UK Labour Government Would Pursue Generics Priorities
Compulsory Licensing And State-Owned Generics Company In The Spotlight
Executive Summary
The election manifesto produced by the Labour Party offers something for everyone, from the dropping of prescription charges and a boost for health care spending to more use of compulsory licensing and the building of a state-owned generics factory to make medicines more affordable.
The UK opposition Labour Party has promised that if it wins the country's 12 December general election it will boost health spending, abolish prescription charges, support the development of genomics and cell therapies, and ensure continued post-Brexit UK participation in EU agencies and funding programs.
But it also plans to set up a state-run generics company, use compulsory licensing provisions to secure access to cheaper medicines, and phase out R&D tax credits as well as the “Patent Box,” which lowers the tax companies pay on patent-derived profits. And after Brexit, it says it will seek continued close regulatory, scientific and trade ties with the EU.
The promises are contained in Labour’s election manifesto, “It’s Time for Real Change,” a sweeping set of commitments that would, if implemented, lead to a massive upheaval in the political, social and financial landscape of the UK.
Party leader Jeremy Corbyn says: “Labour will rewrite the rules of the economy, so that it works for everyone. We will rebuild our public services, by taxing those at the top to properly fund the services we all rely on.” A Labour government, he claims, “will give the NHS [National Health Service] the funding it needs, end privatization, and never let our health service be up for grabs in any trade negotiation.”
Industry bodies gave the manifesto a mixed reception, welcoming plans to support innovation in areas like cancer and dementia and to increase access to medicines, but warning that abolishing incentives like the R&D tax credit and the Patent Box, and widening the use of compulsory licensing, would remove a “powerful incentive” to R&D investment in the UK.
Health Spending To Rise
Among Labour’s key promises is to increase expenditure across the health sector by an average of 4.3% a year. “This investment enables us to end patient charges, guarantee the standards of healthcare patients are entitled to receive from NHS England, invest in education for the health workforce and restore public health grants,” it declares.
The manifesto says that the experience in Scotland, which dropped prescription charges in 2011, shows that such a move would not lead to a huge upsurge in prescriptions. The volume of prescribed items dispensed rose in Scotland by only 3.8% from 2010/11 to 2011/12.
Scottish Government Ministers concluded that it was “simply not the case that free prescriptions have led to a free-for-all, or caused a hike in prescribing,” the manifesto says. However, Labour is giving itself some room for manoeuvre on prescribing levels: “Erring on the side of caution we have budgeted for a 5% increase.”
Giving With One Hand, Taking With Another
Labour says that in its hands the NHS “will be at the forefront of the development of genomics and cell therapies so that patients can benefit from new treatments for cancer and dementia, whilst ensuring the UK continues to lead in medical developments.” It has also promised to raise R&D investment to 3% of GDP and to “increase jobs in the pharmaceutical industry.”
But the originator sector is not convinced that Labour has its back. The Association of the British Pharmaceutical Industry welcomed the party’s “manifesto aspirations" to improve patient access to medicines, to be at the forefront of scientific innovation, to raise R&D investment and to increase jobs in the pharmaceutical industry.
However, it said, “we do not believe that Labour’s aspirations can be realised if measures that damage the UK’s R&D ecosystem are carried out.” ABPI CEO Mike Thompson declared: “Whilst ambitions to improve patient access to medicines, increase jobs and raise R&D investment to 3% of GDP are welcome, these proposals will actively undermine achieving them.”
Among those proposals are phasing out the R&D tax credit for large corporations and abolishing the Patent Box during the next parliamentary term.
Labour’s reasoning – as explained in an accompanying document entitled “Funding Real Change” – is that such tools do not really serve to incentivize R&D in the real world. It bases its conclusions on reports by the Institute for Innovation and Public Purpose and the Institute for Public Policy Research which, it says, “have been critical of the effectiveness of blanket tax reliefs for research and development.”
According to the Labour document, a report from the IIPP said there was “little evidence” that the R&D tax credit “played a part in the decision to engage in R&D.”
But the UK BioIndustry Association criticized the move, saying that abolishing the tax credit scheme for large companies would “remove a powerful incentive for them to invest in R&D in the UK, which will have a knock-on effect on SMEs, universities and NHS hospitals that benefit from the co-location of international companies’ R&D activity in the UK.”
It added that the Patent Box was “highly effective” in supporting R&D-intensive companies and encouraging them to “locate the high-value jobs and activities associated with the development, manufacture and exploitation of patents in the UK.”
Compulsory Licensing, State Generics Company
Labour’s plans also include wider use of compulsory licensing and the establishment of a state-run generics company, an idea that was first floated at the Labour Party conference in September. (Also see "UK Industry Is Puzzled By State-Ownership Proposal" - Generics Bulletin, 27 Sep, 2019.)
Citing the case of Orkambi as “just the latest example of patients held to ransom by corporations charging extortionate prices for life-saving drugs, the manifesto says: “We will establish a generic drug company. If fair prices are rejected for patented drugs we will use the Patents Act provisions, compulsory licences and research exemptions to secure access to generic versions, and we will aim to increase the number of pharmaceutical jobs in the UK.”
The manifesto does not go into any detail on the proposed generics firm or what it might produce, but the idea was discussed more widely in a policy document published earlier this year.
Instead of “handing over the research to the private sector, the state should take on a more active role and produce priority drugs to sell to the NHS at affordable and accessible prices,” that document says. This could include manufacturing generic medicines that are facing supply or pricing issues and facilitating a straightforward enactment of Crown use licences on patented medicines where necessary.
The document cites “successful examples of publicly owned pharmaceutical companies that produce both originator and generic medicines, in many countries, particularly middle-income countries.”
In the US, for example, it says, “Civica Rx is a new non-profit generic drug company that was launched in January 2018 to produce drugs in response to the problems of shortages and high drug prices.”
In Brazil, state-owned pharmaceutical companies compete with private companies, while China has a “long-standing and strong local pharmaceutical manufacturing capacity, including three major state-owned pharmaceutical companies.”
When the proposals were first mooted earlier this year, the British Generic Manufacturers Association said it was “pleased that the leader of the opposition, Jeremy Corbyn, has recognized the enormous value that generic medicines provide” but suggested that “he has failed to recognize that the UK already has one of the most mature generic medicines markets built on a lack of government interference, freedom of pricing and crucially encouraging competition which delivers the lowest prices in Europe and annual savings to the NHS of more than £13bn ($16bn).”
“Having a multi-source market, as we do, creates competition and drives value as well as security of supply,” the BGMA insisted, “and we would like to understand what difference Labour believes its plans for introducing more competition via a state-owned manufacturer would have.”
Meanwhile, the BIA said that NHS patients and the UK economy “would both lose the chance of new life saving treatments if the UK becomes a hostile environment for intellectual property.” New life-saving medicines are not just being developed by a few large pharmaceutical companies but also hundreds of innovative SMEs across the UK, the association noted.
“Labour’s proposal to use compulsory licenses risks cutting off investment in the small companies up and down the UK that are working hard to develop new treatments for patients that have few options.”
The ABPI agreed that “overturning patents for breakthrough medicines and phasing out R&D tax credits and the patent box would damage the UK’s research base. This underpins thousands of highly skilled jobs and helps the UK to compete on the global stage.”
It said it looked forward to “working constructively with Labour to help them develop proposals that will meet their ambitions and help patients get access to new medicines.”
Brexit
On the UK’s departure from the EU, Labour says it will “give the people the final say on Brexit” by securing a “sensible” deal within three months of coming to power and then putting this deal to a public vote three months after that, with a “remain” option on the ballot paper.
“Labour rules out a no-deal Brexit, and we will end the scandal of billions of pounds of taxpayers’ money being wasted on no-deal preparations,” the party says. “No deal has never been a viable option. It would do enormous harm to jobs, rights, security and to our NHS.”
It says the deal would be based on principles that the Labour Party has set out over the past two years:
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A permanent and comprehensive UK-wide customs union, which is vital to protect our manufacturing industry and allows the UK to benefit from joint UK-EU trade deals, and is backed by businesses and trade unions.
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Close alignment with the Single Market – ensuring we have a strong future economic relationship with the EU that can support UK businesses.
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Continued participation in EU agencies and funding programs, including in such vital areas of co- operation as the environment, scientific research and culture.