to pharmacokinetic and pharmacodynamic properties. The FDA’s use of the word “identical” is very much a legal interpretation, and is not literal.
This has meant that generic drugs can have cheaper ingredients, which can sometimes react badly on patients. But because they are cheaper, NHS doctors will always prescribe a generic drug if one is available; and where patients have to buy their own drugs, they will tend to buy the cheaper version. And many insurance companies will only pay for the cheaper version. Hence drug companies will lose out.
Most drugs are patented to ensure that the company that develops them doesn’t lose their commercial advantage by others copying the drug. Copying would be fairly easy to do; any company developing a drug has to let the health watchdogs know what the drug was made of – making it easy to copy a successful drug – if it weren’t for patents which make this almost impossible, due to strict legal controls.
But drugs developed during the heydays of research are now coming to the end of their 20- year patent protection, enabling other companies to copy the formula.
So who is going to be first to suffer?
This problem has been growing, and drug maker AstraZeneca has just announced that it will cut another 7,300 jobs in Britain.
This comes a year after Pfizer announced it would close its UK research site.
There are still large profits being made, but there are pressures on the whole industry.
Jonathan de Pass, chief executive of the company EvaluatePharma, says “It’s just an immensely challenging time for big pharmaceutical companies. Their whole business model is under huge strain – the whole research model is under pressure.”
What about new drugs?
Not so easy. As Prof. David Phillips of the Royal Society of Chemistry told the BBC, “It’s a fact that the easy targets, in the body, for the production of drugs have, essentially, all been used up.
“The cost of producing new pharmaceuticals, new drugs, is so astronomical now that it only takes one failure of a drug which doesn’t perform as well as was expected or has side effects – one withdrawn from the market that way can really cripple a company.”
A year ago AstraZeneca wrote down £281m when it discontinued research on Motavizumab , a respiratory medicine. In February 2011, late-stage clinical trials were halted on the prostate cancer drug zibotentan.
Patents usually last 20 years, during which market exclusivity allows companies to recover the research and development costs and make a profit. However, once the patent expires any company can make a “generic” version of the drug and sell it for a tiny fraction of the price.
In the USA the biggest-selling drug in the world – Lipitor (the cholesterol-lowering statin) earned Pfizer £8bn two years ago. The patent expired in November last year and cheaper alternatives are now on offer.
This could cause a problem for AstraZeneca, as it makes a statin called Crestor. Although its patent does not run out until 2016, it has been suggested that cheap Lipitor could damage sales.
“It’s still early days, but people are going to be prescribed generic Lipitor – that is bound to have an effect,” said Mr De Pass.
So what can be done to ensure continued research into drugs of benefit to patients?
Prof. Phillips said the key would be research on the fundamental science: “We need to get a stimulus to get that research done in the small companies and in universities so the bigger companies, later down the line, can pick up the promising leads and develop them from there.”
Case Study: when a cancer patient at Chelsea and Westminster Hospital asked for Monofer (an iron-infusion for aneamia) instead of the one prescribed, which the drug makers said was more suitable for cancer patients. The patient offered to pay the difference in price; the hospital refused. So the patient had the less-suitable drug infused, and six months down the line it has cost the hospital well over £1,000 to pay for consequences of giving wrong infustion – and they have now had to administer Monofer.
When Alan Johnson was Labour Minister of Health, he was made to agree that patients could co-pay for difference in drug costs. However, this climb-down seems to have been forgotten, so it is up to patients to point out the law to the NHS, and if they would rather have a more expensive drug – they should be allowed to pay the difference.
Almost all pension plans will be investors in drug companies. They are some of the largest and most profitable in the world, so it makes sense for pension plans to invest in them. However, if they start losing money, not only will patients lose out, but their pension plan payouts will too.
So what of the future?
Drug companies are beginning to realise that they will have to become more open when talking to patients. In Britain, we have one of worst compliance records (taking drugs) in world; oncologists don’t have time to deal with drug side effects, so patients give up and don’t take their drugs.
This is not only bad for patients (according to World Health Organisation French cancer patients on average live over four years longer than Britons), but as we die earlier and don’t take drugs, this affects the drug companies’ profits.
Eventually drug companies will realise that to keep up their profits, so shareholders will authorise reasearch costs for new drugs, they will have to consult more with patients. When this happens, it will be a win-win situation for both parties – but don’t hold your breath!