The chief of the UK’s drug cost-effectiveness watchdog has torn a strip off the pharmaceutical industry saying that the latter’s desire for higher profits are driving up prices, a claim drugmakers have been quick to deny.

In an interview with The Observer, Sir Michael Rawlins, chairman of the National Institute for Health and Clinical Excellence, spoke out after his organisation had once again come in for criticism. Less than a fortnight ago, critics attacked NICE over its decision that kidney cancer patients on National Health Service should not be treated with four drugs – Roche's Avastin (bevacizumab), Bayer's Nexavar (sorafenib), Pfizer's Sutent (sunitinib) and Wyeth's Torisel (temsirolimus) – because they are not cost-effective.

Claiming that kidney cancer drugs could be produced for about a tenth of their current cost, Sir Michael told the newspaper that "we are told we are being mean all the time, but what nobody mentions is why the drugs are so expensive". He noted that part of the problem is that the pharmaceutical industry “is looking at a very bad period in the future because a lot of their big earners are going off patent” and many companies “are looking at a 30% or 40% reduction in the next five years unless they come up with new drugs”. Part of the cost “is cushioning against that”, he said, adding that “the share price is very important to a pharmaceutical company”.

Sir Michael went on to claim that drugmakers have enjoyed double-digit growth year on year “and they are out to sustain that, not least because their senior management's earnings are related to the share price”. He added that “it's not in their interests to take less profit, personally as well as from the point of view of the business. All these perverse incentives drive the price up”.

The NICE chief went on to say that “the other thing we have to pay for is the costs of marketing” and these are generally “about twice the spend on R&D”. He added that “traditionally the pharmaceutical industry will admit that they actually charged what they think the market will bear. The wiser ones are recognising that that model is no longer available”.

However, Richard Barker, director general of the Association of the British Pharmaceutical Industry, responded quickly to Sir Michael’s claims and suggested that the fault lies with the way NICE goes about its business. He said that “pharmaceutical companies invest an average of more than £500 million over more than a decade to bring new medicines to patients”. If they do not earn a reasonable return on this spend, “their investors will not support this, and the supply of modern medicines that enhance and save lives will dry up”.

He went on to say that “what NICE fails to mention is that the medicines in question are in common use elsewhere in Europe, where prices are typically higher than they are here in the UK”. Mr Barker concluded by saying that “NICE has an important job to do, but they need to adapt their approach for cancer medicines, rather than lay the blame on the process and economics of pharmaceutical innovation”.