Nice boss anger at high drug prices (From St Albans & Harpenden Review)

Nice boss anger at high drug prices

4:04am Sunday 17th August 2008 in

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

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 intervention, in an interview with The Observer, came after Nice faced scathing criticism 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.

He said one of the reasons was the need for companies to keep their share prices high.

"The share price is very important to a pharmaceutical company," he said.

"Pharmaceutical companies have enjoyed double-digit growth year on year and they are out to sustain that, not least because their senior management's earnings are related to the share price.

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

In addition he said that companies were facing a drop in profits as some of their biggest earners went "off patent", allowing their rivals to produce cheaper versions.

"And so part of the cost is cushioning against that," he said.