Is there a drug for every disease?

Nominee for the European Inventor Award Category Research: Christine van Broeckhoven, Belgium, Vlaams Interuniversitair Instituut voor Biotechnologie (VIB) for her invention: Contributions to neuropathological medicine (on the left). The European Inventor Award, launched by the EPO and EC's DG Enterprise and Industry in 2006, gives inventors the recognition they deserve. And, like every competition, it is an incentive to all other potential winners. It protects ideas and encourages innovation.

Nominee for the European Inventor Award Category Research: Christine van Broeckhoven, Belgium, Vlaams Interuniversitair Instituut voor Biotechnologie (VIB) for her invention: Contributions to neuropathological medicine (on the left). The European Inventor Award, launched by the EPO and EC’s DG Enterprise and Industry in 2006, gives inventors the recognition they deserve.

Pharmaceutical firms in Europe have an awkward relation with their customers. The truth is that their selling prices and product licencing are directly or indirectly controlled by the buyers, that is governments, or government control health insurance schemes, offering almost free health services to citizens. As everybody knows governments are not only able to influence the approval of new drugs, they are also empowered with the ability to set prices by law.With healthcare costs skyrocketing over the past years and the fiscal crisis having engulfed almost all the 27 EU member states, governments have become very careful over their budgets and spending. In view of that, governments have at least two first hand possibilities, to cut down the drug bill.

For one thing officials can reject the use of new and expensive drugs on the grounds that they have no additional cure properties compared to existing formulas or generic medicines. Secondly, governments can set prices by law, or ask the pharmaceutical firms to return a part of their proceeds at the end of the year. As for the licencing procedure it is a common secret that it can be influenced by state officials.

In view of all that pharmaceutical companies are obliged on many occasions to retreat some of their drugs from entire countries, if the governments are not willing to pay what the firms demand. Another dreadful development is that the arbitrary settings of drug cost by governments, leads some times to huge price differences of the same drug, even in neighbouring countries. In this way large incentives for parallel exports are created, to the detriment of the maker.

Greece is an example of all that absurdities in the market of drags.

Greece

This debt stricken and practically bankrupt country has a history of high drug bills. Government spending on medicines skyrocketed within a few years, from 2002 to 2008. In this short time interval, state budget and public health schemes spending on medicines, doubled to €9 billion from less than €5bn. This outrageous development was the outcome of fraudulent behaviour all along the line. Doctors issued hideously expensive prescriptions, patients didn’t mind because they didn’t pay themselves and pharmacists had a guaranteed 30% profit on sales. During the same time period the number of pharmacies almost doubled and today their numbers per 100,000 of population are 60% above Belgium, the country with more pharmacies in the European Union.

As everybody remembers however, towards the end of 2009 Greece found difficulties in honouring its public debt and within months Eurozone had to support Athens, in order this Eurozone country to avoid bankruptcy. From then onwards Greece is under strong pressure to cut down government spending. To a large extend those fiscal deficit reductions are realised through deep cuts on public bills on drugs. Actually the Greek government doesn’t pay at all its drag bills for many months in a row, posing grave liquidity problems to makers, wholesalers and pharmacists.

The Greek authorities however are using more “methods” to cut down the drag bill. Successive Health Ministers had a rough time, trying to expand the use of generics. Expenditure on prototypes was 80% of total, while in Swiss home to many pharmaceutical giants, such generosity is out of question. In any case medicines are not the only bitter pills, Greece should take. A major reorganisation of the country’s health system was long overdue, but the government rushed to economise on the easy target, which is the expenditure on medicines.

Due to continued government inability to tackle the problem in a rational and organised way over the past months, the entire public health system of Greece is in a desperate state, with everybody going on strike and first degree health care and hospitals deep in the red.

Incidentally the abuse of prototype drags is responsible for only a small part of the huge debts the Greek health system accumulates every month. The Greek government owes billions of euros to many Pharmaceutical firms and some of them are threatening to abandon the country altogether and retreat their drags. Unfortunately there is no end to what is wrong with the Greek health system.

Mismanagement and corruption reigned for decades in public hospitals and the first degree health care system of the country, starting from the unholy alliance of doctors and pharmacists, to the exploitation of hospital patients by doctors. It is not clear which direction the whole issue will take, but it is more that certain a lot of things are to change. Probably the public healthcare system will shrink and the private sector will take its place.

But let Greece cure its own diseases and direct this discussion to the powerhouse of pharmaceutical industry, the R&D.

New drags

No need to say, that success in this department is key to survival and growth. Understandably, pharmaceutical firms can secure additional receipts and extra profits only from new drugs, the development and licencing of which though is becoming all the time more complicated and expensive. On top of that research and development of new formulas has become so focused and specialised, that on many occasions it is carried through more successfully by small groups or even one scientist in private laboratories or universities.

As a result major companies with big, expensive and sometimes rigid R&D departments cannot compete with independent researchers. Practice has shown that the solution the large multinationals now prefer is to buy out small research firms rather than develop new drags by themselves. Still however there are great risks and large investments are required.

“To help cope with declining revenue, Pfizer, Eli Lilly & Co., Bristol-Myers and AstraZeneca will probably increase spending on acquisitions beyond their normal budgets because of “deep operating challenges coupled with deep pockets,” Fitch Ratings said last week”, and Bloomberg reported.

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