Race to the bottom

Pricing policies threaten pharmaceutical makers.

One of the biggest threats to the pharmaceutical industry in the years ahead will be pricing pressure, which is coming from all directions. In the United States, big pharmaceutical companies have already agreed to certain cost control measures as part of the healthcare reform legislation known as Obamacare.. The companies apparently agreed to these measures in return for the promise of new patients, but a few short years after the law’s passage and before all of the provisions have even taken effect, politicians in Washington have already begun discussing further price control measures. Meanwhile, Indian regulators have caused a fuss by granting a compulsory license to generics maker Natco Pharmaceuticals for permission to manufacture a generic version of Bayer’s lucrative cancer drug Nexavar. Indian authorities argued that the license was necessitated by the high cost of branded Nexavar, which keeps Indian patients from accessing this life saving treatment. Bayer, meanwhile, made the well-worn but true contention that pharmaceutical advancement depends on companies’ ability to charge premium prices for innovative treatments.

Lately the debate about proper pricing for pharmaceuticals has shifted to Europe, where drug makers’ profits are under attack from multiple angles. As part of the ongoing debate concerning the best way to rein in spending, many countries are looking at cutting drug prices as a source of savings in government budgets. In no country will these new price controls have more effect than in Germany; as much for the country’s leading role in the European economy as for the lost revenue. Due mostly to its economic strength, Germany has maintained pharmaceutical prices that were relatively robust when compared with its European neighbors. After years of debate, though, Germany has begun switching from a policy that mostly allowed free pricing towards implementation of a new regime that weighs the costs and benefits of each drug, similar to that of the UK’s National Institute for Health and Clinical Excellence (NICE).

In addition to looking at the potential clinical benefit of any new medicine, German regulators will also consider the price for each drug in neighboring countries. Germany’s great wealth means that most of its neighbors have weaker economies, making them a poor benchmark for prices. Indeed, many of these countries look to their larger neighbor to take the lead on pharmaceutical pricing. These ingredients could quickly lead to a race-to-the-bottom for drug prices as countries push each other lower and lower. Germany’s new pricing policies have already claimed at least one victim – diabetes patients in Germany will not have access to a promising diabetes treatment. Wary of the threat of price controls, and deterred by rules for defining the proper comparator, Eli Lilly and its German partner Boehringer Ingelheim decided not to launch their new drug Tradjenta (linagliptin) in the German market. While regulators are working out bugs that may lead to more straightforward pricing in Germany, the overall effect will be the same – consistent lowering of prices.

The race to the bottom in pharmaceutical prices has already caused unintended consequences, spawning an army of carry-trade speculators trying to buy drugs cheaply in one country for sale in another.In the UK, for example, regulators have a reputation for insisting on drug prices that are lower than in neighboring countries. This has led to export of drugs from the UK into neighboring countries where they are sold at premium prices. This practice has already led to shortages of some important drugs in the country, prompting the All-Party Pharmacy Group (APPG), a trade organization, to urge the government to take action. Although the dire drug shortages cited by the APPG are disputed, the potential clearly exists for patients to be denied life-saving medicines. The same problem is manifesting for different reasons in Greece. Due to the slow-motion collapse of the Greek economy, pharmaceutical prices have been slashed dramatically. This has been done to allow people to keep access to their medicines without further bankrupting the government. The unfortunate and unintended consequence of the price cuts is a very lucrative carry trade for pharmaceutical wholesalers.

Amid the clear need for national governments to control healthcare spending, it is unfortunate that wholesalers and distributors are siphoning off pharmaceutical profits. While pharmaceutical companies can justify their high prices with the need to conduct expensive research, the carry trade directly detracts from this goal. Society tends to hold healthcare providers to a higher standard than most capitalists, making the bald taking of profits from unhealthy people somewhat unpalatable. As a result, the European Commission has announced the beginning of an investigation into pharmaceutical parallel trade. Considering these factors, it appears that international pricing pressure and its consequences will be a major area of concern for pharmaceutical companies into the foreseeable future.

Dr. Jerry Isaacson is head of GlobalData healthcare industry dynamics.

Photograph: Getty Images

Dr. Jerry Isaacson is head of GlobalData healthcare industry dynamics.

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In defence of orientalism, the case against Twenty20, and why Ken should watch Son of Saul

My week, from Age Concern to anti-semitism.

Returning late from a party I never much wanted to go to, I leap up and down in the middle of the Harrow Road in the hope of flagging down a taxi, but the drivers don’t notice me. Either they’re haring down the fast lane or they’re too preoccupied cursing Uber to one another on their mobile phones. My father drove a black cab, so I have a deep loyalty to them. But there’s nothing like being left stranded in NW10 in the dead of night to make one reconsider one’s options. I just wish Uber wasn’t called Uber.

Just not cricket

Tired and irritable, I spend the next day watching sport on television – snooker, darts, cricket, anything I can find. But I won’t be following the Indian Premier League’s Twenty20 cricket again. It’s greedy, cynical, over-sponsored and naff. Whenever somebody hits a boundary, cheerleaders in cast-off gym kit previously worn by fourth-form Roedean girls wave tinsel mops.

Matches go to the final over where they’re decided in a thrashathon of sixes hit by mercenaries wielding bats as wide as shovels. Why, in that case, don’t both teams just play a final over each and dispense with the previous 19? I can’t wait for the elegant ennui of a five-day Test match.

Stop! Culture police!

I go to the Delacroix exhibition at the National Gallery to shake off the sensation of all-consuming kitsch. Immediately I realise I have always confused Delacroix with someone else but I can’t decide who. Maybe Jacques-Louis David. The show convincingly argues that Delacroix influenced every artist who came after him except Jeff Koons, who in that case must have been influenced by David. It’s turbulent, moody work, some of the best of it, again to my surprise, being religious painting with the religion taken out. Christ’s followers lamenting his death don’t appear to be expecting miracles. This is a man they loved, cruelly executed. The colours are the colours of insupportable grief.

I love the show but wish the curators hadn’t felt they must apologise for Delacroix finding the North Africans he painted “exotic”. Cultural studies jargon screams from the wall. You can hear the lecturer inveighing against the “appropriating colonial gaze” – John Berger and Edward Said taking all the fun out of marvelling at what’s foreign and desirable. I find myself wondering where they’d stand on the Roedean cheer-leaders of Mumbai.

Taking leave of the senses

My wife drags me to a play at Age Concern’s headquarters in Bloomsbury. When I see where she’s taking me I wonder if she plans to leave me there. The play is called Don’t Leave Me Now and is written by Brian Daniels. It is, to keep it simple, about the effects of dementia on the families and lovers of sufferers. I am not, in all honesty, expecting a good time. It is a reading only, the actors sitting in a long line like a board of examiners, and the audience hunched forward in the attitude of the professionally caring.  My wife is a therapist so this is her world.

Here, unlike in my study, an educated empathy prevails and no one is furious. I fear that art is going to get lost in good intention. But the play turns out to be subtly powerful, sympathetic and sharp, sad and funny; and hearing it read engages me as seeing it performed might not have done. Spared the spectacle of actors throwing their bodies around and singing about their dreams against a backdrop painted by a lesser, Les Mis version of Delacroix, you can concentrate on the words. And where dementia is the villain, words are priceless.

Mixing with the proles

In Bloomsbury again the next day for a bank holiday design and craft fair at Mary Ward House. I have a soft spot for craft fairs, having helped run a craft shop once, and I feel a kinship with the designers sitting bored behind their stalls, answering inane questions about kilns and receiving empty compliments. But it’s the venue that steals the show, a lovely Arts and Crafts house, founded in the 1890s by the novelist Mary Ward with the intention of enabling the wealthy and educated to live among the poor and introduce them to the consolations of beauty and knowledge. We’d call that patronising. We’re wrong. It’s a high ideal, to ease the burden of poverty and ignorance and, in Ward’s words, save us from “the darker, coarser temptations of our human road”.

An Oscar-winning argument for Zionism

Speaking of which, I am unable to empty my mind of Ken Livingstone and his apologists as I sit in the cinema and watch the just-released Academy Award-winning Son of Saul, a devastating film about one prisoner’s attempt to hold on to a vestige of humanity in a Nazi death camp. If you think you know of hell from Dante or Michelangelo, think again. The inferno bodied forth in Son of Saul is no theological apportioning of justice or deserts. It is the evisceration of meaning, the negation of every grand illusion about itself mankind has ever harboured. There has been a fashion, lately, to invoke Gaza as proof that the Holocaust is a lesson that Jews failed to learn – as though one cruelty drives out another, as though suffering is forfeit, and as though we, the observers, must choose between horrors.

I defy even Livingstone to watch this film, in which the Jews, once gassed, become “pieces” – Stücke – and not grasp the overwhelming case for a Jewish place of refuge. Zionism pre-dated the camps, and its fulfilment, if we can call it that, came too late for those millions reduced to the grey powder mountains the Sonderkommandos were tasked with sweeping away. It diminishes one’s sympathy for the Palestinian cause not a jot to recognise the arguments, in a world of dehumanising hate, for Zionism. Indeed, not to recognise those arguments is to embrace the moral insentience whose murderous consequence Son of Saul confronts with numbed horror. 

This article first appeared in the 05 May 2016 issue of the New Statesman, The longest hatred