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Towards a National Pharmaceutical Service

There are some problems which are too big for the private sector to handle. I’ve given extensive arguments explaining why this is the case for climate change and why solutions will require public ownership of energy. However, there is another set of less well known problems which are going to require similar state action: those around pharmaceutical companies.

While there is a certain amount of hysteria and fear-mongering about “big pharma”, the drug companies are far from innocent. There are well known cases of companies withholding and manipulating data. Health authorities are periodically hit by shortages of vital drugs due to supply chain problems or cessation of manufacturing. Companies demand high prices for patented drugs and have even been jacking up the cost of generics. They demand for the legal monopoly that is patent protection in exchange for developing new drugs, yet still fail to invest in developing treatments for rare diseases. We see pharmaceutical companies raking in spectacular profits, claiming it is needed to fund research. However, almost all of them spend more on marketing their drugs than they do researching new ones and profits far outstrip investment on research.

Despite all of this money, we still are not seeing the research we need. Scientists in basic research find pharmaceutical companies do not consider it worth while to develop new antibiotics. Any time an antibiotic is used, a few bacteria which happen to be resistant will survive and go on to reproduce. This is the process of evolution and means that old antibiotics tend to lose their effectiveness and need to be replaced with new ones. However, developing new antibiotics is a research-intensive process with relatively low returns. Antibiotics are only used by a given patient for a few weeks, unlike medication for chronic conditions which tends to be used throughout a patient’s lifetime. The low returns are worsened by the fact that new antibiotics are only used when all others have failed and will only see widespread adoption around the time when the patent expires. The result is that drug companies are failing to address the terrifying prospect of antibiotic resistance.

To date, most proposals to address this have involved bribing the companies to invest through tax breaks, longer patents, or preferential treatment of their more profitable drugs in exchange for new antibiotics. There has also been some direct government involvement in research in the name of defence against bio-weapons. A UK-based panel has proposed a global authority which would buy the distribution rights of new antibiotics from the companies which developed them, supplying the new drugs to patients in a manner consistent with public health. However, all of this leaves us with the problem that the drug companies would be making billions from profitable drugs while sticking taxpayers with the costs of unprofitable, but vital ones.

Drastic reform is clearly needed if we are to fix all of these problems. Drug companies must start behaving in a way which maximises health outcomes rather than profit. So obvious and vital is this imperative that the likes of New Scientist magazine penned an editorial calling for “transforming pharma companies – or parts of them – into public goods producers, with public interest rather than profit driving R&D and marketing”. Ideally, we would take this principle to its maximum, nationalising all (British-based) drug companies and integrating them with the NHS.

Unfortunately, mass-nationalisation seems to be off the table at the moment. So, let’s look at a more pragmatic solution for the time being. Drug supplies and antibiotic resistance are problems which need to be fixed as soon as possible, so we need a proposal which could win public support and be implemented in the near future. To this end, I suggest that the next Labour government create a new state enterprise or agency, which for the purposes of this article I will call the National Pharmaceutical Service (NPS).

The NPS would be charged with producing a secure supply of select generic medications and developing new drugs, particularly those which would have a low rate of return on investment (such as antibiotics). It would work closely with public research agencies and universities in this effort. It would also be allowed to produce profitable new drugs and generics to help cover its costs. All of these would be provided at low prices to the NHS and pharmacies. If practical, they could also be sold to other developed countries and, perhaps, at a subsidized rate to developing ones.

Additionally, the NPS would be to act as a bulk-purchaser of privately produced drugs, selling them on to pharmacies and the NHS. In doing so, it would incorporate the NHS’s drug procurement division. Having community pharmacies purchase their supplies through such a central agency would tend to provide lower prices and spare them the headache of working through global supply chains. The fact that the NPS could threaten to produce a drug in-house if private companies offer an unfavourable deal would increase its bargaining power and help to discipline predatory corporations. Should it choose to start production, it could offer a more reliable supply to other country’s health services, giving it a distinct advantage in the global market. A body like the NPS would be in a strong to back the All Trials campaign of Ben Goldacre to end the scandal of the partial and distorting data on drugs. It could also implement his ideas for gathering good quality big data from GPs on drug effectiveness.

This is all eminently achievable within the current political situation. While it would, no doubt, be heavily lobbied against by the pharmaceutical companies, there seems to be little they could do to prevent it. If they retaliated through capital flight then their old factories and research centres could be bought up by the NPS, protecting jobs. Setting up the new public enterprise would require some capital, but interest rates remain low and it would be well within the means of Labour’s promised public investment package. In the long run it would likely save the government money by offering cheaper medications. This is not to mention the enormous social good it would provide by offering reliable drug supplies and developing vitally needed antibiotics. All or most of this strategy would likely be achievable even within Single Market rules. The threats that the NPS would combat are so great that the UK would have a strong argument it represents a “proportionate” response, justifying any market distortion to the European Court of Justice.

Nearly 70 years ago, Britain played a pioneering role in healthcare by creating the NHS. This represented a strong statement that healthcare is a human right which should not be left to the market. The NHS went further than preceding systems by taking hospitals completely out of a market framework and running them as part of an integrated public service. The next Labour government should take the next step by introducing the idea that not just provision should be viewed as a public service, but the development and production of medicines as well.

7 Comments

  1. jeffrey davies says:

    oh dear big farma are corrupt always chasing the monies not the care they even got our gov to ban a product made from cannabis so that they can peddle their own products we need a honest gov who will look after its peoples

  2. Bazza says:

    We should take them into democratic public ownership so we have free or cheap drugs.
    More research could then be done into ‘less profitable’ conditions and people with serious conditions would no longer be robbed of a few extra years of life by the market!
    Someone once told me a story: some intelligent aliens landed and saw people all over the world with conditions then they saw giant warehouses stacked full of drugs.
    They said why don’t you give these to those who need them?
    Oh we can’t do that, we need to make a profit.
    It’s time to be bold!

  3. Janet Marks says:

    I like this idea. I think we have to create new ways of providing a sane and safe society for all of us, while at the same time harnessing the private business world in clever and ingenious ways.

  4. John says:

    Yes! This was part of Bevan’s original project.

    I’d add to this that we should look at an intellectual property regime for certain drugs making them effectively generic when sold to other countries, provided those countries run a research outfit with proportionally similar funding and objectives. In that way we could use these under invested in areas as a basis to encourage international cooperation.

    Think “2% of your GDP and all drug categories covered can be bought as generics”.

  5. Peter Rowlands says:

    An excellent piece, well argued and with imaginative and affordable proposals. This is such an important issue, and it should become more prominent.
    I am reminded of John le Carre’s novel ‘The Constant Gardener’ which dealt with Big Pharma.

  6. David Pavett says:

    Very politically sound piece. It offers practical solutions as a next step forward rather than proposing maximal solutions which stand no chance of being implemented. I hope this proposal is taken up through the Labour Party. I will put it to my LP branch to send to the NPF and the Policy Commission on Health & Care. I just wish I had any confidence in those bodies are believed that they would do any of the research required to turn this into a detailed policy.

    The point about the All Trials campaign and the big data proposal using GPs could be very powerful. It would give the government both a stick and a carrot in its dealings with big pharma.

    1. C MacMackin says:

      Well, I do make clear what the maximal solution is and I think we should keep in the back of our mind that ultimately we’ll want to socialise the entire pharmaceutical industry. When the time comes that we are in a position to enact mass nationalisations, that should have high priority. However, an advantage of my proposal is that it can lay the groundwork. If the NPS is successful then it would allow people to ask why we bother with private pharma companies at all. It would also create an infrastructure of public control which other companies could be folded into when the time comes. Finally, I think the government should authorise it to purchase assets of existing pharma companies where it feels there is a business case. This could start to bring the industry into public ownership without level of confrontation involved in nationalisation.

      More broadly, something we on the Left should remember is that it is possible to pursue public enterprise even if we aren’t strong enough to nationalise anything. Most Canadian public enterprise was created within the public sector and, at most, would then go on to purchase some private assets. This was especially done in sectors that were relatively new, allowing the public company to expand in a relatively uncrowded market and become an important player (e.g. electricity). A British example of this sort of approach would have been Girobank. This can be a useful and pragmatic strategy which should be kept in mind by the next Labour government.

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