ORK0299

Written evidence from Just Treatment

25th February 2019

Website: www.justtreatment.org

In November 2018 Just Treatment submitted evidence to the Health and Social Care Select Committee in the context of the ongoing inquiry into pricing and access to Orkambi (lumacaftor-ivacaftor) on the NHS. That submission argued that the government should move to resolve the impasse resulting from Vertex’s refusal to offer a fair and affordable price to the NHS by issuing a Crown use licence allowing the NHS to procure a cheaper, quality assured generic version of the medicine.

In early February, along with a group of parents of children who need Orkambi, Just Treatment launched a public campaign urging the government to pursue this outcome. This submission is written to complement the arguments articulated in our November submission, and is framed around key questions we believe need to be answered by the key parties who will be questioned by the committee.

Overview:

●                    The government has acknowledged that it has the power to issue a Crown use licence to secure an affordable, generic version of Orkambi for NHS patients.

●                    The challenges which would need to be overcome to pursue this avenue are far from insurmountable, and with the alternative options presenting a high risk of children and young people dying without access to this treatment, there is a moral imperative upon the government to take active steps to enact a Crown use licence on Orkambi.

●                    Vertex’s claims that a Crown use licence would significantly undermine future innovation do not stand up to scrutiny. In the face of Vertex’s corporate intransigence, the lives of NHS patients should take precedent.

Detailed submission:

1.                Vertex has the ability to charge as much as it can get away with because it has a patent on Orkambi which grants it a twenty year monopoly, free from competition. But their intellectual property (IP) rights are not absolute, and national and international law recognises that those IP rights need to be balanced against patients’ right to health.

2.                “Crown use” refers to legal provisions within the UK patent law that allow for the government to make use of patents without the authorisation of the patent-holder. Specifically, these provisions are found within Sections 55-59 of the UK Patents Act 1977 (as amended), and are supported by international agreements such as the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).[1]

3.                Crown use has been used before by the UK, specifically facilitating procurement of generic forms of patented pharmaceuticals, through the 1960’s and 1970’s. In the case of Pfizer v. Ministry of Health [1965] AC 512, for example, the UK used these provisions in order to authorise the purchase of generic antibiotics (tetracycline) from Italy for use in NHS hospitals.

4.                The Crown use provisions in sections 55-59 of the UK Patents Act 1977 (as amended)[2] provide broad authority for the Crown to make non-authorised use of patents in any of a variety of ways, including manufacture, use, importation, sale, and retention. Section 55(1) states that such action may be taken by “any government department and any person authorised in writing by a government department ... for the services of the Crown and in accordance with this section...”

5.                The legal text makes its applicability to medicines clear: "In this Act, except so far as the context otherwise requires, ‘the services of the Crown’ includes...the production or supply of specified drugs and medicines;" and specifically references use of the provision by the NHS.

6.                Based on expert advice we estimate that a year’s supply of generic Orkambi could be profitably supplied for £5000 or less - a saving of nearly £100,000 over the current UK list price. Treating the 4000 or more patients in the UK who could benefit from Orkambi at Vertex’s list price of £104,000 per patient per year could cost the NHS £416m a year. The most recent NHS offer to Vertex was £500m over five years - an unprecedented amount for the NHS. A generic product at £5,000 per patient per year would mean all patients in the UK could be treated for just £20m per year - a saving from the Vertex list price of £396m. Over ten years this translates to a saving of nearly £4bn.

7.                An adjournment debate on the potential use of Crown use licencing to secure affordable access to Orkambi, led by Bill Wiggin MP, included an acknowledgement by the health Minister Steve Brine MP that the government had “considered this option” and that he had “received initial advice on Crown use licensing.”  He stated that “the use of these mechanisms is not our preference, we are looking at all options.”

8.                It is therefore clear that the ability of the government to pursue this option is not in any significant doubt - but the question rests on the ability of the government to overcome the challenges that pursuing a Crown use licence might present; and its willingness to prioritise the health of NHS patients in the face of Vertex and wider pharmaceutical industry opposition.

9.                Below we address a number of the challenges highlighted by the minister, none of which we believe to be prohibitive.

10.            It was asserted that “Crown use has only really been intended or designed to deal with emergencies”. This is a mis-representation of both UK and international law on these mechanisms. The WTO TRIPS Agreement allows for the bypassing of some procedural steps towards a compulsory licence in the case of emergencies. In non-emergency scenarios they are still a legal option - the normal procedural steps simply have to be undertaken. Furthermore, it is in the power of the UK government to determine what qualifies as an emergency. The parents remortgaging their homes to pay out of pocket for the drug, or those seeing their family members die without access to Orkambi might think little of the view that this is not an emergency.

11.            The assertion that “Crown use has not historically been intended to...create a mechanism for the production of medicines at a lower price” is not backed up by historical precedent. Crown use has been used to overcome high prices. In 1975, in reference to Crown use, renowned IP scholar Stephen Ladas commented: “Although this power of the Ministry of Health to purchase drugs and medicines from sources independent of the patentee has been much criticised by the pharmaceutical industry, it is not likely to be affected by such criticism. Such power will be exercised if the patentee is alleged to maintain unduly high prices for these products.”

12.            The minister argued that “compensation would need to be provided to the original patent holder—in this case, Vertex, and that would stick in the throat of many of us—which would need to take into account any loss of profit from not being awarded a contract to supply the patented medicine.” But this assumption should not be immediately made. This right is only extended to those with a reasonable expectation of profit and three years of failed negotiations show that Vertex can not strongly claim the NHS would have bought from them if not for the Crown use licence. Furthermore - the relevant section of the patent law (57A) has not been tested in court so the government has a strong chance of setting useful new precedent by fighting against an interpretation which would render the entire Crown use provision next to useless.

13.            Finally, it was argued that the length of time it would take a generic product to be made available would be prohibitive. Again, we do not believe this to be the case. First and foremost we believe the credible threat of government action to issue a Crown use licence is one of the few realistic means of altering the dynamics of the deadlocked negotiations; increasing pressure on Vertex to negotiate an affordable price in the short term to avert an outcome which could deny it sales in the UK for years to come. We also believe there is limited prospect of Vertex agreeing a deal unless they secure reform of the NICE process to allow reimbursement at a higher price. This will also take considerable time and does not guarantee a positive outcome for patients. In the interim there are a range of very good reasons for the government to pursue a Crown use licence in parallel. We also believe that there are a number of steps that the government could support that would shorten the timelines associated with access to a generic version of the drug - specifically organising a large scale clinical trial to maximise patient access whilst collecting the relevant data to support regulatory approval.

14.            Below are a series of questions we believe could be usefully asked of the NHS and NICE when being questioned by the committee on this topic, and some information relevant to the potential answers:

15.            What advice have the government received on the leagility and feasibility of issuing a Crown use licence on Orkambi? Has any of their advice pertained to concerns around how such of a course of action could affect perception of the UK as pro-industry?

○                    We believe that the issues determining the potential success of a Crown use licence fall into three key areas: legal questions; technical feasibility; and financial implications.

○                    The legal grounds to undertake this action do not appear to be questioned by the government, and are well established through UK and international law, and UK legal precedent. Does the government agree that they have the legal power to enact a Crown use licence to procure an affordable version of Orkambi for the NHS?

○                    The technical challenges involved in identifying and ensuring the capacity of the generic manufacturer to supply the UK do not seem overly complex - there are multiple suppliers of the active pharmaceutical ingredients; and generating the necessary evidence to ensure safety and efficacy of a generic product should not be difficult. Have the government explored this aspect of the proposed course of action? Have they explored generic manufacturing capacity or the time it could take to establish a large scale clinical trial?

○                    The potential that the government would have to pay out compensation equivalent to profit that Vertex could have been expected to receive had a Crown use licence not been issued is based upon an interpretation of the law which a) would render the Crown use provisions largely useless, and b) ignores the reality that there is no prospect of the NHS awarding Vertex a contract at the price they are demanding. We therefore believe that the government can strongly argue that there should be no compensation for loss of profit awarded to Vertex, meaning only a small royalty set at between 2% and 12% of the generic sales is due to the patent holder. The law around compensation for lost profit has never been tested in court - would the government agree that it is possible that law could be interpreted in a way which would rule out ‘loss of profit’ compensation needing to be paid to Vertex?

○                    We believe a generic version of Orkambi could be procured under a Crown use licence at a price of £5000 per patient per year. This is around £100,000 less than Vertex’s list price. Do the government acknowledge that the potential reduction in price by pursuing a Crown use licence could be dramatic?

○                    We believe a significant factor in the government’s reluctance to issue a Crown use licence is an unwillingness to make a move likely to be unpopular with the life sciences sector. If this is case the government should be held to account for its decision to prioritise averting a perceived risk to the UK economy rather than take a step which could result in NHS patients accessing a life-changing medicine. Is concern about the potential response of the pharmaceutical industry a factor in the government’s thinking?

16.            Do you believe Vertex been negotiating in good faith?

○                    It appears from Vertex’s statements over a considerable period of time that they have been focused on agitating to secure a review of the NICE appraisal process that could result in their medicines being approved for use on the NHS at a higher rate of reimbursement. What is the government’s view on the argument that Vertex have made little serious effort to reach an agreement on Orkambi and the pipeline, but have instead been focused on building pressure for a change in the NICE methodology?

17.            More than three years have passed since Orkambi was given regulatory approval, and well over six months since negotiations reached an impasse. We have heard that your first preference is for agreement to be reached with Vertex, but if there that does not happen, what is your plan B?

○                    The government have a responsibility to ensure NHS patients have access to medicines and the can realise their right to health. It is not surely not sufficient to say that if Vertex refuse to do a deal that they will take no further action, and allow cystic fibrosis patients to die without access to these medicines?

18.            Below are a series of questions we believe could be usefully asked of Vertex when being questioned by the committee on this topic, and some information relevant to the potential answers:

19.            What assessments of cost-effectiveness have been made in other countries?

○                    NICE is far from alone in viewing Orkambi to be significantly over-priced.

1. Canada’s review body said a price cut of 98% was needed to make it cost effective.[3]
2. France sought an 80% reduction in the price.[4]
3. New York State are seeking a 70% reduction.[5]
4. Although agreements were subsequently reached, Ireland’s HTA recommended a price cut of 81%[6] and the Netherlands said an 83% price reduction was needed to achieve cost effectiveness[7].

20.            Which countries have not yet agreed a price?

○                    Vertex seek to portray the UK as an outlier, but significant numbers of wealthy countries have baulked at the price sought by the company and Orkambi is not reimbursed in a significant number of western health systems, including: Canada, Spain, Switzerland, Poland, Belgium, Russia, New Zealand and Portugal.

21.            With estimates of profitable generic production of less than £5000 what is a fair profit?

○                    Vertex will argue that this doesn’t include research and development costs, and that their investment in R&D has been significant, but they have over $3bn in the bank; have spent over $500bn buying back their own shares; and benefitted from sustained and significant public and philanthropic investment in the development of the medicines – de-risking the riskiest part of the R&D. They could start charging a dramatically lower price and still be able to make a handsome profit.

○                    It should be highlighted that there is almost no transparency or public accountability about the investments in R&D made by Vertex. Will they make this information public?

22.            How long do you expect to maintain a monopoly in the cystic fibrosis market?

○                    Vertex has a range of drugs in this class, largely untroubled by competition from rival manufacturers and expects to retain monopoly intellectual property protection on its cystic fibrosis drugs well into the 2030s.[8] Furthermore, it has been pursuing an aggressive mergers, acquisitions and deal making strategy to consolidate its monopoly in this therapeutic area, focused on scooping up competitors’ promising CF medicines. In 2015 Vertex secured a monopoly on the worldwide development and commercial rights to a potential CF treatment in a deal worth between $80 million and $1 billion to its developer Parion Sciences.[9] In 2016 they bought AmorChem’s CF related assets,[10] and in a $250m deal in 2017 Vertex secured the global rights to another potential CF drug developed by Concert Pharmaceuticals.[11] It could be argued that Vertex’s efforts to build and maintain a monopoly in this therapeutic area should be refered to the Competition and Markets Authority.

23.            Do you agree that there are clear legal safeguards in UK and international law to address situations such as this, where a drug companies’ patent monopoly comes into conflict with patients’ right to access a medicine? Why would the NHS not prioritise the lives of patients?

○                    Vertex will argue that the potential threat to future investment in innovation. But Vertex were criticised last year for insinuating that they might leave the UK if they don’t get their way. Patient’s lives should always come first. These kinds of threats are a poor reflection on the company. The UK’s reputation for science and bio-tech is largely built upon the exceptional research work undertaken in our university and publicly funded labs.

○                    They may also argue it would be a serious infringement of their intellectual property rights. However, no right is absolute and when the IP rules were written they included safeguards designed to ensure citizens’ right to health were balanced against a drug company’s intellectual property rights.

24.            How much funding and support have Vertex received from UK taxpayers and the UK CF community? Isn’t it an injustice that the UK taxpayer, and British cystic fibrosis patients helped to develop this medicine, but that contribution is not reflected in the price offered to the NHS, meaning NHS patients are now denied access to the medicine?

○                    Vertex benefited from the support, including grant funding, of these UK organisations as part of stage three clinical trials: The National Institute for Health Research Respiratory Disease Biomedical Research Unit at the Royal Brompton, Harefield National Health Service Foundation Trust, Imperial College London, and the Northern Ireland Clinical Research Network (Respiratory Medicine).

February 2019