Tiny Tim wasn’t the only orphan to suffer a miserable Christmas at the hands of a merciless Scrooge.  The same fate awaits so-called orphan disease patients in the UK.  This year, it’s the turn of around 400 cystic fibrosis patients, who cannot access newly-approved Kalydeco on the supposedly comprehensive National Health Service (NHS).

Its easy to imagine the sadness of children from poor families pressing their nose against the glass of the toy shop window decked out with dazzling presents for Christmas, knowing these delights will be denied them but not their school friends.  How much worse must it be knowing there is a drug that could dramatically reverse your chronic illness, but being told you cannot have any?

Yet that is exactly what is happening, not for the poor children on the block but in the world’s seventh largest economy.

On the face of it, the cause of this wholly unacceptable state of affairs is the ‘scandal’ of drug pricing.  Vertex, makers of Kalydeco, want $294,000 for a year’s treatment.

“Can it be right for the NHS to offer free IVF to infertile couples while denying Kalydeco to CF sufferers?” @sciencescanner on Twitter

But actually, the ultimate cause is the myth we (in the UK) continue to perpetuate that its possible to offer comprehensive healthcare to all, free at the point of use.  While the development of new drugs is funded almost entirely with private capital, yet healthcare is delivered from the public purse there will always be a mismatch – with companies developing drugs no-one can afford to use.

What is urgently needed is a proper debate about healthcare priorities – a debate that is stifled by the increasingly hollow assertion that the state can cover all your healthcare needs.

Pricing drugs for ‘orphan diseases’ has caused intense public debate for a number of years.  Because the cost of developing a new drug is unrelated to the number of people who will use it, making the development of drugs for rare, or orphan, diseases economically viable requires the makers to charge a higher price.  At a minimum, the price will be the cost of developing the drug divided by the number of people who will take it.

Recent estimates suggest the development cost of a new drug is stable at just over $1billion – so when the denominator is very small, the resulting price can look difficult to justify.

Perhaps the most expensive drug on the formulary right now is the anti-C5 antibody Soliris™ from Alexion, with a list price around $400,000 for a year’s treatment.  It is used to treat a rare condition called Paroxysmal Nocturnal Hemoglobinuria (PNH), a life-threatening blood disorder that is fortunately very rare – affecting about one person per million.

The high price of Soliris escapes scrutiny to some degree because it’s an antibody therapeutic (and so assumed to be relatively expensive to make, compared to conventional small molecule drugs – of course it is, but no where near expensive enough to justify the price on that basis), and in also in part because PNH is ultra-rare.

But the new wonder-drug for cystic fibrosis (CF), Kalydeco™, does not fare so well.  For a start, it’s a conventional (and so cheap-looking) small organic compound.  And the number of patients it can help is almost an order of magnitude larger – still only around 400 people in the UK who have the right genetic type of CF to benefit, but enough to yield an annual bill of around £100million at list price.

Tiny Tim isn’t the only orphan suffering at the hands of Scrooge this Christmas.  Arguments over orphan drug pricing are leaving young CF patients without an effective treatment option.

Like Soliris, Kalydeco works very well.  Patients show dramatic improvement in symptoms that will likely translate into better life expectancy as well as quality.  But mindful of the cost-effectiveness of treatment the UK NHS has not yet authorized the use of this drug in the patients who really need it.  The Clinical Priorities Advisory Group have delayed a recommendation, and the subtext is clear: there is a negotiation between the NHS and the drugmaker on price.

Both sides are playing chicken, wondering who will get the worse publicity – a national healthcare provider that is failing to provide essential care? Or a profit-driven US company charging an apparently astronomical price for a simple small molecule?

The company gets some of the blame.  Self-evidently the company seeks as high a price as possible to maximize its profits.  And Vertex executives, it would seem, have been guilty of some morally ambiguous tactics of their own to maximize their personal returns.

But the NHS is also under increasing pressure to provide available treatment no matter what the cost – or the cost-benefit.  Patient groups and vocal minorities are getting better and better at mobilizing support for delivering popular treatments irrespective of the economic case.  At times, these decisions seem to rest on just how heartless the campaigners can make health bosses look, rather than on any semblance of rationality.

The real problem, though, lies deeper in the system.

In today’s world, drug development is principally a private enterprise, using private capital (mostly belonging to the shareholders of the global pharmaceutical companies).  By contrast, most healthcare delivery is publically funded (whether through insurance schemes or state-backed providers).  This creates an unresolvable tension.

Controlling spirally healthcare costs by driving down drug prices is currently very much in vogue. But it is the wrong solution to the problem.

At the very least it creates an unresolvable tension as long as the core principle of healthcare is that communities will provide for their members whatever healthcare innovations are generated.

As long as providers are willing to pay high prices, it remains economic to develop drugs for orphan indications using private capital.  If public providers, like the NHS, play chicken with the private developers and force the price down they may succeed in the short term – but the longer term consequence is clear: everyone will cease to research and develop cures for orphan diseases.

Is that what we, as a society, want to see happen?  I suspect the answer is no.

Now look at it in reverse.  As long as public providers are always prepared to pay what it costs for new medicines (as long as they are safe and really do work, as is the case for Soliris and Kalydeco) then there is a huge incentive for developers to create as many new drugs as possible for as many diseases as they can – irrespective of how many people suffer from them.

Is that what we, as a society, want?  At first glance, the answer seems to be yes.  But there is an inevitable consequence: healthcare costs will keep on rising inexorably.  Since we cannot control costs by forcing down prices (as is the current trend) – simply because that will make any new innovation uneconomic – as new innovations reach the market overall costs will spiral.

That is not hypothesis – the real data of the last several decades testifies to the accuracy of the statement.

So what is the solution to this conundrum?  We cant pay (much) lower prices for medicines, nor can we afford to pay for all the new innovations at “market” rates.

The answer has to be a change in the principle of comprehensive health care, free to all at the point of delivery.   Its not a case of whether we have to sacrifice the central dogma of the UK National Health Service – it’s a case of when and how we do it.

Controlling prices can only come by limiting in some (democratically agreed fashion) the range of services that can be provided.

Controlling healthcare costs has to come from limiting scope not limiting prices.

As @sciencescanner asked on Twitter recently, can it be right for the NHS to offer free IVF to infertile couples while denying Kalydeco to CF sufferers?  Does a broader right to reproduction outweigh the right to life for others?  Surely not.

All the evidence suggests we can no longer afford to offer (or even pretend to offer) everything.  Economic necessity tells us that the mismatch between private drug development and publically funded healthcare will eventually drive healthcare costs into territory where even the strongest economy cannot support it.   Current economic difficulties (caused by a willingness to keep spending on things like healthcare even when national productivity was insufficient to support it) may only hasten the moment when the crunch is reached.

But it will come – and one day soon.

DrugBaron does not pretend that it is easy to decide between emergency care and preservation of life for one versus increased quality of life for others.   But we need to set a budget and then decide openly what can be provided within that budget – and what cannot – rather than persist with the notion that everything is possible (if only we could drive down drug prices or increase the efficiency of healthcare delivery).

Rather than the absurdity of the current system of price-setting – where private companies must gamble as to whether they can be reimbursed for their product at a price that made the development economic – the publicly funded healthcare system must make clearer the prices it is prepared to pay for adding a year of life, or improving the quality of life.  That way, innovators will never develop medicines that are uneconomic or which society with the unpalatable sight of young people with a serious chronic disease facing Christmas without a drug that can ease their burden immeasurably.

The twin plea, then, goes as follows:

Please make drugs like Kalydeco available to patients in the UK who will benefit from them, now that they are available elsewhere.

But at the same time, please cap the healthcare budget by limiting the scope of what kind of healthcare we as UK citizens can reasonably expect to receive in the future.  With clear guidance on what kind of innovations will, and equally importantly, will not form part of that universal offering it is not just patients that will benefit – drug developers will too.

The Cambridge Partnership is the only professional services company in the UK exclusively dedicated to supporting companies in the biotechnology industry. We specialize in providing a “one-stop shop” for accountancy, company secretarial, IP management and admin services. The Cambridge Partnership was founded in 2012 to fill a gap. Running a biotechnology company has little …