Be Excellent To Each Other

They've cloned Baden-Powell?!

"But we've got something that basically does the same stuff, but we don't wanna sell it cheap."

Typically not true, right on the bleeding edge.

Or they might do but you'll need to run another two years of trials etc. In some instances market forces simply don't operate in the way that they can in most other industries that I can think of. I'm not sure how any of that is the fault of NICE or the NHS, though.

However that doesn't explain the recent story about the NHS seeing 1000% price rises for some generic drugs.

Fine. "Theirs delays death from little left finger cancer, ours delays it a leeeeeeetle bit less".

What if you're talking about chemo drugs though? Something that offers, say, a 5% increase in remission rates isn't something you can ignore in favour of a cheaper competitor.

You bloody can, if you the per % cost is cheaper on the 45% drug than the 50% drug.

What?

Your argument is that pharmaceutical companies don't have to make money. They are obliged to their shareholders to make money, turn a profit and increase the dividend. They don't do this by refusing to sell into a market.



But still profitable.



I see. And they're all doing competing research, haven't been bought up by GlaxoSmithKline, J&J, Pfizer or Roche and are about to release - in your free market - the same product (give or take a trademark)?



More like:

BP1: We've invented this new drug

NHS: Great! What does it do?

BP1: Oh.... x,y & z!

NHS: Great! Who else is developing this, how much did you spend on it and what's your initial asking price?

BP1: No one! £x! £xx

NHS: That's fine, let's negotiate!

Er, sorry, not if you can read, it isn't.



Depends by how much. If they can dump the stuff in another market at marginally higher rate they will



Please see earlier, repeated, comments on UK OFT investigations into the pharma companies acting as a cartel. And in any event, even if they're not actually acting illegally, why would any of them be the first to break ranks and spoil the party for all of them? The fact none of them *has* should tell you something, no?



Or,

BP1: We've invented this new drug

NHS: Great! What does it do?

BP1: Oh.... x,y & z!

NHS: Great! Who else is developing this, how much did you spend on it and what's your initial asking price?

BP1: No one! £x! £xx

NHS: That's fine, let's negotiate

BP2: No. You need it, we'll make sure your patients know about it, and NICE will approve it for use and noone else makes it. And we've already got a story lined up in the Daily Mail fro a soon-to-be-widow wailing about how you're taking her husband away from her because you won't let him have the drug. Check. Mate.

I can read perfectly well, thanks - pharmaceutical companies are obliged to sell by their shareholders.



Means nothing. To be accused of a crime does not imply guilt.



NHS: Oh, well I'm afraid you'll have to go on the list of least preferred suppliers and we'll have to stop buying other products and services from you. Ta ta.

The NHS can't blacklist someone like Glaxo. It's utterly impossible. Ergo, they have a very small stick indeed.

Really sorry chap, but it does appear not, seeing as you have somehow read into my postings that "pharma companies don't have to make money". I have never said nor even implied such a thing.

What the pharma companies are most definitely not is "legally obliged to sell particular products to any particular party [i.e. the NHS] at any particular price [i.e. cheap]" unless and until they sign a contract saying so. Which they don't have to do. Which was what I meant by "not obliged to sell".



Hahahaha. Well now. How touchingly naive. That may be the case with th echap down the road who got falsely accused of nicking someone's car, but it's usually "no smoke, no fire" with corporate things. Anyone who's read up on the case knows that the investigations got dropped due to incompetence on the investigation side - not due to innocence. I'm well aware of a number of companies who break competition law as a matter of course.

And you don't deal with the second and third sentences. If any of the the pharma companies saw any commercial advantage in selling cheap or could be pressured to do so, they would have. They haven't.


Oh my word.

Meanwhile, in the real world...

Sorry, but that's not how it works. Maybe (definitely) it should be, but it isn't.

Quite.

Given that the drugs companies have drugs that the NHS needs but can't buy from anyone else (both in terms of individual on-patent drugs, and generally that you have to buy drugs from drugs companies), what on earth leverage does the NHS have? Why would any of them agree to a drop in prices when they know that if they stonewall, everyone else will as well, and the pie stays big for everyone? It's not like they're particularly in competition with each other on price - just drug types and efficaciousnessness. So noone has to take a smaller slice of a smaller pie.

Maybe it shouldn't be like this, but it is, and the only way to make it not be like this is to place legal requirements on drug companies to (a) sell drugs to the NHS it wants (b) at the price the NHS wants to pay. And that is fucking communism.

You've done exactly that - it's there for everyone to read. Let's re-quote it for good measure:



And let me restate: They are obliged by their shareholders to sell product, make money and return a dividend.



Such is your opinion. And that's all it is. Incidentally, what's wrong with innocence until proven guilty?



Things aren't quite as you think you know they are.

Oh for goodness' sake.

That was a statement made in the context of selling to the NHS and the NHS having no leverage over the pharma companies - they're not obliged to sell shit to the NHS if they don't want to. i.e. they're not obliged to sell anything to any specific person if they don't want to - they can withhold drugs from the NHS and noone can prevent them. That was the point. Nowhere in there did I suggest "companies do not have to make money" and just stop selling to everyone, and nor would any sane human being - especially a commercial lawyer. It's almost like you were deliberately misunderstanding in order to try to score points.

And as for shareholders, the company's not "obliged" to do anything specific there either. The shareholders do not run the company. They can vote out the directors if they're really unhappy, but that happens pretty rarely in FTSE100 companies. Christ, just look at the shit Stuart Rose got away with. That's the downside of being a shareholder in a listed company - you're one of many many many people and basically have no say. Unless you can mobilise 75% of the voting power to vote out a director, you're stuck with what they want to do. They may do something stupid and tank the share price but that doesn't appear to be happening with the pharma companies' current "sell as we want" approach, does it?



Sorry, edited my post. I know of a number of companies who break competition law as a matter of course. The sad fact is that a lot of companies who get investigated for competition law breaches get away with it because their lawyers are better than the OFT's or the SFO's - I have friends in my profession who defend them on this for a living. Excuse me if I tend to be a bit cynical about the private sector as a result.


Actually, they really are, sadly. The big companies are screwing over the public sector quite hard, and short of, in the case of big pharma, introducing a law requiring them to sell to the NHS what the NHS wants and to sell at specific prices there's not a lot the NHS can do in a free market economy where companies are free to buy, sell and choose their customers and generally act like evil capitalist cocks.

Jesus. Are you sure this is an Internet forum?

Just a quick one:

No-one is claiming that's how things work now, in fact we've been saying the precise opposite these last 5 pages or so! No, this is how things COULD and SHOULD work.

How? EoaE has spoken eloquently about a 'least preferred supplier list', whereby profitable but non unique to one supplier products are preferentially sourced from anyone who is not on the list. I too have alluded to this; it's hardly rocket science, but very basic business sense. If that fails, there's always the possibility of actual regulation to limit profits/prices. That's what governments can do and I'm betting those pharma companies would want to avoid that like the plague first - they'd roll over alright, especially in today's trading environment. It's only useless, hand-wringing, ineffectual, limp-wristed beaurocrats supposedly charged with getting us a good deal for the last 10-15 years who say it's 'impossible', 'can't be done'. (They can't, or won't do their job, more like - I'd soon sort 'em out...).

I am of course a free marketeer, but the captive NHS, more or less the sole mainstream UK consumer of the kind of uber expensive, cancer designer drugs we're talking about (i.e. not paracetamol tablets), is largely operating against a de facto monopoly! Drugs companies are able to charge extortionate prices that dwarf any R&D (and even advertising ) costs, because they can hide behind 20-year patents. That ain't no free market and it DOES need to be sorted. (It would appear that some limited, belated progress has already been made by NICE, much to Craster's increduility I imagine, but we/they need to go much, much further. Every billion saved in bolstering big pharma's profits means more nurses can be retained, less hospital departments closed, more lives saved).

Cavey, I think we're all basically saying the same thing but talking at cross purposes. And my apologies for the combative approach last night, EoaE.

My point all along (at least after the phase of the discussion about whether Big Pharma are making "excessive" profits or not, which, in relation to the UK, I'm still not convinced) has been that the NHS does not have the bargaining power to screw down Big Pharma on prices by any great degree. On the one hand you have the NHS, which is a captive market, and on the other you have Big Pharma, who are free suppliers, and, as you say, acting as a monopoly (whether due to happenstance or breach of competition law...). If the NHS could really, as EoaE seems to have suggested in the last page or two, just say "sell us cheaper or we won't buy it from you", and that would work, then don't you think they would have tried that already? My wife worked in NHS management and at the DoH, and I'm aware that the senior bods there are more than happy to throw their weight around and would try just that. As you well know, commercial deals are struck on the basis of relative strengths of negotiation position, and there's not really a lot the NHS can do on a commercial level to change that given the hugely powerful global edifice of Big Pharma that they're up against. Again, if they could have, they would have.

And so, as I've said a couple of times now, the only solution to get to the "SHOULD" situation is, as you say, to pass legislation forcing big pharma to sell at set or capped prices. And the corollory to that is that you'd also have to pass a law forcing Big Pharma to sell the drugs to the NHS when the NHS wanted it, because otherwise if Big Pharma don't like the price they can just take their fancy cancer drugs and push them elsewhere at a higher markup, or threaten to do so until the price is reset.

And that idea of legislating companies' bottom lines, to me, is something I'm very uncomfortable with. I know it's the only way to change the cost of drugs to the NHS, but it's basically communism!

And where do you stop then? The same issues apply to an extent in things like defence and rail, although the drivers are slightly different. That said, they bloody well *should* legislate to cap peak fees and prevent them from redefining when peak is, but I know from experience that where a franchise has been offered on restrictive terms like that people have, basically, not bothered bidding...

I thought it was fascism in its classical sense.

Please post definitions and we'll argue over it then.

EDIT - after a quick wiki, I have to say my word. You're quite right.

It's fascism!

I'm not surprised.

HAHAHAHAH.

I saw the deleted post, Mali.

Ssshhh!

I've skim read, but a couple of points.

First off, the NHS gets the pills cheaper than the wholesale price in the US.

Second, and related, Big Pharma has enjoyed double digit expansion because of its practices in the US Healthcare system. While fighting Obamas public healthcare plan (to the tune of $350m) the delays induced raised the basic cost of healthcare insurance by just under 10%, while the cost of some everyday drugs used in the US went up by between 20-45%. In a year.

The NHS actually does a very good job of protecting us from the worst excesses of Big Pharma capitalism.

Edit: It is worth noting that a large chunk of Big Pharma profits recently are from what we might consider non-essential drugs. Viagra, IBS, prostate and such like. They are heading down this sort of route because the more customers you can flog your product to, the better.

... But apparentely not so good that we couldn't have saved a further 4 to 5 billion pounds over the last 10 years, had we simply empowered NICE to take them on (as anyone with a scintilla of business sense would've done), according to Peter St. John's post, link and estimate?

Still, what's five billion quid between friends, besides paying for, let's say, 500 spanking new schools? Yup, there's surely no flies on the NHS in this regard...

I said it does a very good job, not a perfect one.

Our "end" price is still cheaper than the US wholesale one.

Also, from Peter's article:



That's the type of concern here - not that Pharma possibly shouldn't sell drugs cheaper, but the possible consequences of trying to browbeat them into doing so.

You do over-simplify EoaE's and my own approach, chap, but they clearly haven't tried this already, have they? Even NICE, apparently unshackled for the very first time, has just now managed to save millions in the last year. As I mention to Pliss, my good friend Peter St. John estimates that, had the NHS/NICE adopted this much watered down strategy as compared to the types of measures that we are now discussing, even this would've saved four to five billion quid these last 10 years alone? (He's not exactly prone to exaggeration, bias or inaccuracies, as I'm sure you know. If he claims something like this, I believe it. ).

Your whole argument seems to hinge on the assumption that the NHS and their procurement team have thus far done absolutely everything in their power to get the very best commercial deal from pharma companies - this position seems utterly absurd to me. How can this even be remoteley true when NICE have demonstrably made such significant savings themselves just this last year! Clearly, there has been, and remains MUCH room for improvement. The NHS is a huge, single purchaser of drugs, quite possibly the largest in the world (it is the largest employer IIRC), so they have massive buying power. Pity for us all that they don't wield it well enough.



The solution, clearly, is to THREATEN regulation if the pharmaceuticals don't play ball on a voluntary basis. That would soon see those prices dropping, as it's the very last thing that they would want. There's one of your sticks for a start, and this is the very definition of proper, hardball reforms that we so desperately need. Stop tinkering round the edges like Labour and get on with big politics.



Sorry, but regulation has to be applied (or at least threatened) when it's public money at stake and there's NO meaningful competition/market forces at work at all. That doesn't make me feel squeamish at all, whatever label is applied to this approach by others. I call it "good business practice".

Ain't that the truth. If you call failing to save five billions in public money in just 10 years "good", simply by failing to adopt even the most basic common sense business practices and enough to build hundreds of new schools, that's entirely up to you - it's a subjective term.

Me? I'd call it "utterly niave, demonstrably useless, ineffectual shit", personally, but there we are.



Big deal. So some people are even worse than us? Good luck to them. I'm talking about the interests of British taxpayers.
Anyway, I doubt the US has a single purchaser like the NHS, it's probably a whole, fragmented bunch of hospitals, insurance groups and all the rest. From a procurement point of view, big difference compared to the NHS, I'd say.

Hahaha.

Ah sorry, maybe I should just go cunt-calling instead, right Wullie? lol.

I think, Cavey, that you can't look at the NHS as an isolated system - sure, there is definite room for improvement (though with the buying power of the NHS about to be weakened through the dissolution of the PCTs, I worry about what extra leverage we can bring to the table, to be honest), but if looking at the entire Western world, we're actually not doing a half-bad job at holding drug costs down, then I think the NHS is to be congratulated a little. And then told to do better, like it always is

That figure has been extrapolated from the fact that they've managed to save money on three deals and are assuming that based on that they can save an equivalent amount on every drug they buy. Which is pretty wild speculation.

Well your main argument appears to be they're all fucking useless & should've been working harder to save our moneys, other folk are pointing out that it's not quite as simple as that.

The odds are stacked in the pharmaceutical companies' favour & so the NHS need to be careful about how they negotiate.


Also, I've yet to call you a cunt

Fair comment Peter, yet we are agreed on the fundamental issue, there clearly is room for improvement and indeed, some considerable improvement has already resulted from a change of procurement policy that could've easily have been effected years ago. (Of course, even a slight improvement in % terms yields massive actual savings, given the enormity of the actual sums involved).

Another key aspect is the sheer size and hence buying power of the NHS, as a single, focused entity, which is itself a hugely advantageous procurement bargaining tool as you naturally recognise, and as compared to contempory other systems/purchasers. I think it is abundantly clear from the evidence you've presented that the NHS has not maximised this key advantage to its fullest possible extent in the past, otherwise we simply wouldn't be seeing the step change savings that NICE were able to deliver last year. (And of course, I seriously doubt that even these are anything like optimal, given that they were achieved on just a handful of discrete deals and there's been no threat of regulation, or at least a 'least preferred supplier list', as we have been discussing here).

Well, you said it Cras - all that money saved from just three deals, eh? Imagine what they could've saved if they'd had 10 years of meaningful, direct negotiation with the drug companies, with the threat of 'least preferred supplier lists' and even direct regulation, if these companies didn't play ball.

Does the NHS develop/research any medicines itself?

Incorrect. Most of the large companies are (despite being officially not allowed to cross state lines) massive multi-state conglomerates. Plus a captive market of 250 million people that you can actively market and sell to. There isn't a single NHS-like entity, but enough massive private sector companies to make a comparison valid.

No, no no. A small amount of money saved from three deals, which they've extrapolated out to a massive projected saving if they managed to do the same for every deal. Which is an enormous assumption.

Do you know the size of the top five US private sector purchasing entities, as compared to the NHS? I'm quite prepared to be proven wrong here, but I would be very surprised if they were as large as the NHS.

Regardless however, as I said earlier, I basically don't care that others do worse than us. The point is, we clearly can, and therefore must, do better.

190 posts in and no-one has yet actually mentioned anything in any form of valid economic context.

Bravo.

I wouldn't call cutting the annual cost of a drug that 2,000 people a year need in this country, from £60,000 to potentially £17,500 per patient 'small' - that's up to a £85 million per year saving on just one drug, and a 71% drop in price! There's one of your five billions over 10 years, for a start. Imagine what could be achieved if we could get anything like these kind of savings on other hugely expensive 'monopoly' drugs.

Not as far as I know.

They really should.

I'm posting the extreme figure here (I'd imagine you also should look at BLue Cross/Blue Shield in places like California, for example):

http://www.washingtonpost.com/wp-dyn/co ... 02943.html

$216.7 billion in 2006, of which around $72bn was from Medicare.

Presumably though they can't keep these deals secret so the drug companies must know that whatever agreement they come to with the NHS is going to have a pretty drastic effect on their prices worldwide. So if NHS sales account for a fairly small proportion of overall sales then their bargaining position isn't quite so strong.

They do research. But I'm not sure that trying to turn the NHS into a drug company would really work out. They wouldn't be able to compete without the same freedoms to fuck everyone over.

Not to my knowledge.

I'm mostly sure that the research done at universities is then spun off into companies owned by the universities who then sell the stuff on to other people.

Heh, yeah but they'd could save potential shit loads by making their own 'gear'.

I agree with Cavey entirely.