The Cooperatition Incubator

The Financial Times reports on The Athenaeum Group, named after the club in Pall Mall.  The group is one of a growing number of high-level forums taking place around the world to tackle a disturbing divergence: the number of new medicines has steadily dropped, while the cost of bringing each one to market has risen sharply to more than $1bn (£605m, €700m). The group’s hope is to redress the problem with initiatives to overhaul individual companies, foster collaborations with rivals and create broader partnerships with researchers and regulators.

Richard Barker, Chief Executive of the Association of the British Pharmaceutical Industry, the UK’s trade body commented:

“It’s very important that we move away from just saying this is extraordinarily expensive.  If we extrapolate the current line, we will not have affordable medicines.”

Pharmaceutical companies face the disappearance of billions of dollars in revenues in the next few years as patents expire on their existing medicines, undermining the sales that have kept them in business.  Meanwhile, state and private healthcare systems alike are seeking ways to cut costs and are balking at the rising price of new medicines.

Kenneth Kaitlin, director of the Tufts Centre for the Study of Drug Development, which produced the $1bn per drug cost estimates, says:

“The industry has been talking about the issue for many years, but there were never the drivers that there are now. I don’t think it has ever had so much at stake. There are companies that are not going to survive.”

He cites as symptomatic the large-scale takeovers this year of Wyeth by Pfizer and Schering-Plough by Merck, which he argues were primarily designed to defer patent expiries and cut costs rather than provide a solution to falling research productivity.

Companies are also seeking to boost innovation through intensified collaboration . Eli Lilly has signed cost- and revenue-sharing deals with operators including Covance and Quintiles. AstraZeneca has agreed development projects with Bristol-Myers Squibb on a diabetes drug and with Merck for a cancer treatment.

GSK this year went much further, announcing a deal with Pfizer to pool all of their existing and experimental drugs for HIV. They must share future revenues – but also stand to gain more than either could separately, by combining expertise and funding and sharing the high risks of failure. By making their venture a separate entity, they also strip out other overheads, boosting accountability and focus.

Some of the more radical drug company partnerships are taking place with nonprofit organisations. Cancer Research, a UK charity, has lately signed three deals, including two with AstraZeneca, to test experimental treatments that the company was unwilling to pursue on its own.

Their approach also raises a third, and still more radical, way of tackling the innovation drought: collaborative alliances that go beyond individual partnerships to span the entire pharmaceutical industry as well as academic researchers and regulators.

One advantage is greater information sharing to cut costly duplication. Rival companies spend large sums on similar research programmes that lead to dead ends when they discover that a compound is toxic or fails to have the hoped-for curative effect.

Traditionally, companies have had no desire to accelerate their rivals’ relative progress – and medical journals have little interest in publishing reports on research that does not work. While the limitless space of the internet helps tackle the latter issue, incentives may be needed to deal with the former. Mr Barker from the British trade grouping says: “In principle, we all learn a lot from rigorous analysis of failures. We need a Journal of Outstanding Clinical Failures.”

In the US through the Critical Path Initiative, and more recently in Europe via the Innovative Medicines Initiative – both in tight co-operation with their respective regulators – progress has been made in identifying common “biomarkers” by which competing companies agree on the best ways to measure an experimental drug’s efficacy or safety.

“Companies have recognised there is no comparative advantage in safety,” says Ray Woosley, Critical Path president. But he concedes that they are most willing to co-operate in areas where they are failing to make much headway on their own, such as treatments for Alzheimer’s disease. “If they had a magic bullet, they would not share data.”

Thomas Lonngren, head of the European Medicines Agency, the European Union’s regulator, says that since the innovation drought became clear this decade, much progress has been made through earlier and deeper consultation with industry.

He argues that the biggest barrier to progress is science itself. “We are going into a new era of drug development where it’s getting more and more complex. It is generally accepted that we have moved from low- to high-hanging fruit. Mother Nature is saying that she has the cards.”

The Independent reports how in April 2008, after a gruelling two-year inquiry, the UK Competition Commission unveiled its eagerly anticipated final report on the £110bn grocery sector.  A key recommendation was to establish an ombudsman to police relations between the big grocers and suppliers, in an effort to stamp out alleged cases of bullying or the supermarkets allegedly abusing their immense buying power.

The commission, which does not have the power to introduce an ombudsman itself, sought the agreement of supermarkets for this. But most have vehemently opposed the idea, arguing it would add red tape and costs, which would be passed on to customers.

Yesterday, the commission bared its teeth and formally recommended to Lord Mandelson’s Department for Business, Innovation and Skills (BIS) that it should establish an ombudsman to arbitrate on disputes between grocers and suppliers, under the terms of the new Groceries Supply Code of Practice (GSCOP). The new code will come into effect on 4 February 2010, replacing the hitherto voluntary code that the big four grocers signed up to. The ombudsman and GSCOP applies to the 10 grocers with annual turnover of more than £1bn: Tesco, Asda, Morrisons, Sainsbury’s, Aldi, Lidl, Waitrose, The Co-operative Group, Iceland and Marks & Spencer.

Peter Freeman, the Competition Commission’s chairman, said:

“Our inquiry clearly revealed problems that require action and which, if left unchecked, would damage the consumer. We continue to believe that everyone’s interests – and that includes retailers – would be served by tackling a problem that has clouded the industry for many years now.  The current economic difficulties if anything reinforce rather than reduce the need for action.”

While industry observers have welcomed the introduction of an ombudsman, some remain sceptical that the body would be able to rein in any activities of the big supermarkets.

Bryan Roberts, the global research director at Planet Retail, says:

“It is welcome in practice, but I think it will be a paper tiger. It will probably not amount to much.”

Grocery suppliers certainly feel that the current system favours the supermarkets. At present, the Office of Fair Trading is responsible for monitoring relationships between suppliers and supermarkets under the voluntary Supermarkets Code of Practice.

However since the code came into effect in 2002, the OFT has never moved against a supermarket after receiving a complaint from a supplier, although the grocers assert this is because the existing code works.

In reality, suppliers have little confidence in the regulator to deal with grievances and – given the enormous buying power of the big grocers – are petrified of having their contracts terminated if they stick their head above the parapet to complain. More specifically, suppliers feel they lack protection against practices that can include retrospective changes to contracts agreed, or being charged for wastage or shrinkage when products break or get stolen in the supply chain.

Duncan Swift, the joint head of food at the accountancy firm Grant Thornton, which advises financially distressed food businesses, says:

“Having seen the lack of effectiveness of the [voluntary] code since 2002, you effectively need a regulator that has the appetite and the industry teeth that are seen to make a difference.  All the supply-chain risk continues to be borne by the suppliers.”

The ombudsman’s overriding role will be to undertake investigations and to act as an arbitrator between retailers and suppliers in disputes arising under the terms of newly introduced GSCOP.

In certain circumstances, it is envisaged that the ombudsman will be able to investigate “proactively” areas of complaints regarding a particular retailer, while maintaining the anonymity of the supplier.

Fear of losing a supermarket’s business is a key reason why so few suppliers come forward.

However, if a supplier wants to get a complaint formally resolved, it will almost certainly have to be named to enable a thorough investigation and arbitration. A supplier that wins a dispute could be reimbursed for lost business and incurred costs in bringing the action – although this has not yet been decided.

A decision is likewise pending on whether fines will also be issued, but the Competition Commission said yesterday that:

“The ombudsman would be more effective if it had more comprehensive powers to investigate and penalise retailers for non-compliance with the GSCOP.”

Over recent years, the highest- profile case referred to the OFT involved Ferndale Foods and Asda. But in 2005, the OFT dismissed the ready-meal supplier’s claim that Asda has failed to give it the full 90 days notice before terminating its contract. Mr Swift said: “The OFT has done nothing of note in regulating the supermarkets over the last seven years.”

Only a few of the big grocers, including Waitrose and Aldi, are in favour of the ombudsman. While the big four supermarkets broadly welcome the strengthened GSCOP and it being extended to their six rivals, Tesco, Asda and Sainsbury’s are firmly against the introduction of an ombudsman.

They argue that it represents unnecessary red tape, will lead to higher costs for consumers and will provide additional protection for some of the world’s most powerful consumer goods companies, such as Unilever and Procter & Gamble.

Lucy Neville-Rolfe, Tesco’s executive director, said:

“We believe that, perversely, the ombudsman would mainly benefit large successful suppliers who are well able to look after their own interests.

“It’s a highly competitive industry and if our ability to negotiate with such suppliers is reduced, the inevitable result will be higher prices to consumers at a difficult time.”

An Asda spokeswoman said: “An ombudsman is bad news for consumers – it will effectively be a one-sided pressure group for price rises from big multinational suppliers, allowing inflation in through the back door.”

Sainsbury’s said: “We consider that the OFT is well placed to continue in its current role of regulating the code and that there is no need to establish new powers.”

However, Mr Swift says the idea that the ombudsman will hit consumers is “scaremongering”. The Commission forecasts that the cost of the ombudsman, including set-up costs borne by the grocers, will be about £5m a year, compared to the £70bn of grocery supplies to retailers in the UK.

In fact, Grant Thornton estimates the ombudsman will only add 1.25p to the average family weekly grocery bill. However, the British Retail Consortium said: “Lord Mandelson must reject the Competition Commission’s recommendation.”

In fact, some are sceptical that the the department will want to bring in the ombudsman any time soon. For those in favour of an ombudsman, the worst-case scenario is that BIS will not want to introduce the necessary legislation to establish the ombudsman and will refer it back to the OFT.

Mr Swift said: “BIS is highly unlikely to do anything before the next general election. That means that it will be left to the OFT, to take on responsibilities which an ombudsman would have had.”

Source: FT.com

Tesco, Britain’s biggest retailer, and smaller rival Wm Morrison insisted on Thursday they would not give up their fight against allegations that they fixed the price of milk.

The Office of Fair Trading said that only Tesco and Morrison were continuing to contest the provisional findings of its investigation into alleged price fixing in the UK dairy market, which accused a number of dairies and supermarkets of colluding to raise prices artificially in 2002 and 2003.

Other parties investigated by the OFT, including Asda, The Cheese Company, Dairy Crest, J Sainsbury and Robert Wiseman Dairies, have all settled with the OFT. Arla Foods is being spared a fine for its role after co-operating with the OFT.

The OFT sent out further evidence on Thursday that its claims support its findings of alleged collusion to all the parties involved in the investigation.

“At this stage it should not be assumed that the law has been broken,” the competition watchdog said, adding that it would “carefully consider any representations, and the evidence as a whole, before reaching any final conclusion.”

Tesco said it would continue to mount a strong defence against the OFT’s allegations.

“We have made it clear that we did not collude with anyone and that remains the position,” said Lucy Neville-Rolfe, director of corporate and legal affairs at Tesco.

She said Tesco did not believe that the nature of communications with suppliers, at the heart of the investigation, went beyond permissible discussions under competition law.

She added: “We will of course look carefully at any new evidence the OFT sends to us relating to events that took place in 2002 and 2003. We will, however, continue to defend our position strongly.”

Morrison will also continue to contest the allegations.

It said in its own statement: “We wait to read the document in detail; however, our initial view is that nothing has changed since the original statement issued two years ago.

“It remains our firm belief that there are no reasonable grounds for the OFT’s allegations against us and no evidence to suggest our involvement, therefore we are continuing to contest the provisional findings and make strong representations that Morrisons should not be part of this inquiry.”

It is continuing to fight as it does not believe it was involved in fixing prices, and does not see that there is compelling evidence to suggest that it was.

It has also only been accused in one of the particular instances of alleged price fixing.

The OFT said Tesco and Morrison would now have an opportunity to make written and oral representations in response to the additional evidence.

The Public Health Commission was established in 2008 following a request by Andrew Lansley to review a Responsibility Deal to improve public health. Dave Lewis, Chairman, Unilever UK & Ireland, agreed to head up an independent Commission.  The Commission itself comprised 14 members with a range of expertise and backgrounds and held 7 meetings between October 2008 and May 2009.  Today’s report is the culmination of its work.

The report acknowledges (pg 19):

Commission expertise came from representatives of the supermarkets who serve millions of people each week, the branded goods manufacturers who understand why people buy their products time and again, the charities who run programmes addressing the needs of individuals, families and specific communities, the consumer groups who effectively campaign on the health issues which matter most to their constituents, and the academics and healthcare professionals who build our understanding and carry it into effective working practice.

The need to take a holistic view of both the problem and the solution as well as bring structure to the latter could not be more urgent; the facts are seemingly endless and speak for themselves:

• Obesity has trebled in the last 20 years, now affecting nearly one-quarter of adults and one in ten children
• There are approximately 70,000 premature deaths each year in the UK as a result of an unhealthy diet 
• The number of deaths caused by alcohol has doubled in the last 15 years
• In the last 40 years, average consumption of alcohol per head has doubled
• In 2006, only 40% of men (70% of boys) and 28% of women (59% girls) achieved recommended levels of physical activity 
• Diet-related ill-health costs the NHS £6 billion per year; lack of physical activity up to a further £1.8 billion and the health costs of alcohol misuse are estimated at £2.7 billion annually. The costs to the wider economy and society are far more profound.

Rather than take the Responsibility Deal by pillar and by point, the Commission made it their springboard for asking what business and Government could do to reach people with consistency and clarity in all the varied contexts of their everyday lives: in workplaces, communities, schools, shops and restaurants, bars and clubs, and through media, marketing and advertising.  Where and how could we best enable and encourage people to make healthier choices? Where and how could we best support key messages being absorbed?  Most crucially, how could business and Government bring all these opportunities together in a joined-up way that made sense not just to the person at work, or the person at home or at play but to individuals in totality wherever they may be and whatever they may be doing?

In addressing these questions we have responded to every element of the Responsibility Deal we were asked to consider and made it a catalyst for something bigger: a more holistic framework for addressing the single-minded objective of improving the long-term health of the nation.

It’s a framework of six inter-dependent parts that puts the ideas of consistency and clarity centre-stage. We believe in the need to:
Educate
It is easy to assume that education is the solution to this complex problem – it’s not. Evidence suggests that the relationship between education and the behaviour change we need is complex and imperfect. But education is a necessary foundation for long-term, sustainable improvement. There is an urgent need
to raise awareness of the opportunity that the combination of a balanced diet, the right level of physical activity and responsible drinking presents as a gateway to good health and a full life. As our recommendations set out, it’s a need that is best met by clear messages, articulated in a consistent and compelling way through all availablechannels and over the long-term.

Improve what we eat and drink
As a nation we eat too much salt, saturated fat and sugar and too few of our recommended five portions of fruit and vegetables each day. The proportion of energy-intake from trans fats is still a real issue for specific sections of the population. Progress has been made in recent years on many of these fronts but we should act with ambition to do more. Part of the answer lies in working hard behind the scenes: working to adapt consumer taste through removing what is unhealthy from the food that people buy and reducing the exposure of children to advertising of the least healthy products. Part of the answer lies in providing nutrition information in a way that allows informed choices to be made. The consistency of that provision and the breadth of its application, particularly its extension to out of home (OOH) settings, will be key.

Eat and drink appropriate quantities and increase activity
Striking the right balance of energy-in and energy-out is vital to any strategy addressing lifestyle related ill-health; many of us simply consume more calories than we expend in living our lives and our health suffers as a result. In doing less, we neglect the rich physical and mental rewards that increased activity and exercise offer. Too many of us drink too much alcohol: anti-social behaviour is one consequence, rising alcohol-related chronic disease and increasing liver deaths is another. The impact on wider society is costly and painful. By making all forms of physical activity more accessible, healthy options more available,
and drinking environments more conducive to moderation, our recommendations look to ensure that people have the options they need to take responsibility for striking the energy-in, energy-out balance and for drinking responsibly.

Maximise prevention while maintaining cure
Prevention is too often the poor relation of cure. We recommend that Government work in a joined-up way in addressing and prioritising prevention, emphasising preventative opportunities in the healthcare system and ensuring those opportunities are adequately resourced. There is a major role for the third sector here as both a strategic and delivery partner and in using their trusted brands and organisations to disseminate public health messages with greater credibility.

Evaluate for continuous improvement
Evaluation in the area of public health is often poor or incomplete. There is an obvious need for a step-change in the quality of data on which decisions are based and from which lessons are learned. But there is also an opportunity to address evaluation in a way that is different not just in scope and quality, but in kind. We talk about the role of agile evaluation: the use of consumer purchasing data provided and interrogated by business to create an immediate feedback loop on the impacts of public health interventions and to inform decisions on required  action. Business and Government can work together towards the creation of a virtuous circle of continuous, evidence-based improvement that will play a significant role in extracting maximum value from shared investment and maximum impact where it matters most, in people’s lives.

Build genuine partnership
The idea and realisation of true partnership will be central to any Responsibility Deal. Without it, the opportunity to make a real, tangible difference to the health of individuals, families and communities will be lost. However, partnerships can be hard in practice. They require courage from all sides, honesty and integrity, a willingness to work for the long-term and a fundamental respect for the expertise and ability that all partners bring. We simply must
succeed in the building of genuine partnerships against the public health agenda; it is vital if meaningful progress is to be made.

The following chapters set out the detail of our recommendations. However, the principle of coherence is key.  In our work we found no shortage of initiatives looking to address the health challenges of poor diet, lack of physical activity, and excessive alcohol consumption; there is no lack of effort and energy being invested in making things happen. Indeed, we believe strongly in keeping and developing what’s working and turning existing best practice into common practice. The issue is that many of the tools already to hand are only half used or sold short in favour of ‘the next big thing’; we found multiple,
unconnected interventions that push hard, but point in different directions. The cumulative result, too often, is limited impact, confusion, and marginal return on investment.