Why We Need a Public Generic Drugs Manufacturer

By Adam Peggs

In recent years the cost of medicines for the National Health Service – already sky high – has been rising further, imposing pressure on the NHS and limiting access to adequate healthcare for many.

The result has been a situation in which too much spending is handed straight to companies who charge eye-watering prices for vital medication and in which the vision of a public, high-quality health system comes under strain. While the underfunding of the NHS and the tendency toward fragmentation and marketisation are key parts of this story, so is the role of the pharmaceuticals industry and its relationship with the health service.

An essential part of addressing this will be the need for a publicly owned generic drugs manufacture as part of an enlarged role for the public sector and state intervention in the pharmaceuticals industries.

This call is not new. Last year, the Labour Party unveiled a number of policies before the 2019 General Election to make this a reality, including pledges to terminate patents early in cases where doing so would be in the public interest and could significantly cut the costs of medicines. These proposals were presented in the Medicines for the Many document released last September, which promised to put ‘public health before private profit.

As part of this, the party adopted a commitment to establish a publicly owned generic drugs manufacturer, a policy first discussed by Corbyn all the way back in 2015 – but which had effectively disappeared since then. The proposals from the party would have used “existing but underutilised legal powers” to suspend monopolies when the NHS doesn’t receive a fair price, with a company in public hands able to step in and manufacture the drug at a reasonable price.

Though the policy might seem outlandish in Britain’s privately-dominated market economy, it follows successful precedents in South America, continental Europe and the US.

Now in the age of Coronavirus, the dominance of large, extractive pharmaceutical companies is even more salient than a year ago. And the solution is even more urgent. With the NHS under increasing pressure, the government engaged in an outsourcing bonanza and Brexit raising the prospect of higher drug prices, it is right to restate the case for a new approach.

A state-led approach involving generic drugs manufacture, that is a drug with the same chemical substance as the original which had been covered by a patent, could radically reduce the cost of many drugs. In some cases, such as cancer medication, some key drugs could be reduced in cost by 75% to 96%. As Labour argued last year, this should involve a new generic drugs manufacturer which is publicly owned and is genuinely democratically accountable, working in the public interest. According to polling from a year ago, some 86% of the wider public agree with this policy idea.

Existing pharmaceutical companies will argue this is the wrong approach. One major company even suggested that such a policy would actively harm efforts to find cures for diseases. Yet there is evidence that this approach is likely to work and would cut the cost of drugs for the NHS, improving access to vital healthcare and relieving strain on the health service.

Advocates for the pharmaceutical industry have historically argued that generic drugs could harm profit incentives for companies which could have a negatively knock-on effect on innovation. Yet there is justified scepticism to this line of argument, not least due to the results delivered by the status quo. The popularity of this demand and its increased salience should surely demand its resurrection.

Under the current approach we have the cost of drugs to the NHS rising at a worrying pace, despite the drugs being purchased having often been developed via state-subsidised research. Though advocates argue the status quo is best placed to promote innovation, there is much to suggest this is untrue. Prices, and the nearly inevitable effect on access to medicine, give an idea to why this is the case. As the Medicines for the Many report points out it is a “stark” injustice that the high cost of medicines can deny people access to treatment for major illnesses. That this is the case when we have universal healthcare undermines the whole principle of the system.

Mariana Mazzucato, Professor of Economics at UCL, is among those to have demonstrated that there is a clear and compelling case for a larger role for the public sector when it comes to pharmaceuticals. In the foreword to a 2018 report, Mazzucato advocates “rethinking the direction of innovation” and notes that “innovation is a collective process”, highlighting and praising publicly owned, state-led and non-profit examples of drugs producers.

Examples of public companies exist in Brazil, the United States, the Netherlands and Cuba, and could be introduced in Canada in the coming future. In the case of Brazil, public sector companies provide a significant proportion of medicines and the vast majority of vaccines. Some of these companies in other countries have played a key role in offering their cheaper prices to cut the cost of medicines in lower income countries.

 Labour’s proposals from last year proposed making this a major focus of a UK-based public drugs manufacturer. This approach could help tackle extortion of countries in the Global South by companies primarily from the Global North, whereas currently the poorest countries can pay up to “30 times more for medicines”. This relatively small step would be one clear way of working to address the inequalities baked into the international economic order. It would be a change which could save lives.

Despite the pressing need for change when it comes to medicines, the United Kingdom appears to be moving in the opposite direction to the one set out here. At this year’s Conservative conference Boris Johnson bragged that under his government, private companies would hold the intellectual property rights for any Coronavirus vaccine in part of a defence of free market principles. When the Coronavirus vaccine is rolled out, we can expect shareholders to receive large wads of public cash, regardless of who funded the research.  

You would think that for a party of social democrats and socialists representing working people, the case for tackling profit maximisation in healthcare ought to come relatively naturally. The health service was envisioned to provide universal, high-quality healthcare, not serve as a source of wealth creation for private drugs manufacturers. Challenging the idea that healthcare as a sector should be a source of shareholder profit is a simple and obvious cause for the left.

In the world of Covid-19, pressures on the NHS have multiplied and questions over the production and cost of vital medicine have come more closely to the fore. While the NHS will need to be restored as a fully public health service and receive substantial long-term increases in its resources, this will not necessarily be enough. Leaving the cost of drugs unchecked risks a substantial portion of public healthcare spending being soaked up by companies external to the NHS. Ultimately taxpayers’ money should go toward funding a public service run in the public interest, not passing on profits to firms in the private sector. It’s in this context that we need a public generic drugs manufacturer to lead on developing medicines that are affordable to all. 

Image: https://www.flickr.com/photos/36495803@N05/8116279888/. Author: epSos.de,  licensed under the Creative Commons Attribution 2.0 Generic license.