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The three-way race for control of Parliament leaves the future of the British pharmaceutical industry in the balance.
Despite its relatively small size in the global market for medicines, the UK retains a high profile because it serves as a window on the industry's future. The Pharmaceutical Price Regulation Scheme (PPRS) is a benchmark for pricing in dozens of other countries, while the National Health Service (NHS)—second only to the Chinese People's Liberation Army in the ranks of the world's largest employers—exists as a laboratory for cutting edge experiments in the delivery of healthcare. In addition, successive UK governments have created an international precedent by raising the status of the biopharma sector as a target for sophisticated industrial policies designed to advance innovation as a business process.
Thus, it is worth looking at the May 6 parliamentary election to gauge the impact on the industry's business model and related public policy agendas. Given the growing importance of government purchasing—even in the US—progress on policy is sure to drive successful repositioning on the commercial side.
Healthcare has been tagged as a top issue for voters, and is being discussed within a larger, almost spiritual debate about the relevance of major institutions in an era where the UK seems destined for global economic decline. This theme accounts for much of the newfound appeal of the Liberal Democratic Party, perennial "also-ran" of the UK political system, and its leadership candidate, Nick Clegg. Clegg's boost has come from his strong performance in three televised debate, a media event that the US has been used to for 50 years, but which has been slow to infiltrate UK shores.
As a result, a solid electoral outcome that delivers a clear majority to the Conservative opposition against the ruling Labour party is much less certain. Going forward, healthcare policy is likely to be more heavily politicized and subject to marginal changes rather than decisive shifts.
All three parties are highlighting their commitment to the NHS as a free point-of-service healthcare provider. The enormous national deficit is ignored where it comes to health; none of the three parties are advocating significant cuts in NHS outlays, although Labour has already established a consensus that real growth—which over the past decade has pushed UK health spending to a level above the OECD norm—cannot continue.
Another ripple in the election is the debate about rationing access to key services like cancer care. Just before the election announcement, the Conservatives weighed in with plans to improve the availability of anti-cancer treatments not currently approved by the National Institute for Health and Clinical Excellence (NICE) for use in the NHS. The Tories promised an extra £1 billion in funding for new anti-cancer treatments if they gain power, money they would raise by cutting NHS employment.
However, John Appleby, chief economist of the right-leaning think tank The King's Fund, criticized the plan as "sleight of hand," saying the money would have to come out of other budgets. Labour dismissed the plan as "selective" and "misleading," and not much more than an attempt to grab headlines. Interestingly, NICE, with a new emphasis on sophisticated public relations, announced that it would not publish any new technology appraisal, in either draft or final form, during the general election campaign.
Labour, meanwhile, is promising a new set of initiatives to save money for the NHS through expanded preventive services focused on primary care and diagnostics in the fight against chronic disease. The Conservatives have attacked the government's emphasis on meeting complex performance targets, which have led to an explosion in spending on consultants, IT, and management experts. A Tory government would actually commit to spending slightly more on the NHS in real terms than the other two parties, paid for through higher taxes. Nevertheless, the Tories have been less specific than the other two parties in detailing their plans for health, devoting only four of 76 pages in their election manifesto to the subject. Should they form the next government, the Tories will likely revert to type and resume the initiative to open up at least some of the NHS to market forces. As an April 14 Guardian editorial observed: "One detail that does not make it into the [election manifesto], but which is plainly set out on the Conservative Web site, is a new economic regulator, with a remit to 'promote competition." This will include the health service.
The Liberal Democrats, in keeping with their message against waste and featherbedding, focus on trimming the NHS of costly management ranks and simplifying the NHS structure through such initiatives as cutting the number of semi-independent health agencies by a third.
The lack of campaign rancor over health (excepting cancer treatment) may be attributed to the fact that Labour's 13-year record in improving the NHS isn't that bad. The King's Fund released a report in April stating that the NHS in England has improved "significantly" since 1997, and pointed to major and sustained reductions in waiting times, better access to GPs and primary care services, and a substantial fall in death rates from cancer and heart disease. However, it countered this with the observation that the health gap between rich and poor was wider than ever, and that the UK's cancer survival rates, although improving, still lag behind the rest of Europe.
On the industrial policy front, none of the three parties want to kowtow to Big Pharma. Nevertheless, The Guardian's April 11 story revealing that Novartis and Roche are threatening to pull investments out of the UK in an ongoing row over pricing and rules surrounding clinical safety trials seemed more of an embarrassment to the government than a sign of it resisting corporate pressure. According to the report, "the documents ... make clear that cabinet ministers have been conducting a vigorous charm offensive to prevent multinational drug companies leaving Britain."
Roche refuted the story and Novartis declined to comment, but none of this stemmed the flow of conspiracy theories about an attempt by Big Pharma to influence the course of the election. The corporate world, of course, has more to gain from a Conservative win—the Tories have vowed to cut corporation tax and new businesses' National Insurance contributions—but Labour is certainly not keen to lose the business vote it worked so hard to gain back in 1997.
There was more explicit agreement between the parties on the "Patent Box," a scheme proposed by the Review and Refresh of Bioscience 2015 advisory report and confirmed in Chancellor Alastair Darling's March Budget to reduce corporate tax on income from patents from 28 to just 10 percent by 2013. Another initiative that the parties all support is the "Innovation Pass," which will help patients with rarer diseases access highly innovative new drugs not yet appraised by NICE. Although proposed under Labour, both initiatives will come to fruition regardless of the election winner.
Not long before the election was announced, the Labour government also issued a press release stating that the Prime Minister intended to establish a new cabinet-level "Minister for Life Sciences" in the next Parliament. There is no reason to believe a Tory or Liberal Democrat win would nix this idea either.
There has also been an overall convergence of policies regarding biotech and SMEs. The Tories are promising that "R&D tax credits will be improved and refocused on hi-tech companies, small businesses and new start-ups," along with government guarantees to create more diverse sources of affordable credit for SMEs. Labour, for its part, aims to "bring together a total of £4 billion of public funds and combine it with private money to channel equity to businesses looking to develop and grow." This scheme will include an extra £500 million of bank lending being made available.
But the closeness of the three parties on these and other issues has not inspired much optimism among industry analysts. If the May 6 election results in a hung parliament, with each of the two major parties dependent on the Liberal Democrats for support, the larger problem will be the absence of a stable hand at the till, causing more confusion and uncertainty as a cobbled administration awaits improved conditions in which to send voters back to the polls to deliver a clearer mandate.
And what's the big issue for Big Pharma? Whether or not there will be stable, predictable, consensus-based policies at a time when companies have numerous alternatives on where to place their money and expertise, often at much lower cost. An inconclusive election result will perpetuate the policy inertia that industry leaders such as GSK's Andrew Witty contend is the more serious long term threat to the UK's status as a favoured site for pharma investment.
Julian Upton is Pharmaceutical Executive's European correspondent. He can be reached at email@example.com