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Paying the Price

Living as I do in a relatively affl uent area of France it has been diffi cult to see any great austerity programme imposed in the last fi ve years by the Sarkozy regime. The recent national elections marked the end of this regime and the election of Francois Hollande as the new president, who is apparently going for growth, not austerity. On the same day Greece also decisively rejected the onerous austerity measures being imposed upon her by the EU. However, whether these two regime changes will actually mean a change of direction for the continent of Europe is moot in my opinion.

Part of the cause of the structural defi cits that both countries suffered was caused by overgenerous social security and healthcare provision. France spends 11 per cent of its gross domestic product (GDP) on healthcare – the second highest in the world after the US. With the downturn in the economy, the gap between receipts from social security charges and expenditure is growing ever larger. Expenditure in Greece at 9.8 per cent is also one of the highest. This in part can be explained by the large number of specialists – the highest among countries of the Organisation for Economic Co-operation and Development (OECO) – and the ineffectiveness of the existing control mechanisms of health insurance funds who incur the costs.

It is easy for commentators to blame the pharmaceutical industry for the escalating costs of healthcare. There is an element of truth in this as the more advanced remedies are becoming eye wateringly expensive. The priciest I have come across is Soliris, from Alexion, which costs $500,000 per patient. Biotechnology analyst Geoffrey Porges of Sanford C Bernstein stated on 17th April that ultra-high-priced drugs are the one ‘bright spot’ in the pharmaceutical business. Companies will be able to maintain their prices for these expensive medicines, he argued, calling Alexion “the paradigm of the postmillennial biopharmaceutical company.” A second medicine Alexion is testing could also cost more than $200,000 a year. Biogen Idec could price its new drug for amyloid lateral sclerosis at more than $75,000 per patient per year. Vertex Pharmaceuticals’ new cystic fi brosis drug Kalydeco costs $290,000 and a new Vertex CF combo pill could cost about as much. This is hardly good news for any of the hard pressed healthcare providers in Europe, let alone France and Greece, and makes one wonder if these therapies will ever be available in outside the US.

One of the most important questions when we think about how new medicines should be priced is this: is it better for a new medicine to help a select few patients a great deal at a high per-patient cost that will be paid by the healthcare system (because few individuals can afford these kinds of drug prices), or is it better to have lower cost medicines taken by millions? Right now in the US they appear to have decided on the former. That may well be the right decision, but it would be nice if it seemed we were actually putting some thought into this issue.

Part of the reason why these high end therapies are so costly is due to the composition of the drugs being developed – antibodies and cell therapies are by their very nature much more expensive to manufacture than typical small molecules. Another consideration is the increasing cost of drug development. For many current indications recommended drug regimens are quite effi cient. Proving that a new therapy is more effective, and if necessary more cost-effective, becomes increasingly diffi cult and requires ever larger numbers of patients to obtain statistical signifi cance. Furthermore, as diagnosis using biomarkers improves the numbers of parameters measured in each clinical trial again increases as every year goes by. Modern drug development is a costly investment – up to $1.3 billion per drug!

So far this year we have seen good revenue fi gures from a number of pharmaceutical companies and leading CROs have seen an upsurge in business. It has always been said that pharmaceutical companies are recession proof – perhaps with investment into new therapies they can provide some light at the end of the austerity tunnel.


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Graham Hughes
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