Most people with any exposure to innovation in the NHS, and indeed healthcare more generally, know that it’s pretty dysfunctional, but studies are emerging that illustrate just how dysfunctional it is.  For instance, earlier this year a report was published by the King’s Fund to investigate innovation in the NHS.

The report suggests that there is no shortage of entrepreneurship in the NHS, but that transferring even simple innovations from one NHS organization to another is incredibly difficult.

This has been followed by a second report into the global health innovation system that has recently been published by University College London.  The report reveals that patients are being let down by a health innovation system which is failing to deliver the treatments they need at a price the government can afford.

Hampered by profit

The report suggests that innovation is being hampered by a focus on short-term profits, and this is preventing drugs and treatments from tackling critical health needs.  Rather than delivering the treatments the industry so badly needs, it instead incentivizes high prices that deliver short-term returns to shareholders.  As a result, the longer-term research tends to get overlooked.

Suffice to say, the solution isn’t as straightforward as demanding lower prices, but rather a fundamental change in the system itself, whether it’s the dynamics of patents or the way corporate governance strangles innovation.

“The diagnosis looks bleak for the health innovation system; it’s expensive and unproductive and requires a complete transformation. We have a situation now where the NHS is a huge buyer of drugs and the UK government is a significant investor in the development of new treatments, yet big pharmaceutical companies are calling the shots,” the authors say.

A broken system

The report suggests that R&D priorities are not typically determined by the public health needs of society, with the industry often ignoring diseases that are especially prevalent in developing countries.  Indeed, the authors argue that half of the medicines approved in recent years have offered no extra health benefits.

What’s more, R&D also appears to be getting less efficient, with fewer approved drugs per dollar of research spending.  In the 1950s, firms were able to produce around 40 drugs per $1bn, but this has falen to just 0.65 now.  This perhaps helps to explain why the 19 pharma companies in the S&P 500 spent $297bn buying back shares between 2007-2016, which is 61% of their overall R&D budgets during that period.

So what can be done to improve matters?  The authors argue that the industry needs to transition towards a more mission-oriented approach to improving health outcomes.  This would often be directed by governments and channel the energies of all stakeholders in a common direction towards specific public health goals.

They also recommend healthcare providers strike better deals through conditionality, especially when the government is a major investor in the research itself as well as the end product.  This conditionality could also prevent the public from paying twice for treatments.

For instance, the NHS has spent around £172 million on the prostate cancer drug Abiraterone, despite contributing 14% to the overall research costs.  What’s more, the Institute for Cancer Research, who discovered the drug, and who receive a lot of their funding from the non-profit sector, received just £137 million from sales of the drug, compared to Johnson & Johnson, who earned around £1.9bn.

“A pharmaceutical industry that makes billions in profits without providing the affordable medicines that people need is one of the scandals of our time. It’s easy to feel that there is no alternative, but in fact there are a whole host of alternatives that are already working in a number of countries. It is time to scale up what’s working, and drop what’s not so that people here in the UK and around the world can access the effective treatments they need,” the authors say.

It should perhaps not need saying, but nonetheless, the UK health system is relatively unique, and so the recommendations may not apply elsewhere, and with the pharmaceutical industry a very global one, it’s not clear how effective the report will be in driving change, but with the pressures on healthcare growing around the world, it is commendable that they at least try.