Cost Control in the UK

Via the Guardian:

A Herceptin-style drug that can offer some women with advanced breast cancer nearly six months of extra life has been turned down for use in the NHS because of its high cost.

In draft guidance now open to consultation, the National Institute for Health and Care Excellence (Nice) blames the manufacturers, Roche, who are asking for more than £90,000 per patient, which is far more than any comparable treatment….

It is not a cure, but in trials it extended life by a median of 5.8 months, compared with the current combination of lapatinib plus capecitabine

This drug will be available to British patients through a special fund but it will not be a first line, readily available course of treatment.  NICE, the NHS cost effectiveness research body is charged with determining what things should be paid for by the National Health Service and at what price.  It has the ability to say no in a very public and very enforceable manner.  NICE’s decision framework is fundamentally simple. 

NICE uses cost-effectiveness thresholds that value a perfectly healthy year of life to be worth spending 20,000 to 30,000 pounds sterling or roughly $33,000 to $49,000.

Having used the QALY measurement to compare how much someone’s life can be extended and improved, we then consider cost effectiveness – that is, how much the drug or treatment costs per QALY. This is the cost of using the drugs to provide a year of the best quality of life available – it could be one person receiving one QALY, but is more likely to be a number of people receiving a proportion of a QALY – for example 20 people receiving 0.05 of a QALY.

Cost effectiveness is expressed as ‘£ per QALY’.

Each drug is considered on a case-by-case basis. Generally, however, if a treatment costs more than £20,000-30,000 per QALY, then it would not be considered cost effective.

Using NICE’s methodology, the drug, Kadcyla, supplies less than half a year of life, and once adjusted for quality, significantly less than half a QALY for at least six and potentially twelve times the cost that NICE and NHS is willing to pay for that type of improvement in health. 

There are two possible scenarios going forward.  The first is that Roche, the drug manufacturer, dramatically drops the price of the drug to get it underneath the cost effectiveness threshold.  The second is that Roche does not move its price point by much if at all, and NHS spends its limited budget on more effecient interventions for other people.

59 replies
  1. 1

    I believe we’ve found the death panels.

  2. 2
    sparrow says:

    Seems reasonable, however sad it is for those that will be denied the extra time. Personally, if it were me I might rather take the 30,000 and spend my last days in a Greek island drinking Ouzo. At least those would be some high-quality days. For a drug that doesn’t offer a cure, I think the cost-effectiveness needs to be even more stringent.

  3. 3
    scav says:

    Heaven Forfend! someone discussing the price setting bean-maximizers at our profit-seeking corporate moral betters and smearing them with the epithet “death panels”! Think of the Shareholders! The CEO, the Board and their Quality of Life!

  4. 4
    dollared says:

    I love a good negotiation. Especially when it’s played out in public. From this chair, this is pretty much the same as the Seahawks negotiating an extension with Richard Sherman, using the Seattle Times as the method of exchanging offers.

  5. 5
    Violet says:

    Like this sort of thing doesn’t happen here in the US between drug companies and health insurance companies. Happens all the time. It’s just behind closed doors so we don’t get to see why, when we go to the ph ar macy to get some prescription from our doctor filled it turns out it’s not covered under our insurance.

  6. 6
    Gopher2b says:

    @sparrow:

    I’ve always thought the solution to these type of issues (treatment for terminal patients) is a blend of life insurance/health insurance payment that people can choose to use however they want (righteous vacation, inheritance for kids/grand kids/treatment).

  7. 7
    RandomMonster says:

    DEATH PANELS!!!! *argle bargle*

  8. 8
    Davis X. Machina says:

    @Violet: The Market, blessed be it, demands martyrs. Any deity worth his/her/its salt can summon them up in droves.

  9. 9
    jayackroyd says:

    Dean Baker has argued, for quite a while, that the thing to do is decouple research from production.

    http://www.theguardian.com/com.....s-industry

    Drugs are cheap. There are few drugs that would sell for more than $5-$10 a prescription in a free market. However, many drugs in the United States sell for hundreds of dollars per prescription and, sometimes, several thousand dollars per prescription. There is a simple reason for this fact: government-granted patent monopolies.

    The government gives patent monopolies to provide an incentive for drug companies to carry through research. This is an incredibly backward and inefficient way to pay for research. It leaves us paying huge amounts of money for cheap drugs. It also often leads to bad medicine.

  10. 10
    Fuzzy says:

    Cost effectiveness is not the problem. Extending a miserable quality of life is the question. At what point do the patients wishes, not the families or doctors, become primary.

  11. 11
    jl says:

    People often forget that “This drug will be available to British patients through a special fund but it will not be a first line”.

    Not sure what situation is with supplemental insurance and rules for private medical provision in UK, but the ‘free market’ system in Switzerland (which for awhile was the reactionary propaganda bait-and-switch of choice for opposition to ACA) has similar cost-effectiveness tests for reimbursement by the mandated national health care policy. There, the consequences of not passing the cost-benefit test seem less harsh since patients who want those additional treatments can purchase supplemental policies that will pay for what the mandated policy will not.

    I think people find the use of these threshold value cut-offs in cost-effectiveness analysis disturbing, since they seem to impose limit of the value of life. I think there is a good basis for setting a limit on the statistical value of life from the point of view of a healthy person who is evaluating relatively small variations in expected mortality around a very low base level. From the viewpooint of a sick person where treatment choices imply large variations in expected mortality around a much higher than usual base level, these threshold values mean nothing, as AFAIK, economic theory and statistics has virtually nothing to say about what a reasonable value for statistical value of life should be.

    The original rationale for use of cost-effectiveness analysis from back in the 60s and 70s did not use threshold values. The idea was that if the health system got a fixed pot of money to spend each year, and treatments were doled out in order of their cost-effectiveness, from least to most, until all the money was gone, then the resulting set of delivered treatments would be the same as delivered by an economic cost-benefit analysis, and with enough strong assumptions, would be economically efficient. Under that way of looking at it, there was still a threshold value, but it was implicit in the set-up, and would be determined by the social decision to spend a certain amount of money on health care.

    And from that angle, the criteria for determining who is allowed to move from first-line to second line treatments, and then to the expensive treatments like this cancer drug under compassionate care exemptions, is what really determines how draconian this policy is.

    And I have to put in my usual gripe about using the word ‘costs’ to describe what are really expenditures or reimbursement, determined by the price the company asks for the drug. The economic costs of making and delivering the drug are nowhere near the reimbursement that the drug company is asking, they may be only tenth or a hundredth of rhe requested money. Most of the reimbursement should be called monopoly rents for a drug that is under patent. And the question there is whether the monopoly rents for holding patent, and that produce static economic efficiency are put to good use in providing incentive for future R and D, which increased dynamic efficiency over time.

  12. 12
    jl says:

    @Violet: Yeah, what Violet said.

    In the U.S. this process is just accepted as necessary for general welfare, to produce our free market paradise, when the choices are made behind closed doors by a private insurer, but a merciless death machine if a public or government organization does it, and is open for public review. Which I think is an odd, but for the bigshots convenient, way of looking at it.

  13. 13
    jl says:

    @jl:

    Sorry for typos:

    and treatments were doled out in order of their cost-effectiveness, from least to most,

    should be

    and treatments were doled out in order of their cost-effectiveness, from most cost-effective first to least cost-effective last.

    And

    and that produce static economic efficiency are put to good use in providing incentive for future R and D, which increased dynamic efficiency over time.

    should be

    and that produce static economic INefficiency are put to good use in providing incentive for future R and D, which increases dynamic efficiency over time.

  14. 14
    Belafon says:

    @Fuzzy: I suspect if you have the money to buy the drug, you can get it. All this decision does is not set up purchasing by the NHS. And in that case, there will always be choices. Do you think the NHS should buy that and forgo insulin treatment for children? What other health coverage would you sacrifice for this drug?

  15. 15
    Richard Mayhew says:

    @Violet: Big difference is that Roche can get most if not all of its asking price in the US (single supplier with a plentiful horder of extremely sympathetic people to cry on TV vs fragmented payers who are some of the most hated industries in the country) and Medicare can’t, by law, bargain or otherwise use its immense purchasing power.

  16. 16
    Keith G says:

    @Gopher2b: I like the idea of a cash incentive to opt out of extraordinary life extending measures; and yet one needs to be careful not to provide inadvertent financial incentives for bad behavior.

    Also, bear in mind that mortality predictions can be awfully inaccurate even if palliative care is the only treatment the patient is using.

  17. 17
    Violet says:

    @jl:

    Not sure what situation is with supplemental insurance and rules for private medical provision in UK,

    UK residents all have health care under the NHS. Private health insurance is also available, which means the patients can “go private” for various things. You can buy your own private health insurance and it’s also offered as a perk by employers. One friend got private health insurance through her job and “went private” to see a specialist when her GP wouldn’t treat her abdominal issue seriously. Turns out she had a tumor, so that was a good decision on her part.

    A family member (older) purchases her own health insurance. We were talking about it and she said at her age she can’t really switch policies without a huge increase in price. I guess she’s sort of grandfathered in with her old policy, even though it doesn’t cover everything the way she wants.

    She needed hip surgery and chose to go private using her private health insurance. That meant she knew which doctor would perform the surgery, rather than being randomly assigned one whenever a spot became available. She also got to plan when the surgery was. And she got an upgraded private room. From what I understood, the surgeon was the same as one of the ones she would have been assigned by the NHS, so it’s not like she went to a doctor outside the NHS.

    The impression I get is that everyone gets a baseline level of care. Those who can afford it or who have employers who offer it can also get supplemental private insurance. It’s sort of a two tier system.

  18. 18
    Robert Sneddon says:

    @jl: Supplemental medical insurance policies and private medical services are readily available in the UK. BUPA is one of the biggest medical insurance providers here, popular with trade unions and businesses and the private medical sector is widely used by, among others, wealthy Saudis and the like. Many of the doctors providing private services also work for the NHS on a part-time consulting or contract basis. The area in London which provides private health services is called Harley Street in the same way Bond Street is traditionally the home of upper-end tailoring in the Capital.

    The NHS is not an insurance scheme, it provides medical coverage to all British citizens at no cost at the point of use — no silly co-pays and clinic visit fees and billing for tests etc. that other more commercial insurance systems like the Swiss and the French require for treatment. The NHS is funded out of central Government revenues via taxation so anyone in poverty doesn’t have to pay anything to get examined or treated unlike most of the rest of the world’s health systems.

  19. 19
    David in NY says:

    @Infamous Heel-Filcher: If that hadn’t been the first comment, I’d have been sorely disappointed in the BJ commentariat.

  20. 20
    evolved beyond the fist mistermix says:

    Having seen Herceptin used in the end-stage breast cancer of a 40 year old family member, if this drug is really the “new Herceptin” the thing to realize is that Herceptin has very few side effects, so the months of extended life come at very little physical cost. In an ugly painful 7 year slog, the only thing that worked better than Herceptin was marijuana.

  21. 21
    Arclite says:

    Roche replies:

    How can the government put a price on life??!! It’s murder!!!! Now pay us our 90,000 quid per person.

  22. 22
    Just Some Fuckhead, Thought Leader says:

    The free market requires blood sacrifices.

  23. 23
    bluefoot says:

    @jayackroyd: Unfortunately, it’s not that simple. Drugs can be cheap to manufacture. They are not cheap to create. It costs, on average, $1.1 billion per drug to get it to market. While that does take into account drugs failed in late stage clinical trials, it does not count all the money spent on research and development that didn’t pan out (a LOT happens before you even get to clinical trials) or research that didn’t find a new chemical that could be put into development as a potential drug. The numbers are even scarier if you take the total amount of R&D spending per year and divide by the total number of new drugs per year. (According to Forbes, annual R&D spending $135 billion for 25-35 new drugs.)

    I think there are two sides to the patent argument. There are incremental improvements in formulation, drug delivery, etc that can create monopolies and drive up prices. But there are many areas where drug development isn’t even pursued because the patent life will run out before the clinical trials are complete, or only give a year or two of patent coverage to recoup costs before a generics company who hasn’t put in the money to develop the drug comes in and starts manufacturing, driving down the cost.
    Part of this, of course, is the insistence that companies provide maximum return for shareholders. When it takes $1 billion and 10 years on average to develop a drug, no wonder there is pressure for high prices.

    The solution? I don’t know. People bandy about the idea of there being a consortium or some sort of worldwide fund that pays for clinical trials, since those are the largest cost in drug development. An additional upside would be that the data could be public. But in practice, there isn’t any agreement about how that would work.

    Also, drug cost is something like 10% of total healthcare spending (I think that number is US). It’s an easy target, but maybe there are other places where cost savings wouldn’t mean some people wouldn’t get the treatment they need.

  24. 24
    jl says:

    @Violet: @Robert Sneddon:

    Thanks for into on supplemental insurance in UK. I did understand that the NHS is not an insurance system, sorry if I was unclear on that.

    Re patent and prices demanded by patent holders, to be super cynical, what we only know is that it looks like the drug provides an extra six months of life of a given quality, from whatever information the drug company chooses to reveal.

    The economic argument involves a bargain, which is that in return for the patent, the patent holder agrees to reveal all information about the invention. The rules for disclosure of data, at least those of the FDA, are so loose and full of holes, that I think this requirement may have been rendered meaningless, at least in the U.S. It seems that, for drugs, patent holders get all the benefits of a patent and of holding a legally defensible trade secret, but few of the costs of either.

    This has long been a struggle in patent law and economics, especially in the chemical industry. But seems to be even more of a problem with drug development in the U.S. A good history, even interesting to read (!) of the trade-offs in the economics of patents and how they have played out over the last 200 years is Patents and innovation: Evidence from economic history
    P Moser, The Journal of Economic Perspectives, 2013.

  25. 25
    Violet says:

    @Richard Mayhew: Except the health insurance companies just choose not to cover them if they’re too expensive. I don’t use that much in the way of medications, but in the last five or six years I’ve had two instances where my pre scription coverage didn’t cover two medications prescribed by my doctors. For one of them I had a coupon from the manufacturer so what should have been $200 (zero covered) was something like $20. The coupons only lasted a few months though, so if I wanted to continue to take it I had to find $200. I quit taking it.

    The second one was $600. Zero of that was covered by insurance. It did apply to some deductible so it had that going for it, but as for the medication it wasn’t covered. Fortunately it was a one time thing.

    My point is that full price may mean the drug company gets their price but they also lose paying customers who walk away when the price is $200 or $600 because they can’t pay. It’s death panels by high price.

    I can’t be the only person who has experienced this sort of thing.

  26. 26
    catclub says:

    an other way to put it is not taking (as much) shit from big pharma.

    Naturally, since the US is the biggest ( We’re Number 1!), we take the most shit from big pharma.

  27. 27
    Another Holocene Human says:

    @Infamous Heel-Filcher: Unhappy people are always the most afraid to die.

  28. 28
    jl says:

    @bluefoot: Patent pools have long been a solution in chemical and manufacturing industry. Not sure to the extent that they can be, or have been, adapted to drug industry. The idea is that if production in a sector of an industry has ground to a halt (and that has happened in the past) because of a maze of interlocking or overlapping patents and lawsuits, all the patents go into a common pool. Manufacturers and researchers pay a fee for use of all the information in the patents that are in the pool.

  29. 29
    Another Holocene Human says:

    @jayackroyd:

    The government gives patent monopolies to provide an incentive for drug companies to carry through research. This is an incredibly backward and inefficient way to pay for research. It leaves us paying huge amounts of money for cheap drugs. It also often leads to bad medicine.

    Completely agreed. And not even getting into the fact that our tax dollars paid for that basic drug research for years. The profitable co’s spend their money on marketing and lawyers for when the marketing leads to deaths. Nice business model.

  30. 30
    burnspbesq says:

    @jayackroyd:

    I certainly understand the argument Mr. Baker is making, but do you really want politically accountable people allocating research dollars?

  31. 31
    Barbara says:

    I think it’s important to note that when you get to Stage 4 cancer — which means the cancer has spread to distant organs — there is never any “cure.” At that point, it is all treatment.

    I only know about breast cancer but some Stage 4ers live years and years, sometimes a decade or so, on various treatments. They take one drug or combo until the cancer evolves past it and starts growing again, then they take another, or have some sort of radiation treatment, etc., rinse and repeat.

    There’s always a lot of hype about new drugs coming down the line; I’d bet that a lot of people on Kadclya think, “Well, if this only works for six months, who knows what new drug will be available then?” And sometimes they’re right, something new comes out and it does make a tremendous difference to them.

  32. 32
    jl says:

    @Another Holocene Human: It is true that using conventional methods of financial analysis, the big drug companies seem like they get excess profits: the rate of return is out of line with the observed variation in profits. It is not as outrageous as indicated by analyses that just look at means, as done by public interest groups like Public Citizen, but there do seem to be excess profits.

    There is also a problem of wasteful duplicative research. A big deal in the drug industry is, following the initial patent for a new chemical entity, for the original patent holder, and potential competitors to file dozens of patents on various modes of administration, dosages, and details of medication formulation. All these things are research projects that have a very high probability of success, pretty much anyone who gives it an honest try can come up with a pill that you take once a day rather than four times a day. So, by economic criteria used for other industries, these innovations in dosage and frequency of administration, etc., should not be eligible for patent. And a hundred years ago, such secondary patents were not enforceable in U.S. courts in other industries.

    So, the high prices pay for this kind of research as well as truly innovative research, at least in the modern U.S. ‘anything goes’ world of patents.

  33. 33
    burnspbesq says:

    @jl:

    Patent pools have long been a solution in chemical and manufacturing industry. Not sure to the extent that they can be, or have been, adapted to drug industry. The idea is that if production in a sector of an industry has ground to a halt (and that has happened in the past) because of a maze of interlocking or overlapping patents and lawsuits, all the patents go into a common pool. Manufacturers and researchers pay a fee for use of all the information in the patents that are in the pool.

    And this passes muster under antitrust law how, exactly?

  34. 34
    Fuzzy says:

    @Belafon: I agree. With limited resources we should do the most good for the most people.

  35. 35
    jl says:

    @burnspbesq: And executives who run a monopoly or duopoly insurance company in a given U.S. state, are accountable to who, exactly? Other than their cronies and the shareholders who want high profits and growth at all and any cost.

  36. 36
    bluefoot says:

    @jl: That’s really interesting. I don’t know that I’ve ever heard this being applied to drugs, but it’s a great idea worth investigating. Especially with the proliferation of “me too” drugs. It could decrease everyone’s costs and it may also help streamline the regulatory process (i.e. review and approvals by the FDA, EMEA, etc). The only ones that might not be happy would be the patent lawyers.

  37. 37
    jl says:

    @burnspbesq: Well F if I know how patent pools exist legalwise, IANAL. But they exist.

    Maybe a patent lawyer will come along who can explain the legal ins and outs of them.

    @bluefoot: (and burns too).

    I’ve known some patent lawyers, they seem to be able to make a very nice living off of patents, and love everything about them, be they stand alone, or in pools, or wherever.

    There has to be a patent lawyer among the BJ commentariate. They tend to be calm and quiet types, though.

  38. 38
    Roger Moore says:

    @jayackroyd:
    I think there’s a very good argument in favor of separating R&D from manufacturing, but the line about no prescription costing more than $5-10 seems like an exaggeration. There are plenty of generic drugs out there today that cost more than that, so patents can’t be the only thing driving up prices. I wouldn’t expect mAB and similar large protein drugs ever to get down to that price level because the production is genuinely challenging and for a lot of them the market is pretty small.

  39. 39
    Violet says:

    @burnspbesq: Google patent pools and antitrust and there’s plenty of info out there on how it works.

  40. 40
    mclaren says:

    @bluefoot:

    Unfortunately, it’s not that simple. Drugs can be cheap to manufacture. They are not cheap to create. It costs, on average, $1.1 billion per drug to get it to market.

    In reality, most of the money pharmaceutical companies spend on drugs is spent on marketing — not on drug development.

    “Big Pharma Money Spent on Marketing Exceeds Drug Development Costs” Natural News, 22 February 2008.

    The solution to the problem, which so baffles both Richard Mayhew and bluefoot, is simple and obvious. Remove profit from the equation. Nationalize all the big pharmaceutical companies and let the NIH identify and develop drugs, then sell ’em to the public at cost.

    Moreover, a great deal of the statistical claims made about drugs by pharmaceutical manufacturers turn out (upon closer examination) to boil down to vacuous pseudoscience:

    Amid a furore over the safety of its antidepressant Paxil in 2004, it was discovered that GlaxoSmithKline had conducted numerous trials that failed to prove the drug was an effective treatment for children. However, a minority of trials did suggest efficacy, to a statistically significant confidence level, and these were the studies that got published. It wasn’t until scientists added together all the unpublished data that it became clear the drug increased the risk of teen suicides, for no offsetting benefit in treating depression, and it was banned for use by minors.

    GSK responded by promising to reveal all its trials and to publish all its data, regardless of their outcome, and other large drug companies followed, more or less reluctantly. As a result, we continue to learn that large claims made for blockbuster medicines tend not to stack up over time, Tamiflu being the latest example.

    Source: “When Use of Pseudo-Maths Adds Up To Fraud,” Stephen Foley, The Financial Times, 20 April 2014.

    Isn’t it interesting that while Richard Mayhew and his lickspittle amen chorus puzzle over the allegedly baffling problem of the high cost of drugs, they never mention the word “fraud”?

    Many — perhaps most – current high-priced drugs are worthless, useless, and a fraud, the statistical “evidence” for their effectiveness ginned up in an orgy of pseudoscience by corrupt big pharmaceutical manufacturers who use fraud and statistical legedermain to confect fake numbers about the worthless ineffective drug’s so-called utility.

    Nationalize big pharma. Sweep out the corruption, end the fraud. Drug prices will drop, and genuinely ineffective drugs will never be pushed to market.

  41. 41
    Roger Moore says:

    @jl:

    The economic argument involves a bargain, which is that in return for the patent, the patent holder agrees to reveal all information about the invention. The rules for disclosure of data, at least those of the FDA, are so loose and full of holes, that I think this requirement may have been rendered meaningless, at least in the U.S.

    Those are really two different things. The patent application is supposed to include all the information necessary for somebody who is already skilled in the technology to reproduce the invention. For biologicals like this, that basically means the complete gene sequence they’re expressing. I happen to know people who do this stuff, and that really is all the information they’d need to produce the same protein. I might demand that they also provide a frozen sample of their expression system, but that wouldn’t really be necessary.

    But that’s completely separate from the disclosures they need to make to the FDA, most of which happen after the patent has already been submitted and approved. They’re required to produce a lot of information for the FDA about producing their drug but they appear to be able to hide a bit more about the actual clinical trials. My impression is that the FDA knows a lot about drug production and their inspectors are very good at digging and finding flaws with that side of things, but they aren’t as good about digging into the clinical trials data. The real area where the drug companies have been hiding data is from adverse event reporting on approved drugs.

    Full disclosure: I work in a FDA registered lab at a non-profit hospital and have been through an FDA audit. We do quality testing both for in-house drug development work and for outside manufacturers. Some of my coworkers in other labs do development work on recombinant antibodies, and our institution has a substantial history in developing biologics.

  42. 42
    Roger Moore says:

    @jl:

    There is also a problem of wasteful duplicative research. A big deal in the drug industry is, following the initial patent for a new chemical entity, for the original patent holder, and potential competitors to file dozens of patents on various modes of administration, dosages, and details of medication formulation.

    There’s also a lot of “me too” chemicals, where competitors find slightly different chemical entities that have approximately the same effect. One company comes up with an anti-heartburn drug or a boner pill, and then two or three others come up with compounds in the same class that have nearly identical effects but are chemically different enough to be patentable. Because they have slightly different indications and doctors don’t usually use price as a major point when giving prescriptions, the presence of multiple drugs with similar effects doesn’t do much to drive down costs.

  43. 43
    jl says:

    @Roger Moore: I’m not sure I agree, at least from an economic and money making view. Though I admit i was extremely sloppy and did not mention the difference between a patent application and what the FDA requires. A molecule is easy to describe. But what the patent holder for a brand name drug is really selling is the whole package of how the drug works in patients. That package includes the molecule, all the glue and stuff that governs how the drug is released an delivered to the target inside the body (edit: the excipients! I love that word), the side effects, and effectiveness in different populations, especially wider patient populations that will be the market for the drug soon after it is in use. All these issues are very bid deals in deciding whether to use the drug or a close substitute.

    I think a lot more information about all these issues need to be disclosed as part of the patent process. Too much can be hidden by the drug company.

    This was a problem in Europe in the nineteenth century when chemical companies would selectively leave out important details that prevented competitors from using information in the patents to reproduce the product after the patent expired. It was considered important enough to address back then, since gaming patents this way defeated one of the rationales for how patents worked. But it does not even seem to be a topic of discussion now.

  44. 44
    JaneE says:

    It sounds like these patients in the UK have pretty much the same situation as patients in the US. If you have enough money, you may be able to prolong your life more than someone who doesn’t. The difference is that in the UK basic health services and care are available to everyone. In the US, the poor have shorter life spans even without breast cancer.

  45. 45
    jl says:

    @Roger Moore: thanks, I did not know ‘me too’ chemical entities were that big a deal. But I stink at chemistry and it bores me to tears, or to sleep.

    Anyway, obviously, I am skeptical about the suitability of the current patent process wrt to funding drug R&D.

    Edit: and I wonder about the role of ‘slightly different indications’ in product differentiation for no real purpose other than preserving market power. Another reason for drug companies to spill more info.

  46. 46
    bluefoot says:

    @jl: “Me too” drugs have become way too big a part of the pipeline, IMO. The large driver is the cost and uncertainty of drug discovery – investors, boards, and C-suite types would much rather spend much less vs de novo discovery on a “me too” and the chances of getting to market are orders of magnitude (not an exaggeration) higher.

    Re “slightly different indications”; I think part (50%? 60%? more?) of that is preserving market share and part of it is driven by the regulatory process. i.e. the regulatory agencies are often pretty conservative on what they will approve to be on the label and they take a dim view of “off label” use.

  47. 47
    Roger Moore says:

    @jl:

    I think a lot more information about all these issues need to be disclosed as part of the patent process.

    And I would argue with the idea that the patent process is where to include that information. Right now, the patent on a new drug is applied for as soon as the active substance in the drug (API, active pharm aceutical ingredient in the lingo) is developed. The details of the full formulation for the drug happen during the course of the clinical trial. If you require disclosure of that kind of information as part of the patent process, it will effectively limit patents to drugs that can pass a clinical trial.

    I would rather let companies patent any new compound they think has interesting drug properties as early in the development process as possible, whether it eventually proves usable as a drug or not. That gives other people working on drugs more information about potentially interesting substances. It also gets the clock on the patent ticking as early as possible so it’s theoretically possible for generics to get into the market earlier. If there’s a disclosure problem, it’s that FDA should be allowed and required to disclose more of the information when it approves or denies new drug applications.

  48. 48
    Roger Moore says:

    @jl:

    I did not know ‘me too’ chemical entities were that big a deal.

    They’re a big deal as far as competing drug companies are concerned. When one company comes up with a blockbuster drug, the competition tries to get around their patent by looking at similar molecules. That kind of molecular tweaking can have some real benefit- it might change the biological half-life of the molecule or off-target effects- but it’s mostly about the other companies wanting to get in on sales.

    As far as the different indications, a useful example that you might be familiar with is NSAIDs. Now that they’re out of patent, it’s nice to have a choice between aspirin, ibuprofen, naproxen, etc. because they’re all slightly different and better for different uses. Aspirin has the biggest effect on clotting, so it’s what doctors recommend as a low-level anti-clotting agent to help against heart attack. Naproxen has a longer biological half-life, so it’s useful for people with chronic conditions like arthritis. Ibuprofen has the biggest anti-inflamatory effect, so it’s used for sprains and muscle soreness.

  49. 49
    pseudonymous in nc says:

    NICE’s guidance is just that: in certain situations where doctors consider it appropriate to use hyper-expensive treatments, then there’s room to get approval. It’s just not automatically available. Of course, you’ll get the Daily Mail whining about “miracle drugs” being denied to cancer patients, even though they’re not, and the Mail basically hates the NHS.

    That happens right down the line — in the US, you’ll get shoved in the Magic MRI Machine early on, because Magic MRI Machines are expensive and need to be fed with warm bodies to cover their costs, and patients have been led to think that if there’s not some kind of extensive lab work or scanner involved, they’re not getting treated; in the UK, you’ll get sent for imaging if simpler and cheaper diagnostic techniques don’t deliver.

    Supplemental medical insurance policies and private medical services are readily available in the UK. BUPA is one of the biggest medical insurance providers here, popular with trade unions and businesses

    BUPA and other private providers are mainly for private rooms and scheduling. Companies basically offer private insurance so that their employees can take time off work according to what suits the employer, as opposed to depending upon the general waiting list. So it’s very much a professional and regional split: if you’re working in the City of London, you’ll have a private policy, but the further away you get from the capital, the more likely it is you’ll not have any issues with NHS treatment in terms of access and convenience.

    The private/NHS split for consultants goes back to the origins of the NHS, where Nye Bevan was only able to get them on board by “stuffing their mouths with gold”, i.e. letting them keep their private business in exchange for working with the state system.

  50. 50
    Phoenician in a time of Romans says:

    @Belafon:

    What other health coverage would you sacrifice for this drug?

    Bingo! That’s the operative question for the NHS.

    Patients are free to get the medication through other means, but a government system HAS to balance benefits and efficiencies to deliver the biggest “bang for the buck”. And cancer treatments are simply the most visible and dramatic example of something that might creep over the threshhold.

    There’s another consideration – Roche knows that if they lowered the cost past a certain point, they’d suddenly get a lot more demand in the UK as the NHS started subsidising the treatment…

  51. 51
    Warren Terra says:

    For all the people insisting this drug should be vastly cheaper, a few points to consider:
    1) the manufacture of this sort of drug is hugely expensive. Herceptin is iirc a humanized monoclonal antibody – a very large protein made by recombinant animal cells in culture. Making and purifying that protein from cultured cells in sufficient quantity and purity, free of other products of those cells and especially of contamination by bacteria or viruses, to a standard suitable for use in human patients, is incredibly expensive, and the occasional process failure can require a whole factory to be sterilized and all of its production be lost for months. Between the direct costs and the insurance costs, production of these drugs isn’t going to be cheap as it can be for small molecules, nor are there big economies of scale, because of all the safety checks and the risks of larger batch contamination.

    2) everything in point (1) means there’s essentially no threat of generic competition.

    3) the very limited market (six months to a year of a subset of breast cancer sufferers with the right EGF response) makes it hard to recoup costs of research and capital costs of production. The drug maker would obviously be happier with half the population taking a dose every twelve hours for decades, and that’s not going to happen here.

    Do I think Roche is gouging? Yeah, probably. It’s what these companies do. But they’re likely gouging a lot less than the tens-of-thousands price quote might suggest; after all, if it were just about gouging they’d be trying harder to get NICE to approve them, by lowering their price to an acceptable level of gouging.

  52. 52
    Rex Everything says:

    I bet the price reflects Roche’s innovative research into the optimum way to drain a patient’s bank account in 5.8 months.

  53. 53
    dollared says:

    @Warren Terra: We’ll have the answer to the gouging question soon. If six months from now Roche invents a special “UK only” price of $33-$49,000/six months.

  54. 54
    jl says:

    @Warren Terra: @dollared:

    Wikipedia says that Roche is marketing a version of Herceptrin in India for 75,000 Indian Rupees, or about $1225. So seems there is quite a bit of mark-up over production costs for places like UK and US.

    If a patent holder can maintain price discrimination schedule it wants for others, it will sell the product to potential buyers unwilling to pay high prices at lower, down to cost of manufacture, in order to maximize profits. Complicating things is the spread of reference pricing, which is now widespread in Europe. With reference pricing, a national health care system with negotiating power will look for prices charged in comparably sized markets and refuse to pay more. So, lowering the price for UK may lead to more difficult contract negotiations with other countries’ health systems.

    Edit: so the widespread practice of reference pricing interferes with the drug company’s ability to use price discrimination to maximize profits by selling at low price to one customer without messing up its price schedule for others who very well might be willing and able to pay more, and for those already buying obviously are willing and able to pay more.

    Trastuzumab
    http://en.wikipedia.org/wiki/Herceptin

  55. 55
    Warren Terra says:

    @jl:
    Knowing a little bit about purifying proteins to a far lower standard and with far lesser concerns about contamination, I don’t believe you can make a six month dose of a monoclonal antibody to FDA standards for $1000.

  56. 56
    jl says:

    @Warren Terra: Do you have an estimate of what the range of manufacturing costs might be for U.S. standards?

  57. 57
    Roger Moore says:

    @Warren Terra:
    A lot of effort has been put into methods of producing mABs on a large scale to FDA standards, so it may be possible to produce them for cheaper per dose than you would think based on small-scale lab experience. Also, my impression from hanging around on the edge of FDA regulated production is that a lot of the expense is up-front stuff proving that your manufacturing method is up to snuff, and the biggest difference in ongoing production is keeping good records to prove that you’re doing it right. It’s also possible that they’re willing to accept a loss to avoid bad publicity that might cause them problems with the Indian market in general.

  58. 58
    jl says:

    @Roger Moore: India is a lower income emerging economy with a large enough domestic drug manufacturing industry to exempt it from conforming to usual intellectual property and patent protections for big international pharmaceutical firms in recent trade agreements. So, there is probably more threat of competition from domestic production in India (and Brazil and a few other countries) than elsewhere.

  59. 59
    nanute says:

    Richard,
    In case you missed it, you got a nice plug from Brad DeLong yesterday: http://equitablegrowth.org/201.....ss-ratios/

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