Big pharmaceutical companies accused of “ripping off” the NHS with 12 billion in excess profits

Some of the biggest pharmaceutical companies in the world have been accused of ripping off the NHS by making billions of pounds off just a handful of cancer and other drugs.

NHS England has spent £13bn on treatments over the past 10 years, with drug companies making as much as £12.6bn through extreme profiteering, according to research by Global Justice Now, STOPAIDS and Just Treatment. The health campaign groups said most of the 10 medicines mentioned in their report would cost well under 10% of the price charged to the NHS to produce.

The excess profits described in this report represent markups above the estimated cost price of the drugs plus a reasonable profit margin of up to 50%, the groups Bitter Pills report states.

In other words, with a different model where pharmaceutical companies are prevented from making excessive profits, the NHS would save most of the money it is currently paying for new medicines.

The group says their findings are consistent with broader research showing profits of big pharmaceutical companies are nearly double the average of publicly traded companies, with margins as high as 90%.

The report said the NHS achieved £9bn in savings on the 10 most expensive medicines over the last decade through collective bargaining through the medicines watchdog, Nice, and with the voluntary Pricing and Access to Medicines scheme by brand (VPAS).

The government said VPAS saved the NHS over 7 billion in medicines between 2018 and 2023. But big pharmaceutical companies are lobbying against the scheme.

Two major US pharmaceutical companies, AbbVie and Eli Lilly, left VPAS this year because they said the scheme hurt innovation and made it increasingly difficult for shareholders to sustain the UK market.

The VPAS came into effect in January 2019 and limits the profits manufacturers can make on branded medicines sold to the NHS. It does this by limiting the growth rate of brand-name drug spending to 2% a year, with industry required to repay any higher spending. In 2023, manufacturers of branded drugs in the program will have to pay back nearly $3.3 billion or 26.5 percent of sales to the government, up from about $0.6 billion in 2021 and $1.8 billion in 2022.

Although the £13bn spent on the 10 medicines over the decade is less than the NHS’s total annual expenditure on medicines, exact figures are difficult to ascertain, the report said. The campaign groups said they have chosen to focus only on the most expensive drugs to demonstrate that the super-expensive drug problem is a rapidly growing one.

The group said their findings are evidence of profit, as drugs used by the NHS to treat cancer, arthritis and to prevent blood clots may have been produced for a small fraction of the price charged to the NHS. Activists say the situation will only get worse for the NHS unless we change the way we make medicines.

They said pharmaceutical companies often claim that high prices are justified by the high costs of inventing new drugs, but stressed that each of the 10 drugs analyzed in this report benefited from the work of scientists from public institutions, public funding, of charitable funds or in some cases a mixture of all three. Very few of these drugs can reasonably be said to have been completely invented by the companies that now market them, the group said.

Examples include the anti-inflammatory drug adalimumab, which cost NHS England £2.7bn over 10 years. It was sold exclusively under the Humira brand, by pharmaceutical giant AbbVie, until its patent monopoly period expired in 2018; and the cancer drug lenalidomide, sold under the brand name Revlimid and a modified version of thalidomide, marketed by a subsidiary of Bristol Myers Squibb. The NHS spent £922m on the drug over the decade.

Activists are calling for a new model for manufacturing medicines that includes stringent conditions on the use of publicly-funded medicines to safeguard the accessibility and sharing of medical knowledge. They also call for increased public production capacity and the application of anti-monopoly powers to prevent the domination of a handful of mass actors.

Nick Dearden, director of Global Justice Now, said: These figures show we have a broken model of manufacturing medicines, with pharmaceutical companies tearing up the NHS at every turn. If we don’t fix it, our healthcare system could be at risk.

Currently, the money we need to run the NHS is poured into the pockets of wealthy shareholders of large pharmaceutical companies. If we want new and revolutionary medicines, for the benefit of all of us, we must end this looting and take control of the medicines that, very often, public money has already helped create.

Sonia Adesara, a general practitioner and campaigner based in London, said: This research shows that the prices that pharmaceutical companies charge to the NHS have little to do with the cost of producing medicines. The markup on these 10 drugs alone is enough money to cover pay restoration for junior doctors.

Instead of battling with healthcare professionals who are struggling to keep up with the cost of living, the government should try to recoup the rock-bottom prices charged by drug companies.

Bristol Myers Squibb declined to comment on the report. AbbVie, Pfizer and Sanofi, manufacturers or licensees of the drugs mentioned in the report, were also approached for comment. Pfizer said the report’s findings were an industry-wide matter and referred the questions to the companies’ trade body, the British Pharmaceutical Industry Association (ABPI).

David Watson, director of patient access at the APBI, said: It is simply not true to say that the UK is spending too much on medicines or that this is a key driver of rising costs for the NHS. The UK benefits from some of the lowest drug prices in the world, spending less on medicines per person than many of its peers. A smaller proportion of the healthcare budget goes to medicines in the UK than in comparable countries.

Furthermore, the discount that industry reimburses the NHS on medicine sales before any profit has skyrocketed from 6.8% before the pandemic to over 26% this year, well beyond any international or historical precedent, highlighting risk the UK life sciences industry and future early access to new treatments.

The right price of medicines does not depend on the cost of production. It has to be measured by the value medicines provide to patients and the healthcare system, and the UK has one of the toughest systems in the world for assessing this. Pricing must also take into account the risky and uncertain development process that results in significant failure rates.

Government officials said they did not recognize the methodology used in the report.

A spokesperson for the Department of Health and Social Care said: The UK has well established systems in place to control costs and ensure good value for money when spending on medicines. The UK system is regarded as a world leader, largely due to the NHS’s role as the sole buyer providing access to the vast majority of the UK market.

VPAS 2019 is expected to generate approximately £7.5 billion in revenue for the NHS in just five years, while supporting access and adoption of the most clinically and cost-effective medicines. Negotiations are underway to agree on a new voluntary scheme which should continue to support patients, the economy and the accessibility of medicines to the NHS.

An NHS spokesperson said: NHS England uses its commercial capabilities, working alongside NICE, to secure innovative treatments at prices that represent clinical value for patients and payers, and our current pricing arrangement with the pharmaceutical industry ensures medicines remain affordable by balancing competing claims on the NHS.

We work in partnership with the pharmaceutical industry to expand treatment options for patients, but NHS England has also supported the Competition and Markets Authority in taking retributive action against companies that have exploited the NHS for profit.