Subj: UK: Dobson's choice on miracle cures



Date: 27 Sep, 1998



Source: Scotland on Sunday







Dobson's choice on miracle cures

The health secretary may pay a high price for keeping NHS 

costs down, warns David Robertson



HEALTH secretary Frank Dobson is taking on the massively 

powerful drugs industry in a desperate bid to scale back the 

spiralling bill for new miracle cures.



At the same time as the NHS is looking to put a straight-

jacket on expenditure, despite the plethora of new wonder 

drugs grabbing the public's attention, the government is 

attempting to renegotiate its cosy pricing agreement with 

the pharmaceutical companies which limits the profits they 

make.



The Pharmaceutical Price Regulation System is likely to be 

scrapped or radically overhauled to limit drug company 

profits and reign back the escalating NHS bill. Drug giants 

such as GlaxoWellcome and SmithKline Beechan are understood 

to be worried that limits on profits may spread through 

Europe, severely denting future earnings.



Some companies warn darkly that if Dobson tries to cut their 

profits they will move their massive UK research and 

manufacturing operations abroad, while City analysts talk of 

conspiratorial plans by pharmaceutical giants to ration the 

amount of drugs sold to a country if they are challenged on 

price.



The emergence of drugs such as Viagra and the slimming pill 

Xenical have sparked panic in the NHS because it cannot 

afford the new miracle cures. The NHS could be forced to 

prescribe drugs only in life-threatening conditions. 

Everything else, from antibiotics to Viagra, would have to 

be paid for; moving the UK towards the two tier US model of 

health care. This would destroy the idea of free health for 

all, although the massive cost of the new drugs will force 

the government to draw the line somewhere.



GlaxoWellcome's new flu drug, Relenza, will up the stakes 

even further. Clinical data released on Friday showed that 

the drug was effective, which could make it the pill most in 

demand in the world. How is the NHS to pay for it when it 

can barely meet its current bills?



Xenical will be available on the NHS and the government is 

nervously watching to see how many of the UK's 7.5 million 

clinically obese adults jump at the opportunity to take a 

drug that is expected to knock, on average, about 10% off 

body weight.



Patients will cost the NHS UKP3 each day more than UKP1,000 

a year, if they are prescribed Xenical by their GP. The 

total cost could be as much as UKP750 a year, equivalent to 

about 17% of the current UKP4bn a year NHS drugs bill, which 

could force cutbacks in other areas.



Viagra was initially predicted to cost the NHS UKP500 a 

year, but its maker, Pfizer, has halved the cost of each 

pill to about UKP5. Even with this reduction, Viagra 

prescribed on the NHS would cost the taxpayer up to UKP150m 

a year. Instead, a private supply industry has sprouted with 

pills costing up to UKP20 each.



The government wants to discourage GPs from blowing their 

budgets on these nonessential cures. It is proposing to set 

up the National Institute of Clinical Excellence, Nice, 

which will offer guidelines to doctors on alternatives to 

expensive medications. Nice, which will form part of the 

Department of Health's forthcoming white paper, will tell 

doctors that they should encourage the overweight to do more 

exercise and eat less which costs it nothing - rather than 

prescribe drugs such as Xenical.



Doctors are already monitored closely on the types of drug 

they prescribe. A system called Prodigy gives GPs cheap 

alternatives to the big brand name drugs sold by the likes 

of GlaxoWellcome and SmithKline Beecham.



But in an attempt to further nail down the NHS drugs bill 

Dobson realises he must renegotiate the PPRS. The scheme 

limits profits, but also guarantees companies a steady price 

allowing them to plan ahead for major research projects. 

Companies are permitted profits of up to 21% on NHS drugs.



The government has just started renegotiating the PPRS with 

the Association of British Pharmaceutical Industries (ABPI) 

but is understood to be planning a major revamp. It may 

ditch the agreement altogether and unilaterally impose lower 

costs.



This, and the government's plans for cutting the drugs bill, 

has outraged the pharmaceutical companies which are now 

making unsubtle threats about moving their massive research 

and manufacturing sites abroad.



This could be bluff, but the UK is in danger of losing one 

of its biggest industries. City analysts also whisper that 

companies may lay plans to hold governments to ransom by 

restricting the amount of drugs they sell.



The government's official line is to play coy. It admits to 

wanting to contain costs, but insists that no firm decision 

has been taken on the future of the PPRS - it is still in 

negotiations with the industry. The ARPI nervously agrees 

but adds that some form of PPRS is necessary to further UK 

exports and promote the industry globally.



Pharmaceuticals companies themselves are being more strident 

in their opposition to any change to their voluntary 

agreement with the government. They point to the UKP6m a day 

invested in UK research and development.



Pfizer, which makes Viagra and Istin (which controls high 

blood pressure), claims it has invested more than UKP500m in 

the UK since 1990 and is second only to Ford in terms of US 

inward investment in the UK.



The company says that its exports from the UK of UKP348m in 

1997 far exceeded the UKP267m the NHS spent on its drugs - a 

clear indication, it says, that Pfizer is good for UK plc.  



But it is pulling no punches warning of dire consequences 

should the PPRS be revised significantly downwards or 

scrapped.



"Foreign companies will have to consider their positions 

carefully," says public affairs director Miranda Kavanagh. 

"In other countries, like Eire, they offer tax incentives 

for building factories. They welcome our industry."



Pfizer is also bitter that its wonder drug Viagra is not 

available on the NHS while Xenical is. It argues that Viagra 

has only been banned because it is "about sex". The company 

warns that the government is going to have to develop a plan 

for these miracle cures because drug companies are geared 

towards finding cures for these ailments.



UK pharmaceutical companies are some of the biggest in the 

world and include giants such as GlaxoWellcome, SmithKline 

Beecham and Zeneca. They argue that a clampdown on the NHS 

drug bill win have only a limited effect on the overall 

health budget. Drugs make up about 8% of NHS expenditure and 

if, for example, a fat person can be made thin, 

manufacturers claim that in the long run the NHS will save 

money not treating people with problems such as heart 

disease that require expensive surgery and hospital stays.



The UK pharmaceutical manufacturers appear less willing to 

fall out with the new government, and are pinning their 

hopes on intensive lobbying and the ABPI negotiations. Even 

so, they mutter darkly that there could be serious 

consequences if their research projects are undermined by 

cost cutting.



Realistically this is mostly humbug. Glaxo has a market 

capitalisation of about $110bn, SmithKline $56bn and Zeneca 

$36bn. These companies are so large and globally diversified 

that less revenue in the UK will barely register on their 

accounts. The UK pharmaceutical market is just 3% of the 

global total and even household names such as SmithKline 

Beecham, which makes NHS vaccines for polio and measles, 

mumps and rubella, does only about 6% of its business in the 

UK.



The real paranoia surrounding the renegotiation of the PPRS 

is that other European countries may follow the UK's lead. 

That could seriously damage profits and R&D.



The manufacturers' veiled threats show how concerned they 

are that their gentlemen's agreement that stands with other 

European governments could also be ditched.



Frank Dobson could yet rock some of biggest companies in the 

world.



Table.

World's leading drug companies



Company            Market Capitalisation ($bn)



Merck, Sharp & Dohme     162

Pfizer                   131

Novartis                 119

GlaxoWellome             110

Bristol, Myers Squibb    104

Roche                    100

Eli Lilly                 86

Sheer & Plough            73

AHP                       72

SmithKline Beecham        56

Zeneca                    36