E-DRUG: BMJ: Betting on hepatitis C: how financial speculation in drug development influences access to medicines
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[This is a long article, only Introduction, Key messages and References copied in this posting. Copied as fair use. KM]
BMJ 2016; 354 doi: http://dx.doi.org/10.1136/bmj.i3718 (Published 27 July 2016) Cite this as: BMJ 2016;354:i3718
Victor Roy, doctoral researcher, Lawrence King, professor of sociology and political economy
Correspondence to: V Roy vr260@cam.ac.uk
Victor Roy and Lawrence King argue that the acquisition strategies of drug companies magnify development costs and leave the public paying twice—for research and high priced medicines
Sofosbuvir based medicines have marked an important breakthrough for patients with hepatitis C infection, offering cure rates of over 90%. The virus is a leading infectious killer globally, disproportionately affecting vulnerable groups such as people who inject drugs or have HIV/AIDS.1 Even after discounts offered from a US list price of about $90 000 (£70 000; €80 000) per three month treatment course, however, the cost of these drugs, manufactured by Gilead Sciences, has challenged government budgets and led to rationing. Sofosbuvir’s pricing has been at the centre of a global debate over the affordability of prevailing systems of drug development, and the US Senate conducted an 18 month investigation into Gilead’s pricing strategy and its consequences for health budgets and patient access.2
One argument for the high prices has been that the curative drugs represent a major advance in value to patients and health systems. They are indeed more cost effective than many expensive medicines that provide only marginal benefit. Yet the company’s ability to charge high prices ultimately relies on monopoly protections via patents, which the industry has long argued are necessary to encourage costly research and development. Critics, however, charge that these costs are exaggerated.3 4 5
We use the case of hepatitis C to highlight another dynamic missing from the debate: the financial model driving large companies and their shareholders. To maximise growth in earnings, large companies like Gilead often enter expensive bidding contests to acquire companies with promising compounds. Subsequent profits are then directed back to shareholders rather than invested in early stage research. This speculative cycle propels the prices of medicines and impedes affordable access for both …
Key messages
- Gilead's $11bn acquisition of sofosbuvir after phase II studies magnified the speculative costs of drug development
- The resulting $35bn in revenue has been primarily directed to shareholders via share buybacks rather than to further research and development
- The public pays twice, both funding pivotal early research and purchasing the drug at high prices
- Solutions include giving health systems increased power to negotiate pricing and payment models, limiting share buybacks, and testing other ways to encourage and reward drug development
Footnotes
We thank Simon Deakin, Amanda Hoey, Don Light, Martin McKee, Isaac Holeman, and Piotr Ozieranksi, for comments on earlier versions.
Contributors and sources: VR is a doctoral researcher investigating the economics of drug development with a focus on hepatitis C. He documented the scientific and corporate history behind hepatitis C research and development, drawing on scientific and medical journals, media reports, Securities and Exchange Commission filings, transcripts of earnings calls, and the US Senate Investigation report on Gilead Sciences. He drafted the manuscript. Luke Hawksbee and Nicholas Pye collected data from SEC filings and Fortune 500 to develop the figures. LK supervised the research and reviewed and revised drafts of the manuscript. VR is the guarantor.
Competing interests: We have read and understood BMJ policy on declaration of interests and have no interests to declare.
Provenance and peer review: Commissioned; externally peer reviewed.
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