Sir Michael Rawlins Criticises Excessive Pharma Executive Pay




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Video title: Sir Michael Rawlins Criticises Excessive Pharma Executive Pay
Released on: November 04, 2008. © PharmaVentures Ltd
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In this exclusive interview with Sir Michael Rawlins, the Chairman of NICE, Fintan Walton discusses the financial issues facing pharmaceutical and biotech companies throughout the drug discovery and development process. Following several comments made by Sir Michael Rawlins in the UK national press regarding the pricing of drugs and the executive reward structure within the industry, they discuss the need for radical change in the way drug development proceeds from the regulatory level through to the marketing and pricing of drugs.
The role of NICE.
Fintan Walton:
Hello and welcome to PharmaVentures Business Review here live in London. On this show I have Professor Sir Michael Rawlins, who is Chairman of NICE here in the UK. Welcome to the show.
Michael Rawlins:
Thank you.
Fintan Walton:
Michael, National Institute for Health and Clinical Excellence is NICE.
Michael Rawlins:
Yeah.
Fintan Walton:
And is an organization which plays a critical role in both clinical development of drugs and the pricing of drugs in the UK. Could you just outline briefly the specific role that NICE has?
Michael Rawlins:
Well in relationship to clinical care we have two particular forms of guidance that we produce, one is what we call Technology appraisals, looking at individual drugs or groups of drugs and looking to see whether they are clinical effective and cost effective for use in the National Health Service. At the same time we also have a guidelines program which considers not individual products but the whole pathway of cap for Schizophrenia or stroke or whatever it may be and they are also very important because NICE is fundamentally being set up not to be a rationing body to increase the -- improve the quality of care that patients get, all healthcare systems have in appropriate variation in the quality of care and NICE was set up to try and improve the quality of care but within what is affordable for our health -- healthcare system.
Fintan Walton:
Right, but critical for that is looking at it from different perspectives and clearly and the perspective that people see in the public domain is largely one where drugs will either get on to the market or will not get on to the market for pricing reasons?
Michael Rawlins:
Yes, I mean and particularly for the pharmaceutical industry that's probably what they look at more than anything else and of course most of the time we actually say yes to new Pharmaceutical Products only about 4% do actually ever say no to we rather say a full yes or yes for a restricted group of patients within the licensed indications.
Fintan Walton:
Isn't that a difficult task because often these are drugs that hopefully have some clear but clinical benefit and sometimes subtle differences in clinical benefit?
Michael Rawlins:
Of course it's a difficult task but we have to do it, it's got to be done. We have a healthcare system in Britain that's funded from taxation. It's a Finite pot of money that's voted by parliament every year and we have to use that money in a way that is fair to everybody who seeks their care from the National Health Service which is about 95% of the population. So we can't necessarily adopt every new technique, every new technology, every new pharmaceutical product that comes in the market because it may be so expensive as to deprive [ph] many other people of cost effective care. So yes it is a tough job but it's a job that's got to be done and healthcare systems throughout the world are increasingly doing it. In Australia, in Sweden, in Denmark and Germany, in France so on it's inevitable for particularly that healthcare systems that our funded through public money.
Need for making clinical development lower cost aspect.
Fintan Walton:
Right, well before we get on to pricing I think one thing that the pharmaceutical industry would agree with NICE is the cost of getting a drug through clinical development this is one of the key issues>
Michael Rawlins:
Yes.
Fintan Walton:
So where does NICEplay a role in making sure that clinical development is a lower cost aspect?
Michael Rawlins:
Well we don't have a role in that. I mean that is in a sense the drug regulatory authorities you have a major role in that. But I do expect that it is extremely expensive to put a new drug on the market and the clinical programs are the most expensive part and I do fully accept that it has now become far to greater price. The cost of drug development has just increased astronomically over the -- over the last ten-years and it's becoming unaffordable and the lot of the cost is because of the regulatory burdens placed on companies and actually also on university scientists doing clinical trials in the -- on the public sector face exactly the same challenge. And I just don't think it's sustainable, these regulations were introduce for the very best intentions to contract for that to insure that unethical studies aren't done on patients and so on. But the law of unintended consequences has banged in and the costs are now just unbelievable. I know of one trial that's going on at the moment that is going to cost the manufacture a 118 million pounds, I mean we're talking about 350 to $400 million and we just cannot do this any longer because the costs of that marked drug when it gets in the market will be so great nobody is gonna be able to afford it.
Pricing of drugs.
Fintan Walton:
Right, so I would really agree then the cost to try and get a drug and the risks of getting a drug to market is a particularly high hurdle to get through?
Michael Rawlins:
Yeah it is unquestionable.
Fintan Walton:
And then we come into the issues of the direct benefits that a drug can have when it gets to the patient, and there are two ways obviously that there is a direct benefit hopefully in the patient -- patients health but also there may be as a result of that drug a reduction in general healthcare cost because the patient does spend time in the hospital and so forth so talking about?
Michael Rawlins:
Of course and when we look at cost effectiveness we always take into account there is offset costs, the effect that you don't need to be in hospital so long even you may not be in need to be in the hospital at all. So we look at both the cost of the drug and the cost that they saved by using the drug as opposed to something else.
Fintan Walton:
But in the end isn't there a danger that if the price isn't right for a drug in other words may be unpalatable from a patient or even from the player point of view which is the, the National Health Service that we end up not getting drugs through which will benefit patients?
Michael Rawlins:
That I think is a very serious danger and I fully accept that. But the pharmaceutical industry also has a responsibility in this business. It needs to try and ensure that it prices it drugs appropriately. I mean the tradition as you know as well as I do, that the -- the industry is tended to price it's products what it thinks the markets will bear. And it's going to have to realize that the market is not going to be able to bare the sorts of prices that were charged, could bare 10, 20 years ago. The world has moved on and my god [ph] is getting even worse with the economic catastrophe that's confronting the banks and so on and so forth. So it's going to get more-and-more difficult and competitors again have to develop a new strategy and to be fair many of them realizes and I've had many conversations with companies and they all realize that the old ways of doing business, the old ways of pricing drugs again they have to change.
Fintan Walton:
But isn't there a danger also that if the rewards aren't there then biotech companies who are trying to develop these new drugs will not be able to get the funding, will not be able to in other words innovation will be inhibited as a result of stricter pricing process?
Michael Rawlins:
There is clearly a problem here and I understand that. But the trouble is it's no good borrowing money of the banks to fund you know venture capitalist, If at the end of the day they are not gonna sell the drug either because it's so expensive to develop, or the profits that have been made aren't just to great for any healthcare system to manage to afford, is just becomes impossible.
Fintan Walton:
Let's look at a different way. There are lots of biotech companies in America, there are also biotech companies in Europe. Most of those companies would not exist unless pharmaceutical companies were able to get the type of pricing that they would get in the United States. In other words if in the US prices went down as may to with Barrack Obama coming becoming President of the United States, will that have an impact on our ability to innovate for drugs?
Michael Rawlins:
Well I'd hope not, I'd hopefully the pharmaceutical industry would adapt to the changing circumstances and help people like me who are crying out and I've been doing this for some years now about the cost of drugs development and we got to bring it down and so it requires support from the pharmaceutical industry over this and sometimes I don't get the support but I think I want to have some companies over this issue who don't want to upset their regulators and I certainly understand that. And I was once a drug regulator amateur part time and I do understand that. But we are all gonna work at this together, we all gonna work out ways of ensuring that new innovative products come to the market at a price that we can afford in relationship to their value.
Fintan Walton:
So the issue then from your perspective is on one hand the over complex regulation that we may have for drug development which unnecessarily adds additional cost burden to pharmaceutical companies possibly even increasing the risk profile of the drug getting through clinical development?
Michael Rawlins:
Yeah.
Comments on the executive reward structure within the industry
Fintan Walton:
You also made comments which were records in the press about the excesses of executives, Senior Executives in the bio in the pharmaceutical industry?
Michael Rawlins:
Well I think the reward structure is wrong. The reward structure needs to change as Andrew Witty the new Chief Executive of Glaxohas said, he wants the reward structure for the value proposition of his products not directly related to the share price now if the value is good then the share price will the reward structure if he concentrates on the value over the product becomes a much more obvious persuasive argument than just the share prices for investors who may or may not be going bankrupt.
Fintan Walton:
So do you put pharmaceutical executives in the same group as people are talking about, bankers at the moment there ?
Michael Rawlins:
I don't think, they are quite as successful with some bankers. I'm sorry to say or glad to say. No, no.
Fintan Walton:
Right, right. But the key issue here as you think that there are excesses by pharmaceutical companies?
Michael Rawlins:
I think the reward.
Fintan Walton:
And if they got the structure?
Michael Rawlins:
I mean, I think you know the reward structure is sometimes goes very badly wrong I mean no question about that and you know I don't want to get into names and companies but you know you and I know that it goes badly wrong sometimes. What Andrew Witty is suggesting is the reward structures are related to the value of their products and I think that's the right way. He's also saying that companies need to expand their markets you know this is the emerging markets in Asia and China these expensive drugs that have been produced then can't reach at the present price. We need to try and ensure that we can produce them or you can produce them at a price that they can afford too and that will be advantage to be everybody the rewards then in terms of the income would be much broader. So I think he is right, I think the pharmaceutical industries got to change the way it's been looking at it's pricing structure, it's reward structure, it's marketing structure in order to accommodate itself to this new world which is even newer as it were or more changed since the one when I made those remarks in THE OBSERVAR.
Fintan Walton:
Sure and the other group of people who've made some noise about this are the interest groups of around the patient groups themselves have been vocal because they have seen their patients group not getting access to some of these drugs?
Michael Rawlins:
Yes and
Fintan Walton:
So how do you handle that as a communication to them?
Michael Rawlins:
And of course and they have every right to make that sort of these sort of shouts and I fully understand. And I can understand that if you are, have advance cancer and you have only a few months to live the few more months may be very precious it may allow you to go to the baptism of some of those child or grandchild or it may allow you to go to a wedding and those sort of things, I understand that it allow to make peace with your friends and so on. But the problem is if we spend a lot of money there we are gonna deny other people with other conditions which may not be so dramatic of cost effective treatment, so we will be driving patients with perhaps Schizophrenia or depression or heart failure or whatever you like to mention from cost effective care and the great difficulty we have with NICEin the sense is that we have to try and be fair to everybody who uses the health service whether they got advanced cancer or whether they got mumps or measles or whatever. We got to try and look after everybody, we have to try and divide up the part of money that parliament votes for healthcare in a way that is fairest to everybody.
Fintan Walton:
But if somebody who's got a relative is dying and knows they can get that drugs somewhere else but they'll have to pay mortgage their house, remortgage their house, raise money from other funds in order to access that drug that is, is that fair?
Michael Rawlins:
Is it fair for a pharmaceutical company to charge so much money that's the only way a patient can access it, so I throw the ball back at you the pharmaceutical company should be making much greater efforts in order to make assure it's products are available to as many people across the world not just in Britain as concedable.
Fintan Walton:
And obviously the other key thing the impact is that because as you said the UK is a reference for reference pricing in other countries it does have a knock on effort not just in the UK but elsewhere as well?
Michael Rawlins:
Well I understand that but my responsibilities starts at the UK to the UK text pairs, to the parliament in the UK, to patients in the UK and I have to look after their interest and frankly don't have to look after everybody else in the world.
Fintan Walton:
Oh sure.
Michael Rawlins:
My goodness, so my focus is yeah the UK.
Regulatory requirements in clinical development
Fintan Walton:
A lot of people who watch the show will work in the industry are those scientists trying to develop these drugs and so forth and some of them are in the biotech companies, some of them are in the pharmaceutical companies. What can you say what is the solution to this problem there?
Michael Rawlins:
Well the first thing I would say to them is that I admire them enormously, the scientists in the pharmaceutical industry and in the biotech industry. They doing a fantastic job I don't want them to stop, I want them to carry on developing new innovative products, we need them desperately. But we gonna have to develop them in a way that makes them affordable for all the people that they want to see use their products and I know from talking to scientists and I have talked to 100's if not 1000's of them there means immense pride the products that come on the market and they can see having a massive impact on people and they are right to be proud of their achievements and I want to welcome them to be proud of their achievements and I admire them enormously. But it's got to be done at the price that we could all afford and I understand that's difficult. But that's the world we are living at.
Fintan Walton:
So how what is required if we are to get more affordable medicines into the market and also continue the interest to developing innovative drugs which are badly needed for society, does there need to be better cooperation at the regulatory, we talked about clinical cost as an issue?
Michael Rawlins:
Yeah.
Fintan Walton:
Do we need to do we need to have a reform of the clinical development?
Michael Rawlins:
Yeah, I've been saying for some time now that the regulatory requirements ought to pass two tests. One do they actually make a difference and two, are they affordable but they are very important , I mean the regulatory requirements in the pre clinical area which I know is one of the huge amount but you know pre clinical toxicology is largely an evidence free zone, i mean why six months toxicology chronic toxic study? Why not three months? What's the difference and so on and so forth, I mean it's all those activities. And then in the pharmaceutical industry can really engage in that because they are the ones with the data and the regulatory authority. When it comes to the clinical development there are relatively simple measures that could be done to reduce the costs without impeding, impeding the quality very much and there is been a group of academic investigators in part lead from people like (indiscernable) at Oxford who've been pointing out the measures that could be taken to reduce clinical trial cost, so we got to go that way un questionably. The way we do clinical trials in the clinical pathway should change. And I know some companies actually already doing this but you know this business we do see a Phase I studies and then we think about it for a year and do a Phase II study and think about it for another year and then do it. We want to we should have a seamless approach to development that runs all the way through we need real time drug regulations so that regulators where able to agree continuing their study you know almost as it was going on. And we also got to I think also the pharmaceutical industries is gonna have to put it housing hold, I mean the amount of money that we spend on marketing drugs in the states is unbelievable and some companies spend more than twice the amount of money marketing their products than they were in the R&D. That's gonna change. And so everybody has got to really look at what they do people like me at NICE, regulatory authorities and pharmaceutical companies to try and make sure that new products are affordable to the people who want them.
Fintan Walton:
But it's ok for profit for pharmaceutical companies to make profits even huge profits?
Michael Rawlins:
Of course they are gonna make profit I mean they got investors and people will invest in them. I am not arguing about that, in fact I think my pension fund probably has invests in pharmaceutical company so in the sense I've got best of interest in it. And yeah of course that's fine, but we only gonna make money and profits if you can sell your products and you got them to able to sell them at the price the people can afford to pay and this is the dialog we all have.
Fintan Walton:
Professor Sir Michael Rawlins, thank you very much indeed for coming on the show.
Michael Rawlins:
Thank you.
Fintan Walton:
Thank you.
Michael Rawlins:
Thank you.
Michael Rawlins
Chairman
Professor Sir Michael Rawlins was appointed Chairman of the National Institute of Health & Clinical Excellence (NICE) after it's founding in 1999. He also holds several other positions such as Chairman of the Advisory Council on the Misuse of Drugs (since 1998), Honorary Professor at the London School of Hygiene and Tropical Medicine and Emeritus Professor at the University of Newcastle upon Tyne. In 1973 Sir Michael Rawlins became the Ruth and Lionel Jacobson Professor of Clinical Pharmacology at the University of Newcastle upon Tyne, a position he held until 2006. At the same time he held the position of consultant physician and consultant clinical pharmacologist to the Newcastle Hospitals NHS Trust he is a fellow of the Royal Society of Medicine. Between 1987 and 1998 he sat on the Committee on Safety of Medicines as both Chairman and Vice-Chairman. Sir Michael has won several awards such as the Lilly Medal from the British Pharmacological Society, of Amsterdam, the Dixon Medal from the Ulster Medical Society and the Paracelsus Medal from the University of Amsterdam.
NICE
The National Institute for Health and Clinical Excellence ,(NICE) is a Special Health Authority of the NHS responsible for providing national guidance on the promotion of good health and the prevention and treatment of ill health in the UK. Founded in 1999 as The National Institute for Health and Clinical Excellence, it merged with the Health Development Agency in 2005 to become NICE as it is today. The organization produces guidance in three areas of health; public health, health technologies and clinical practice and also publishes appraisals of drugs for the NHS based on cost- and clinical-effectiveness. NICE has gained a high profile internationally as a potential role model for the prioritization of health services.