Unbiased Analysis of Today's Healthcare Issues

Will the UK become a “desert for healthcare innovation”?

Written By: Jason Shafrin - Apr• 30•17

That is the claim made by the Association of the British Pharmaceutical Industry (ABPI).  Lisa Anson, who took over as ABPI president last week, told The Times that the financial squeeze on the NHS threatened the whole of Britain’s £30 billion life sciences sector as firms would reconsider working in the UK.  ABPI asked for the UK’s National Health Service (NHS) to increase spending by £20 billion per year to keep up with demand.

Would pharmaceutical companies really leave the UK?  Well, not entirely.  Let’s look at Anson’s argument, point by point.

Without higher health spending, companies would delay launching medicines in Britain as they were unlikely to be approved, she said. Nor would they be able to do clinical trials because they could not evaluate potential new drugs against existing best treatments if UK patients were not getting them

Will drug companies delay introduction of medicines?  Ms. Anson says drug companies are re-thinking entering the UK.  However, most medicines have very high fixed costs (i.e., RD) and very low variable costs (e.g., the cost of production).  Thus, even if the price the NHS pays declines, in the short-run countries will still find it profitable to sell in the UK, even at a lower price.  However, they may de-prioritize securing NHS coverage in the UK if this market is less lucrative than others; thus access to new medications may be slightly slower, but this impact is likely to be modest.   More importantly, decreased coverage of new treatments has a negative long-run effect on investment in innovation..  If coverage for new therapies in the UK becomes increasingly strict , that policy will decrease incentives for life sciences companies to invest in R&D to create new medicines.

On the second point, Anson is certainly right in many cases.  If the standard of care is not typically provided in the UK, pharmaceutical companies will be likely to conduct clinical trials in other countries.  This is problematic not only due to the extra jobs the clinical trials create, but for some disease–such as potentially terminal diseases like cancer–the ability to join a clinical trial is highly valued by patients.

Is the £20 billion per year spending increase the right number?  As I am not an expert on the NHS system, I am not able to weigh in on whether this figure is too high or too low. However, it is clear that the NHS is not prioritizing access to innovative treatments.

Simon Stevens, head of NHS England, signalled last month that new medicines would have to take a back seat to spending on GPs and mental health because the NHS could not afford everything patients wanted.

Although I agree with Mr. Stevens that patients can’t get everything they want, access to new innovative treatments is often at the top of their list.

 

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