Regulation and intervention by the UK government is needed to “save the pharmaceutical industry from its own worst enemy – itself,” says a new report.

The industry in the UK needs to be viewed more as a utility “and less as part of the casino economy which wreaked havoc with our banks,” says the study, which has been produced by left-of-centre pressure group Compass. The sector must not be allowed to suffer the same fate as the UK financial services sector, which crumbled because of lax regulation, warn authors Jon Cruddas (Labour Member of Parliament for Dagenham) and Zoe Gannon.

The “danger signs” which led to the financial sector’s collapse are already present in the pharmaceutical industry, and include increases in profits and pay even as productivity falls and, “under the threat of flight, companies are lightly regulated in the pursuit of short-term profits driven by the bonus schemes of top executives,” they say.

But the industry is too important to fail; its products determine whether people live or die and what quality of life they have, and drugmakers are much closer to being essential utilities than they think, say the authors. They emphasise that they are not calling for the industry to be nationalised but for it to be more effectively regulated, and for this to be harmonised better at European Union (EU) and international level, so that all stakeholders, including the public as well as private investors, get a better deal. “Some things are too important to be left to the whims of the market,” they say.

The report makes a number of specific policy recommendations for the UK, including greater investment in publicly-funded science. It backs the Office of Fair Trading’s (OFT) call for the introduction of value-based pricing (VBP), and calls for the savings made in this way - which by 2010 could be £1 billion if VBP was introduced this year - to be ring-fenced and invested in greater publicly-funded health research. “This would effectively increase public funding for health research by 60% and put total government spending on health research at £2.7 billion – nearly equal to the industry’s estimated investments in R&D,” say the authors.

They also call for controls on pay and bonuses within the sector, pointing out that Compass will be calling on the government to establish a pay commission to adjudicate on pay in key industries such as the pharmaceutical and financial sectors.

The report goes on to recommend making clinical trials open to public scrutiny - with all Phase II trials conducted independent of the industry - and for doctors to be educated through public funding. Moreover, there needs to be a review of progress made since the House of Commons Health Select Committee published its report on the influence of the pharmaceutical industry in 2005. Among the policy proposals made by the MPs in their report which Compass describes as “sensible” were for strengthening the power of the Medicines and Healthcare Products Regulatory Agency (MHRA), curbing the industry’s “intensive” marketing and adopting a national drugs policy.

In the midst of a recession, with many areas of the economy struggling, the pharmaceutical industry needs to be saved from itself, say the report’s authors. As with the financial services sector, if markets are left too free for too long they eventually self-destruct, they warn, adding: ‘this cannot be allowed to happen in the market for the creation of drugs.”