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Published on 18 August 2008

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Companies ‘driving up drug prices’

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The chairman of the body which advises on drugs’ cost-effectiveness has warned that pharmaceutical companies are driving up the price of vital new medicines in order to boost profits and protect executive bonuses.

Professor Sir Michael Rawlins, the chairman of the National Institute for Clinical Excellence (NICE), complained that the industry was subject to “perverse incentives” to hike prices.

His comments followed criticisms of NICE for refusing to sanction the use of new kidney drugs by the NHS on the grounds of cost.

“We are told we are being mean all the time, but what nobody mentions is why the drugs are so expensive,” he said in an interview with The Observer. One of the reasons for the high cost of drugs was the need for companies to keep their share prices high, Professor Rawlins said.

“It’s not in their interests to take less profit, personally as well as from the the point of view of the business,” he continued. “All these perverse incentives drive the price up.”

He added that companies were facing a drop in profits as some of their biggest earners went “off patent”, allowing their rivals to produce cheaper versions. The companies also had to cover the cost of marketing new drugs, which could far outstrip the cost of actually developing them.

Copyright PA Business 2008

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