THE BLOG

Cancer Drugs Fund Was Short-Sighted

18/05/2016 15:09 | Updated 18 May 2016

2016-05-15-1463310165-9919658-CancerDrugFundFuelsPriceRises_HuffPost.jpg

The Cancer Drugs Fund was put forward by David Cameron during the 2010 General Election campaign - a tempting olive branch for many cancer patients desperate to get access to expensive life-saving drugs but in reality a short-sighted, vote-winning gesture that has helped to make drugs even more unaffordable in the longer term.

If you are unlucky enough to get cancer you would hope that you would have access to the best available drugs via the NHS, but sadly this is increasingly not the case. Rising prices for new cancer drugs mean that a growing number are now too expensive for the NHS to provide and have become a luxury for the rich. In 2015 alone, the NHS withdrew 36 cancer treatments that were previously available and many more are expected to be discontinued very soon, despite the fact that the public has contributed to the costs of research and development for many of these drugs.

Birth of the Cancer Drugs Fund

Funding decisions for NHS drugs are made by NICE (the National Institute for Health and Care Excellence) based on a cost benefit analysis - drugs are only funded if they can extend lives at a cost of less than £30,000 per year, after taking into account the effects on quality of life, or £50,000 for end-of-life drugs. But many cancer drugs are being sold by drug companies for prices much higher than this.

Faced with the growing problem of life-saving cancer drugs being priced out of reach of patients, in 2010 David Cameron came up with the bright idea of creating a separate pot of money called the Cancer Drugs Fund. The idea was that cancer drugs would be given extra money, so that higher prices could be paid, thereby giving cancer patients to access many drugs that NICE had rejected as too expensive. Initially this extra pot of money was £200m per year but due to budget overuns it has now risen to £340m, bringing NHS England's annual cancer drug bill to around £1.5bn. To try to bring the Cancer Drugs Fund under better control, responsibility for it has now been transferred to NICE, which is expected to cull more drugs from the list when it reluanches the scheme in July 2016.

Cancer Drugs Fund Has Made Matters Worse

While the Cancer Drugs Fund may have been set up with compassionate intentions, to help improve access to previously unaffordable drugs, it was hardly a smart move, as in practice the attraction of additional money was clearly only going to encourage drug companies to raise prices even more over the longer term, making them even more unaffordable.

Herceptin Prices By CountryIn 2014, the Financial Times attacked the whole idea of the Cancer Drugs Fund describing it as "a populist gesture that gives the impression of benefiting patients, but in fact rewards poor quality drugs while benefiting a handful of pharmaceutical companies at the expense of the taxpayer and the full range of NHS patients".

Many cancer drugs are only available from one supplier due to patent restrictions and there is clear evidence that drug companies abuse this monopoly over supply to simply charge whatever the market will bear.

The table on the right shows how prices for the popular breast cancer drug Herceptin vary in different countries.

By raising the amount we're prepared to pay, we are just inviting further price increases to levels being charged in other countries with bigger budgets.

Drug Company Profits Soar

Meanwhile, while drugs are being priced out of reach of patients, drug company profits are soaring.  The following table shows 2015 profit margins for the top 7 cancer drug companies, which control over 70% of all cancer drug sales worldwide. Average profit margins are 20.5%, with one company making a jaw-dropping 35.3% profit margin.

Pharmaceutical company profit margins in 2015

High profit margins are not a new thing either - the pharmaceutical industry is the most profitable in the world and profit margins have been rising steadily for years.

Pharmaceutical indsutry profit margins

 
It is morally incomprehensible that profits are being made on this scale while life-saving drugs are being priced out of reach of patients who need them.


We Need to Treat the Causes of High Drug Prices not the Symptoms

It's about time the Government woke up to the way in which cancer is being commercially exploited and cooperated with other countries to tackle this disease as a humanitarian crisis rather than allow it to be treated like a huge money-making opportunity for the privileged few.

The Cancer Drugs Fund was a short-sighted gesture that has further contributed to the problem of high drug prices it was set up to help with.  Rather than simply pandering to the drug companies by finding extra money to fuel ever increasing prices, the Government should be looking at why prices are high in the first place.

Drug companies often try to justify their high prices by saying that the drugs are expensive to develop. This is true to an extent, drugs are expensive to develop, but high prices are being charged long after R&D costs have been paid back and the Government is doing nothing to prevent drug companies abusing their monopoly of supply. On average, drug prices fall by around 78% once patents expire, allowing competitors to make cheaper generic copies, so it should be possible for drug companies to lower prices substantially once R&D costs have been paid off. But this isn't happening.

The latest industry estimate for the average cost to develop a new drug is $2.56bn. This cost takes into account the fact at only 12% of drugs investigated make it to market and also includes the cost of financing the investment at a generous rate of 10.5%. An independent study by The London School of Economics and Political Science found that this figure may be exaggerated by as much as 18 times, but even assuming this figure is correct, R&D costs are being paid back many times over for some drugs.

The following table lists 10 popular cancer drugs and estimates how much revenue has been generated to pay back R&D costs on the assumption that drug prices fall by 78% when patents expire. On average R&D costs for these drugs have already been paid back more than 9 times over and it is still many years before monopolies for some of these drugs expire.

Cancer drug R&D costs paid back many times over

Drug companies are clearly abusing the legal monopolies afforded to them under drug patents to profiteer from the desperation of patients clamouring for life-saving drugs.

This is what the Government needs to tackle to improve access to cancer drugs.

The Government needs to stand up to the drug companies and urgently work on a longer term solution to cancer drug prices, rather than simply writing them cheques for more and more money.

2016-05-15-1463312046-6753297-DyingForACureLogo2.pngIf you agree with me and want the Government to tackle profiteering from cancer, please have a look at a campaign I've set up called Dying for a Cure, which is calling for a major overhaul to the way we develop and pay for cancer drugs.

Comments

CONVERSATIONS