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Payment by result

Bob Damms

The Times

22 April 2010

The future lies not in blockbuster drugs but in niche products

Sir, Your recent briefing goes right to the heart of the emerging crisis in healthcare — the cost of innovation (“Medical blockbusters: Urgent need for more breakthrough drugs to emerge”, Business, April 16). We believe that the future lies not in blockbuster drugs but in niche products.

Pharmaceutical companies will seek to maintain profitability by developing therapies targeted at specific patient sub-populations. However, the need to recoup research and development costs means these drugs are much more expensive. Each course of Avastin may cost £25,000 or more, but targets far fewer patients.

On patent expiration the price of a drug may fall by up to 90 per cent, making it uneconomic for the originator to maintain production. So it becomes increasingly difficult to justify innovation.

Future healthcare will be determined therefore by the premium society is prepared to pay for genuinely innovative treatments. This could mean the NHS providing treatments that are generic, with access to additional treatments delivered by a payment-by- results system, where a pharmaceutical company gets paid when the treatment is effective in the individual patient.

Bob Damms
PA Consulting Group

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