Besides real estate and oil, what is one of the most profitable markets? Disease.
In 2014, the global market for medicines was evaluated at about £820 Billion in turnover (compared to less than £300 billion in 2001). In recent years, the pharmaceutical industry has become one of the most highly profitable sectors. For instance, it comes before the extremely lucrative oil industry. Profit margins in the pharmaceutical industry range from 10% to 43%, i.e. profits can reach about half of the turnover of a pharmaceutical company. In 2013, the ten biggest pharmaceutical companies in the world made over 100 billion dollars in profits… Whereas at the same time they invested less than 66 billion dollars in R&D.
Is it right that the medicinal products market is on the same level as the oil industry or real estate? No. The market for health products (that medicines are part of) is an unusual market for two reasons:
Health products are not consumer goods like mobile phones or clothing. They are products which act directly on people’s health, i.e. they are linked to life and death.
The financial solvency of medicines (meaning the fact that there is money available to buy medicines) is guaranteed in developed countries by social contributions and/or taxes – according to the funding model of each social protection system or health insurance. It is the only market whose financial solvency is based on collecting funds from taxes and social contributions (this is not the case for mobile phones or clothing for instance).
The fact that this is an unusual market means it must be regulated by the State.
Diabetes? A high return, low risk investment.
£192 million per week. £27 million per day. £1 million an hour. £19,000 a minute. £315 a second. It is estimated that £10 billion is to be spent by the NHS on diabetes in the UK in 2016. That equates to 10 per cent of the entire NHS’ budget per year. The cost of prescribing drugs for diabetes has also soared to almost £1bn a year, as the number of people diagnosed with the disease has risen sharply alongside the surge in obesity.
To treat the 3 million newly diagnosed patients every year, the NHS’s expenditure on drugs is only set to rise again. Last year alone, the NHS spent £956.7m on diabetes drugs prescribed by GPs, nurses and pharmacists. For pharmaceutical laboratories therefore diabetes represents a highly profitable, risk-free “investment” as most of the patients will take the treatment all their lives.
Profitability is not only a matter of profit and net margin. It must also be considered that, unlike most other consumer goods, long-term conditions require long-term treatment without which the patient’s condition would become life threatening or their health would deteriorate. A low profit margin among a large number of people guarantees high profits. More than ever, in these “captive market” situations, additional effort should be made on pricing even if the price is already considered as « low ». Even more so as these are often compounds which have been on the market for a long time and for which R&D return on investment has been attained many times over.
In the specific case of Diabetes, it should be considered that if Merck & Co are projected a revenue of $8 Billion from diabetes medication alone by 2020, and when we take into account the costs of glucose monitors, testing strips & nutritional supplements (not included in this figure), pharmaceutical companies have no incentive to find an effective cure for diabetes. This has been a prominent concern of multiple lobby groups globally, as pharma companies profit heavily from high return, low risk investments.
Only 1.5% of Hep C patients receive a cure.
Sovaldi® is a medicine for hepatitis C which is 95% effective when taken with other compounds for the treatment of this disease. Sovaldi® alone costs the NHS £34,982.94 per patient for a three-month course (which is the minimum length of treatment). In absolute terms, when combined with another drug such as Ribavirin, it will cost the NHS £1 Billion to treat just 20,000 of the current 215,000 hepatitis C patients in the UK.
Technically speaking, the cost is in fact higher, because it has to be taken in combination with another compound and may need be taken for a longer period of time than the three-month course. The price of current combination therapies ranges from £50,000 and £69,000 – a lot more than the £34,982.94 previously mentioned. The NHS has currently funded an additional 3,500 courses of Sovaldi combinations since 2015, at a cost of £190 million (1.5% of patient population).
How long will the NHS be able to cover the cost of these medicines? This is the fundamental question asked by Doctors of the World: if we accept the current economic rationale, we would need to spend £11 billion to effectively treat all those infected with chronic HCV in the UK. At this rate we are heading for disaster especially if we add the price of cancer treatments, also indecent, costing several hundreds of thousands of pounds and affecting millions of people. With Gilead’s Global sales expectation this year to reach £13.2 billion from the sale of Sovaldi, changes in the price of this medicine has to happen now.
Are there options?
In 2015 the Egyptian Pharmaceutical company, Pharco Pharmaceuticals Inc. developed a Sovaldi combination drug which achieved a 100% cure rate in patients trialled. The cost of this? The equivalent of £690 for a three-month treatment.
Gilead currently allows 11 Indian and 2 Egyptian companies to make sofosbuvir under license and to sell it at any price they like, in return for a 7 percent royalty. This has raised the eyebrows of global leaders and charity directors for complex reasons. The most concerning is giving a drug company control over who receives its products, which sets an incredibly dangerous precedent in what should be a Doctor-Patient relationship. It is currently sold at $10 per tablet in Egypt, instead of the $1000 per tablet paid in the West. With a reduced rate of 99% and room for a profit margin, why do Gilead refuse to reduce their prices here in the UK?
On average, one case of Leukaemia has a 18,000% gross profit margin.
Glivec™ has revolutionised the treatment of rare forms of blood and bone marrow cancers. Gilvec™ has proved so successful in chronic myeloid leukaemia, that patients who a decade ago survived for a few years can now look forward to a near-normal life expectancy. However, the cost of Glivec™ has risen from £18,000, already highly expensive, per patient per year to around £21,000 in the UK. This is despite the fact that all research costs were covered by the original price, and the number of patients treated and the length of time they are on the drug have both vastly increased because of the drug’s success.
Today, Gilvec™ costs the NHS £21,000 per year per patient. This allows its manufacturer Novartis, to have an annual revenue of over £3 Billion through this drug alone. Knowing that length of treatment can go from several months to several years, the cost of Gilvec™ is unmanageable for the NHS.
According to Andrew Hill, a pharmacologist and researcher at the University of Liverpool, if we take the real production cost of Glivec™ into account and if we add the cost of production and shipping, with a margin of 50%, the medicine could be sold at a price of less than £175 per year. The profit margin that appears on the visual is the proportion between the annual price of £21,000 in the UK and what we can consider as the real cost of this treatment: £175, which already includes a margin.
This Glivec™ example shows that the rationale in force in Hepatitis C treatments is also being used for cancer treatments. Worse still, instead of getting cheaper over time, the price of cancer treatments is getting higher! Thus, the price of Glivec™ in the United States went from $30,000 per year in 2001 to $92,000 per year in 2012!
An influential group of cancer experts has warned that the high prices charged by pharmaceutical companies for cancer drugs are effectively condemning patients to death. The group of more than 100 leading cancer physicians from around the world, including nine from the UK, accuse the drug industry of “profiteering”, making a profit by unethical methods such as by raising the cost of grain after a natural disaster. Stating that the price increase was completely unrelated to R&D investment and was in fact the result of a desire to maximise profits for the pharmaceutical industry, this rationale is clearly demonstrated in the case of Sofosbuvir. This could cause serious damage to the NHS here in the UK when we consider that we have 2.5 million people living with Cancer today.
December flu outbreak. The Christmas bonus has arrived.
The flu vaccine is recommended de facto, especially for vulnerable people and Doctors of the World is not opposed to this. At the earliest, flu epidemics start in October and vaccination campaigns are launched at the same time. It currently costs approximately £100 million per season for the NHS to vaccinate people 65 years of age or over, pregnant women, patients with certain medical conditions, morbidly obese patients and those people living in residential or long-stay care facilities. And those who are not vaccinated make considerable use of treatment for symptoms like Nurofen™ (equivalent of Ibuprofen). Along the same lines as the treatment for diabetes, selling medicines on a large scale requires that the price – even a low price of £6 for a vaccine - is set against the volumes sold.
Headaches and stomach aches are also common during “flu season”. Medicines for these ailments are cheap and sold in large quantities. Here again the idea would be to review prices when we find ourselves in a “cash market”.
What Exactly is Melanoma? £3.4 Billion Turnover.
Melanoma is the most dangerous of all skin cancers as it can be spread throughout the body. Keytruda™ is a medicine that can effectively treat melanoma, lung cancer, or head and neck cancer by working with your immune system. Although effective, the current price of treatment Keytruda™ is £3,682 per dose, or £64,000 a year. According to Fiercepharma estimation, Keytruda™ could generate a turnover of $4.5 billion for the laboratory Merck that has developed this.
As innovations in oncology arrive on the horizon, we have rightful reasons to worry about the financial rationale. Especially as there are more and more people diagnosed with cancer in the UK every year. Today, 2.5 million people are living with Cancer. Today, NICE and the NHS have refused to routinely dispense this effective medicine, owing to the unjust cost of the medicine.
For every £50,000 spent in research, £120,000 is spent on advertising.
The accountable differences between pharmaceutical Research and Development (R&D) and Advertisement and Promotion (A&P) costs, is a lesser well known cost implication for the NHS. With 9 out of 10 of the world’s largest pharmaceutical companies currently spend more on marketing than on R&D, we have to question the intentions of drug development. People? Or Profit?
On average, pharmaceutical cost ratios equate to every £50,000 spent in research, £120,000 is spent on advertising. Our research has also discovered that a proportion of pharmaceutical companies are currently averaging for every 75p spent on “basic research,” £15 is spent on promotions and advertising. Similarly, the Missing Medicines campaign addresses how pharmaceutical companies develop and market the drugs necessary to generate large profits, not cure the ills of the population. As the campaign explains, in the last 50 years, pharmaceutical companies have only produced 2 new treatments for tuberculosis (TB) a disease which claims the lives of 1.5 million people a year. In that same time period we’ve developed 14 new treatments for hay fever, which kills no-one. It is a criticism that highlights the prioritisation of drug development, profit, whilst emphasising that the highest proportion of the cost incurred to the NHS when buying medicines, is due to their marketing and advertisement. Not their contents or development.
As the rate of drug discoveries has declined over the last 10 years, whilst drug prices have continued to rise, why is it that the pharmaceutical industry is allowed to get away with prioritising our money on advertisements?
Breast cancer. The more advanced it is, the more lucrative it gets.
Kadcyla is recommended in the treatment of a very aggressive form of breast cancer (Metastatic HER2-Positive).
The cost of treatment is of course linked to the length of time it has to be taken, which varies according to the stage the cancer is at, patients’ response to it and side effects. In a study conducted by NICE under the Cancer Drugs Fund, they found that although the medicine was effective, its cost at £90,000 per patient failed to match an adequate QALY score, and remains unavailable on the NHS.
Among women, breast cancer is the most common form of cancer (one third of new cancer diagnoses every year – 31%) and the first cause of mortality by cancer. Should women be considered as a business segment and part of a strategy to maximise profits? Or should they be considered as an integral part of a nation that guarantees health protection for all, especially children, mothers and the elderly? Here again, the exorbitant price of new cancer medications such as Kadcyla, means that governments do not respect their constitutional obligations through the NHS to provide effective medicines in primary care.