Billy Kenber
In the wood-panelled boardroom of the Waldorf hotel in central London, two British pharmaceutical executives were explaining how significant profits could be made at the expense of the NHS.
John Beighton, chief executive of the newly created AMCo, and his colleague Guy Clark set out their business model in a slideshow for delegates at a confer- ence in November 2012.
AMCo, formed by the merger of Mercury Pharma and Amdipharm by the private equity company Cinven, outsourced the manufacture of medici- nes and did not fund research scientists seeking to invent new ones. Instead it focused on niche medicines for which it would have limited competition — and maximum profits.
The two merged companies struck deals with global pharmaceutical firms for exclusive marketing rights to drugs that had been invented decades earlier and were now out of patent.
The slides showed how they could be sure of limited competition, or in some cases none at all because AMCo had ac- quired licences granted many years earlier. Any rivals would need a fresh marketing authorisation from the regu- lator, the Medicines and Healthcare products Regulatory Agency under “tougher approval regimes”.
Each individual drug had a relatively small value, a few million pounds, and involved difficult manufacturing pro- cesses, making it unlikely to be cost- effective to challenge AMCo’s domi- nance. A unique pricing situation was also part of their strategy. “The UK is an attractive market owing to unrestricted pricing on unbranded products,” one
slide read. Under a loophole in NHS rules, companies that “debrand” a pro- duct by selling it under its generic name instead of its long-standing brand name no longer face a cap on profits.
In the following months, AMCo took advantage of this situation, making millions of pounds at the expense of taxpayers. The presentation said Amdipharm had an under-exploited portfolio but was beginning to apply Mercury Pharma’s “drive growth”.
One such drug was Neo-Mercazole, a brand name for carbimazole, taken to tackle thyroid problems. Amdipharm held marketing rights since 2004 and it remained at a consistent price. After
AMCo was formed it underwent regular and dramatic price increases. A packet of 20mg tablets rose from £25.12 in Oc- tober 2012 to £261.92 in March 2016.
A number of competitors have en- tered the market and recently the price began to fall to £197.14. The carbimazole drugs are costing the NHS in England an extra £19 million a year, excluding prescriptions in hospitals, according to figures from the government’s Health and Social Care Information Centre.
Another Amdipharm drug, a pain re- lief treatment previously known as Di- conal, had already undergone a series of large increases taking it to £46.95 a packet before Cinven’s takeover. Under AMCo it increased every six months or
so to its present price of £353.06 — a 3,600 per cent rise since 2011.
AMCo holds two marketing authori- sations for soluble prednisolone tablets, a treatment for liver problems. One of these was obtained when it purchased a rival, Focus Pharmaceuticals, in Octo- ber 2014 — the same month it received its marketing authorisation. An AMCo spokeswoman denied it had bought Focus to win this rival licence.
A pack of 30 prednisolone soluble 5mg tablets cost the NHS about £11 in 2012 but has now risen to £53.48. The number dispensed has remained con- stant, at about 9 million a year, but the cost to taxpayers has risen from £3 mil- lion to £15 million. AMCo said it aver- aged only about 50 per cent market share on this product last year.
Another AMCo product, anticoagu- lant tablets called Phenindione, have seen a steep price rise between 2011 and 2016 with a packet of 10mg tablets soar- ing from £24.04 to £519.98. AMCo said the product was “difficult to manufac- ture”. It supplies other therapeutic equivalents at less than £1 a pack.
After creating AMCo, Cinven bought several other small companies that held the licence to generic drugs. The creation proved lucrative for those in- volved, with sales revenues growing by 21.5 per cent to £293 million in 2014.
A spokeswoman for AMCo said that in “many instances” the company’s prices were “significantly lower” than the NHS reimbursement price and its medicines had “either direct or thera- peutic competition”. She added that it offered low-cost alternatives to almost all the drugs mentioned and that AM- Co had an “average weighted” selling price of just £5.94.