High-Cost Drugs — is the model sustainable?

Can society continue to support the high-cost drug model of drug development?

In the past, I have given whole lectures, or included a section in other lectures, on the lack of affordable drugs to address the poor access to MS disease-modifying therapies (DMTs) in resource-poor environments. Please, note resource-poor environments exist in some rich countries, for example, illegal immigrants, refugees or people who are uninsured living in say the United States. Poor access to DMTs is therefore not just a problem for low- and middle-income countries.

It is clear that the reason MS is not treated, or undertreated, in resource-poor environments is economic. The current international drug development framework depends on a high-cost drug (HCD) model to sustain itself. Many pharma executives unashamedly state that the HCD-model is good for the world. Their position is uncompromising and is not only well-rehearsed by pharma employees, but by many third-party organisations who support the pharma industry. I suspect if you work in Pharma you have these arguments supporting this position indoctrinated. The HCD-model is based on the economic argument that the market rewards high-risk industries and there are not many industries that are more high-risk than the pharmaceutical industry.

A recent example is the financial impact on Biogen and Eisai when they pulled the plug on their aducanumab Alzheimer’s disease programme. I am aware that just the costs of the two phase 3 trials were northwards of $1billion. This excludes the R&D expenditure on basic science, early phase clinical development, the supporting phase 2a trial, infrastructure development to be able to produce enough commercial product if the phase 3 studies were positive and pre-marketing preparations within Biogen. The announcement has resulted in Biogen losing about 30% if its stockmarket value, i.e. $20billion in terms of its marketing capitalization, and Eisai losing about a third of its value.

These figures are extraordinary and show you how brutal the markets really are and a sobering reminder that successful drug development is very costly. The flip side is what would have happened if the aducanumab trials were positive. The market rewards risk-takers who win so I have no doubt Biogen’s and Eisai’s share price would have surged and everyone would have been happy. The downside of this latest setback for Alzheimer’s disease is that it really casts doubt on the so-called amyloid hypothesis of the disease. Will these latest negative results act like falling dominoes and trigger industry to close down all the other trials and research initiatives working on beta-amyloid? I hope not.

As we have learnt with progressive MS if you tackle the disease too late when the brain has accrued too much damage, getting a result with existing clinical outcome measures may be difficult. Just maybe this trial also failed because it was tackling the disease too late in its course. This is something the Alzheimer’s field and Society at large need to grapple with. Do we have to change the definition of Alzheimer’s disease and allow a diagnosis to be made in the asymptomatic stage so that trials can be started sooner?

We really need to challenge the dogma that without the ‘HCD model’ nobody really would be taking a punt on hard to crack disease such as Alzheimer’s disease. Is there another way? Could governments and non-profits step-in to help? HCD model may be good for the world if you take a macroeconomic perspective but a microeconomic view, or from a patient’s perspective, there are too many caveats that need to be considered to support Big Pharma’s position on HCDs without some reservations. These caveats should be addressed if the current big pharma model is to survive in its current form and get much-needed support from the governments of the world and their citizens.

Why are high-cost drugs (HCDs) good for the world? In short HCDs act as a global economic stimulus. More importantly, HCDs act as an incentive for innovation. Innovation occurs in many places, but in medicine, and in particular neuroscience it only comes to those who are prepared to take high risks. The costs of drug development have mushroomed, one could argue out of control. It is now simply impossible to develop drugs without big pharma. The risks of failure, measured in billions of dollars, are too high for academia, non-profits or even for governments accountable at the ballot boxes to take on. The product development cycles are typically longer than 10 years and way beyond the life expectancy of any democratically elected government.

Why have we allowed drug development to become so costly? That is a discussion worthy of its own dedicated piece. However, there is no mistaking the observation that markets reward industries that are prepared to take on long-term risk, which is why the profits of the pharma industry remain high. In general, the profitability of an industry is linked to its risk; low-risk industries make lower profits than high-risk industries. If we could de-risk drug development we would be able to make it more competitive and the costs of drugs would fall. The reality, however, is the opposite; even relatively well capitalised University spinoff and start-up companies are forced at some stage to partner with big pharma. The costs of late phase drug development are now too high to finance easily outside of big pharma. We need to ask ourselves the question how did we let ourselves get into this position? We have created the beast we now have to live and collaborate with.

I have some ideas about how to de-risk drug development; to make drug development cheaper. All of my proposals are political. I doubt pharma would be interested in them. I suspect the current model suits them well. Those who walk where others fear to tread will be rewarded many times over; this is why the pharma industry is often compared to the banking industry.

Although the profits from successfully launched HCDs are staggeringly high they feed a food chain that is astonishingly broad and deep. Regulatory, contract research, sales and marketing, public relations, advertising, packaging, distribution, medical writing, events organisation, travel, hotels, conferences, lobby groups, charities to name but a few of the industries that feed off the profits, or future profits, of successful HCDs. The Pharma industry also supports education, at both an undergraduate and post-graduate level. A large chunk of Pharma profits support the private pension funds; big pharma shares are generally considered blue-chip shares hence their prominence in large pension fund portfolios. Then there is the tax take from big pharma, which is why developed countries compete with each other to keep a large pharma footprint in their country.

Medical education: The pharma is probably the biggest funder of continuing medical education or CME. Up until quite recently pharma has been funding CME directly and are now increasingly funding it via third-party providers, for example, Medscape. Without HCDs CME will need a new funding model.

Basic and contract research: A large number of pharma companies are partnering with Universities in relation to basic research. The costs, in particular, the overheads, and the low success rate of in house pharma research has led to a large number of pharma companies funding research initiatives within Universities. The idea being is that they will have the first refusal on any discoveries. The amount of money that follows contract research is staggering; the NHS is a big recipient of some of this money. This is one of the reasons why the NHS are incentivising us to increase the amount of clinical research we do on NHS patients. Without HCDs the flow of money via this route into the NHS will dry up.

Based on the arguments and observations above we are unlikely to see the current model change. I don’t think our politicians have the appetite for it and/or the political lobbyists will ensure the status quo is maintained. This is why initiatives we tried to launch such as the Big Pharma Alternative and others we have supported such as off-patent drugs bill are unlikely to succeed. This means we have to approach the problems that HCDs create differently. We need to think about how we make the global access to HCDs equitable; why shouldn’t MSers in India, or MSers without health insurance, not have their disease managed appropriately? Rather than pointing fingers and stamping our feet we should all get around the table and think about solutions to these problems. For example, Novartis has a scheme, called the Novartis Access scheme, to bring cardiovascular and cancer medication to low-income countries for $1 per month. Why shouldn’t we lobby Novartis to include fingolimod on that list for MSers in low-income countries?

The good news is the MSIF has led on putting together an application to the WHO to get three licensed DMTs on the WHO Essential Medicines List or EML. An application to get azathioprine failed in the past. We are hopeful that if we are successful this time it will be a political win and make governments, particularly in low- and middle-income countries, sit up and take note that MS is a global problem and not just a rich-world problem. I suspect that even if glatiramer acetate, fingolimod and ocrelizumab/rituximab get onto the EML it may not immediately solve the access to treatment problem, but at least it may act as a catalyst for a wider debate and possible endorsement for off-label prescribing of other drugs that are supported by a reasonable evidence-base. Another option is to get some of the Big Pharma companies in the MS space to create compassionate access schemes or to license their drugs to generic companies who can then produce low-cost biosimilar therapies or generics in low-income countries, similar to what has happened with anti-retroviral drugs for HIV. These sorts of initiatives mitigate the bad press that Pharma gets and at the same time will ensure MSers get treated.

The following are some caveats I have to the neoliberal view that HCDs bring value to the economy:

1. There are too many repurposed drugs; as these are less risky to develop do they really justify their high prices? Should there be legislation to cap repurposed drug profits? NICE attempts to do this by asking if the therapy is really innovative and allowing higher reimbursement for truly innovative therapies.

2. There are too many me-too drugs; these are also less risky to develop why do command such high prices? Clearly, in some parts of the world Pharma charges for drugs what it can get for them.

3. Too much is spent on marketing. Can’t Big Pharma market drugs less flamboyantly? HCDs and particularly patients don’t like this. However, if you take a neoliberal view of the world you should leave the market to its own devices. Saying this however is flawed; the HCD market is not a true market. Why do drug prices tend to rise when a competitor enters the market? Surely in a true market, competition should result in prices falling? Is Big Pharma running a cartel?

4. There are too many expensive and poorly designed market-access phase 4 trials. Who is big pharma fooling? Everyone knows these are to get HCPs to prescribe their drugs, with the excuse that the payers need real-life data.

5. Executive pay. Is there any way of making pharma executive pay less of a hot potato than it is at present? When people with chronic disease are dying from lack of access to medication it simply doesn’t look good when executives are getting ‘banker-type’ salaries and bonuses.

6. Flash HQs. Some of the Pharma HQs I have visited are seriously 6* luxury. If patients saw these they would be horrified. I know it is important to create a nice work environment to work in, but there are limits. They don’t have to be flash and they don’t have to be furnished with company-owned works of art from the masters.

7. Poor efficiency. Some of the pharma R&D budgets are ridiculously high for what they deliver. Surely there are efficiency gains to be made? However, I would expect that any gains made on the R&D side would not be passed onto the consumer.

8. Paying the regulators. Why have governments allowed their regulatory agencies to become dependent on pharma subscriptions to function? Does this not create a conflict of interests? Are not the regulators working to a big pharma agenda? I suspect so. Bureaucracy begets more bureaucracy. Bureaucracy needs to survive and expand so the processes and requirements get more complex and expensive with time.

9. Price gouging; this is the practice that some Pharma companies use to maximise profits on existing products. Prices are increased to a level much higher than is considered reasonable or fair and is considered exploitative, potentially to an unethical extent. Recent examples in neurology include 3,4-diaminopyridine for the treatment of Lambert-Eaton myasthenic syndrome. The most well know example is Martin Shkreli’s infamous pyrimethamine (Daraprim) saga. Shkreli got such bad press that annual Shkreli Awards have been established to identify the top ten worst examples of profiteering and dysfunction in health care.

Despite the big pharma world we now inhabit, any industry needs regulation and this is why we need organisations such as NICE to demand value for money and to keep Pharma on their toes. What NICE, however, has created is a large disparity between what drugs cost in say the USA and the UK and Europe. At present the USA is subsidising drug development costs across the world and this is unsustainable in the long-term. It has also led to a brain drain. As a result of the capping of profits in Europe, big pharma has and are still closing up shop and moving their R&D and operations to the markets that pay; chiefly the USA. NICE is almost certainly one of the main reasons behind the Big Pharma exodus from the UK. I suspect it is too late to do anything about it. What you gain on the swings you lose on the roundabout? Unfortunately, in the case of the Big Pharma exodus from the UK, and the loss of the EMA due to Brexit, we have probably lost more than we have gained.

Despite pharma politics and HCDs, it is up to us the neurologists and healthcare professionals who look after people with MS to be their advocates. We have to make the case for them be it to Pharma, MHRA, EMA, NICE or NHS England. What upsets me most when we have made the case successfully and have green lights flashing from all parties we are still so slow at adopting innovations. There is little point in innovating if we simply deny people with MS the benefits of the innovation pipeline. Instead of celebrating new NICE-approved treatments that can really make a major difference to MSers’ lives we debate price and take our eye off the ball. We need to focus on research that addresses the unmet need and adopt innovations when they arrive.

So on balance, until we have an alternative Pharma and their HCD model are the only show in town. If you want your Alzheimer’s disease treated in the future you have to hope they deliver.