Select Committee on Science and Technology Minutes of Evidence

Examination of Witnesses (Questions 480-499)



Lord Haskel

  480. The reason why there is this gap is that this is a very risky area and there are a number of schemes whereby you can share the risk with some government schemes, for instance, the Small Company Guarantee Scheme, the Subsidised Nursery Units and things like that. From what you are saying, do I get the impression that you think these schemes have failed?
  (Dr Reeders) I do not think they are focused enough and I do not think they are targeted adequately. In my experience and my understanding of them, they are not targeted to the highest value added components of what we could achieve in this country, which is development and technology, so I think any scheme that is put in place should be really different. Do not just create jobs, do not just create new companies. Create something that really adds value, which leverages intellectual property. I think you should target the schemes to people who want to develop intellectual property to generate very high value added products, such as pharmaceuticals. That is where I would target funds and that is what is really needed. That is exactly what programmes like the United States SBIR programme do. You have to write a grant at the very highest level with specific commercial aims in mind and then you get federal funding. The federal government in that case can target where it puts it money depending on what it wants to achieve. For example, if it wants to achieve enhanced vaccine programmes you could fund vaccine research.
  (Dr Logan) I just wanted to come in there and say a couple of things about the schemes that are in place at the moment. The Loan Guarantee Scheme is very difficult to get. It is not workable and every time we have gone for it we have been told, "This is only applicable if the researcher does not have any money", and we find that we still have a resistance within universities to researchers putting their house up for collateral. They do not see that they should have to do that, so there is still an attitude thing there. The Loan Guarantee Scheme is not feasible for this sort of research and actually it is not enough money anyway. Smart Award is very good. That has been very successful but we still need something before the Smart Award to fill that gap, because the Smart Award is prototyping. We have still got this gap before the prototyping where we have got this kernel of an idea, we know there is something there, but we need to do the trials. University Challenge has been very patchy. In some areas it has worked extremely well, particularly where we are seeing much more involvement now with the regional development agencies, and in the areas where the funding and the incubation is joined up so that the clinician has the opportunity to go into an incubator and then a science park and has the funding, it is all working extremely well. Yorkshire and Humberside are a good example of this. As I say, it is very patchy and in other areas the University Challenge has either been very risk averse or perhaps has had people on the committees who are not necessarily well enough equipped to make some of the right decisions. In an example I was involved in at Bristol and Bath there were some very bad decisions made at the beginning as people did not have the experience. That brings us on to another issue. There is still a lack of expertise in Universities in this area of identifying from the universities which of these ideas are the ones that are really going to work. You have got the technology transfer officers who sometimes do not have the expertise to judge the winners, so we are not being able to focus the funds we have as effectively as we might do. As I say, the University Challenge has been a bit patchy as well. We need a joined-up provision.

Lord Patel

  481. I am getting mixed messages between what I hear from Dr Reeders and what I hear from Dr Logan, and I therefore seek clarification. From what you said earlier on, Dr Logan, and correct me if I am wrong, you implied that we have (or at least you have in the universities you are involved with) researchers whose research has got to a stage where it can now be converted to a product and it is held in that gap, as Dr Reeders referred to earlier, because there is no finance to convert it to a product. You are suggesting that the systems that are in place, either the loan grant or the University Challenge Grant, are not adequate or are not at that level. On the other hand, Dr Reeders, what you are saying is that if you have got a product which will go to market there are plenty of venture capitalists out there who will do it with you. Is it that there is no enterprise at the university which will allow you to do that? What is it? To say that we have researchers who have research which has come to fruition and they cannot get it to the market sounds to me pretty dreadful. You said you would give us examples.
  (Professor Borriello) On that particular issue, and I alluded to it earlier, there is frequently another gap and that is a gap between the inventor's view of the marketability of their potential product and the investor's view. Sometimes the lack of apparent investment is not due to the fact that it is not available but that the investors make the decision that it is not worth investing in, either because the market is not there for the return, although the product is good, or the product is not what the investors perceive it would be on reaching market.

  482. That is the real world though, is it not?
  (Professor Borriello) That is the real world and that is my point. You will hear differing stories but one has to get underneath those stories and judge whether it was a potential world leading product which they failed to secure funding for because they did not know the system, or whether it was that it was not actually a very good product and nobody wished to invest in it. Both can fail to get to market. It is the first one which should cause us concern, not the second one. The other point is that I think one needs to differentiate between talking about new technologies for communicable disease, surveillance, and control. That would include diagnostics as well as therapeutics and I would argue, maybe from a point of ignorance, that investment in therapeutics is much higher and potentially easier to obtain than it is in diagnostics because the returns on therapeutics, although the risk is high, are equally high. In terms of diagnostics, the returns are low and the risk is high and the market is very competitive. Getting investment in new diagnostics in the UK or, I would suggest, almost anywhere in the world, unless it is a spin-off of something that somebody did not realise had great diagnostic potential, something they did not purposely go to do, such as PCR, then I suspect that that is the weaker link in the UK compared to therapeutics. Everyone is into the new cancer drug, everybody is trying to develop new vaccines, despite the risk. I do not think you would find many people purposely setting out to develop new diagnostics in the universities.
  (Dr Reeders) That is because there is a massive profit differential between therapeutics and diagnostics. Therapeutics is one of the last great bastions of super-profits in the world and it is created by the bizarre fact of giving 17-20 years patent life for composition of matter. You can create a drug and you get 17-20 years of monopoly and you can charge whatever you want for it because you are the only one allowed to sell it, and it is incredibly profitable. Clearly, capital will go towards the profit. Diagnostics are very difficult. They are much less profitable and there are a lot of business model issues concerned with, for example, diagnostic platforms. By and large diagnostics are mounted on platforms run by a few major companies. What you are able to make usually is a reagent that you can put on top of that platform. The companies that control that platform are not always very willing to let you compete, for example, with their products. The profitability in diagnostics is very low and whether you are in the US or the UK raising venture capital for diagnostics is very hard. Unless some structural changes are made to the market somehow to affect profitability, people will not put their money in diagnostics.

Lord Rea

  483. You mentioned that regulations often inhibit in-house developments. Could you expand on that and say why these regulations were introduced in the first place? Could you abolish them and, if so, what would you put in their place?
  (Professor Borriello) As I said, there is frequently a penalty to be paid for improving standards. It is a value judgement. If I give you a simple example with, let us say, the diphtheria dipstick test for diphtheria toxin, where the market is small, you would not get a major manufacturer to produce it although you might get some charitable bodies to fund production for use in the Third World. In the UK, let us say, the Central Public Health Laboratory wished to make these kits. We could use them within our own laboratory for diagnostics. We could probably get them accredited so we retain our diagnostic accreditation, but we would not be able to sell it to another legal entity or employing authority without getting it kite marked as regulated by the In-Vitro Diagnostics Directive. Doing that is costly both financially and in terms of time. We would then have to ask the question as a publicly funded body, is it in our interests to do this, which is going to enable a few labs to have improved diagnostics, or not? Do we just make sure everybody sends their material to us? We would naturally opt for the second option, but the consequence of that is that we are not pushing this technological diagnostic capability out.

  484. What would your solution to this problem be?
  (Professor Borriello) I am not sure there is a ready solution unless, for example, the UK Government decided to set up some small body which would take on that role for all these so-called orphan diagnostics and would bear the cost of that and be the regulatory body. We would give the intellectual property to such a front body in return for that body making sure that that technology was available to the maximum number of people, and it would not be competing. There would be no cry of "foul" from industry because they would not be interested in those mark-ups.

  485. Dr Logan, how would SIMFONEC be classified in that area? Would you not fit the bill?
  (Dr Logan) I think there are still issues. That might be one answer but we do have a situation at the moment where our clinicians have to fill a number of roles and while merit rewards are still based on RAE particularly, if we take our clinicians and our researchers away from their pure research they cannot do their pure science and they cannot get their number of publications out per year, the income for their department goes down. If we were going to have some kind of system like that, in order to incentivise the researchers to become involved we would probably have to have a different merit system within the university. Alan Milburn has just written a letter about rewards for consultants. I was just reading that on the website. He is actually saying, "We will look at the contribution of consultants to the NHS", and he is also talking about the research but there is nothing in there about commercialisation of research. What I would say is that even if those things were available, unless you incentivise the researchers in some way and you find an income stream which is not long term to the department, it is not going to be successful. At the moment the departmental income is based on the RAE and that is a real issue for us.

Lord Patel

  486. I am not sure that this is evidence based. Is it?
  (Dr Logan) Yes, it is. I would refer you to the RAE assessment exercise and subsequent funding allocations.

  487. I am still employed in the NHS as an academic and I still have my merit award. Nobody stops me from doing research if I wish to.
  (Dr Logan) Would you, if you were head of a department in a university, want your key researchers to become involved in the commercialisation process if it meant that they were going to have fewer publications which could affect your income?

Lord Patel: Cyclacel is a good example. It is headed by a key researcher who does research.

Baroness Walmsley

  488. Dr Logan, you moved into the area I wanted to ask about. When we were in the United States in January it became very clear to us that the universities did a great deal more to incentivise their staff to consider commercial development and to be very proactive in doing it. It is part of their assessment, part of the criteria, and it occurred to me to ask you to what extent is that sort of thing being done in the UK? You have moved on to the territory of the difficulty of the income of the department but how would you propose that we moved nearer to the point in this country when the United States has got where they are so hot on these things that nothing seems to escape them?
  (Dr Logan) I think that is a very good point. There is a model. NICENT in Northern Ireland have changed their reward system so that their researchers get promotion on the basis of their record of commercialisation and integration with business. I do not think that is happening in many UK universities at the moment. Certainly, if I take somewhere like the University of Bristol, where I was before, and the universities where I am now, promotion is still linked to research and having a good research record, so we need additional incentives. This is similar to the issue of good teachers who did not get promotion in university if they were not doing the research. We are hitting the same issue again. The culture of enterprise is really there; it is beginning to happen, but we could move it forward more quickly if we changed the personal reward systems.

Lord Haskel

  489. We have explored venture capital for new diagnostics and new vaccines, and Dr Reeders suggested that we had to raise the profitability. How would you do that? Is it the case that there is market failure there?
  (Dr Reeders) My favourite way of increasing profitability is to reduce taxes in selective ways. Maybe this is a personal point rather than an expert point but I do think that when governments shovel money into things to try and stimulate them the productivity of that money can be low. What always does incentivise people is reduction in the taxes they pay, so I think there are ways to reduce taxes on the profits of small companies, on the capital gains of people that make money out of those small companies to try and suck people into those kinds of ventures. That obviously does not target communicable diseases specifically. Another major area in the context of vaccines is to try and develop a process of promoting vaccines. The problem with vaccines is that by and large preventive vaccines are used when you do not have a disease. If you have got a terrible headache you will go to the doctor, you will take the pills, you will create a profit for the pharmaceutical company, but the economic stimulus to prevent a disease is much less than that. Because it is a public health matter rather than an individual matter, governments do have to step in and promote prevention. Right now only three or four of the world's top 25 pharmaceutical companies bother with vaccines at all, so vaccines are a very neglected area and there is a potential to stimulate vaccine development in particular for a range of infectious and communicable diseases that really are not treated right now. Providing perhaps a specific help with conducting clinical trials would be one way to do it. Conducting clinical trials in naive, that is, uninfected, individuals, is extremely expensive. Parents are very reluctant to have their children inoculated with new experimental vaccines and we do need a method to try and bring those vaccine development candidates through. The pharmaceutical industry would be very reluctant to do that because again it is an area where there is not enough profit. There are therefore two very specific things that can be done: in general reduce taxes and specifically in the case of vaccines provide government support, perhaps through the NHS or otherwise, to vaccine development. Vaccines were invented in Britain. We have had a very good track record of developing new vaccines, but the world wide markets are not sufficient to stimulate new capital to go into the area.


  490. Professor Borriello, any comments on that?
  (Professor Borriello) Yes, particularly on vaccines. I think it is quite telling that apparently it is true that the world market in one single anti-ulcer drug is bigger than the total combined market for every vaccine currently available. That exemplifies the point you made about profitability. Coupled to that is adverse publicity and high risk. I think something can be done to protect vaccine companies who are producing products for public health which is that if they have gone through all the appropriate legislation and regulatory screening to become a product that is sold it is difficult to see why they should then be held liable for one adverse reaction which then destroys the market and sometimes destroys the company. If, however, they have been found to be fraudulent in obtaining such regulatory clearance, then of course they should be held liable. I think there is a pull-through in thinking from the tobacco industry where they are saying, "You knowingly sold a product, even if you did not know it was bad and even though it was legal". That does cause fear in investors in things like vaccines, as does the way potential adverse publicity is handled. It is not handled very well in the UK. Having said that, it is not handled very well anywhere in the world.
  (Dr Reeders) I think that is a good point, that one of the limitations in developing vaccines is fear of liability because you are not treating a disease. If I give you a medicine for a serious disease and you get a side effect, I can say, "Look: I weighed the risks", but when I give a naive child a vaccine and then they have an onset of a nasty side effect to prevent a disease they never might have had, the sentiment in the public is very much against that, and yet vaccines are matters of public health and therefore I think the public should underwrite or in some way protect companies that in good faith have problems with vaccines.
  (Professor Borriello) If I may raise one other point, as companies increasingly move towards sub-unit vaccines or, now increasingly, genetically engineered vaccines, so that one makes a safe vaccine, so instead of attenuating a pathogen using passage you attenuate it with a known attenuation using modern molecular methods. Those increasingly are being given orally. Again, that has advantages in not using needles and increasing the risk of the spread of AIDS, etc, in Third World Countries, so oral is better, but that means you excrete the organism. Now a new regulatory body that people are having to go through is saying, do we release genetically modified organisms into the environment? The problem is that the bodies that deal with that are not used to dealing with public health and they are not used to dealing with vaccines. They are used to dealing with genetically modified crops, so there is now a gap based on ignorance (in the nicest sense of the word) between those trying to get some of these products up to market and those who now find they have a role in saying whether or not they can be used.

Lord Haskel

  491. If somebody was sitting here from the Treasury and they heard what you had said, their response would probably be along the lines that more often than not if there is a failure of the market in the private sector and then the government gets involved it is rapidly followed by a failure in the public sector. The objective is to try and get the market to work better, not to get the public sector or government to be involved. Is there no way in some of the things that you have been outlining of getting the market to work better?
  (Dr Reeders) I think the problem is that by and large most vaccines are used for public health purposes. Typically, an individual is vaccinated not to protect him or her but to protect the public. For example, smallpox may be (hopefully not) a classic case of this problem. The big advantage of vaccinating people for smallpox is the protection of transmission in the public. Individuals may not be prepared to pay for the general public good. That has been true of diphtheria vaccine, for example, where individuals said, "I do not care if there is a diphtheria outbreak. I do not like to risk having some (unproven) side effect". I think in general governments should not dabble in markets but let the market dynamic work, unless there is a need to take a public health standpoint. For example, car companies, left to their own devices, would never make better roads. They might make safer cars but there would be no incentive to make better roads. Individuals would not buy safer roads; there would be no way to do that. They will buy safer cars but the cars will go on bad roads. Somehow we have to fix the roads if we are going to influence road safety. Vaccines are a case par excellence where intervention by the public for the good of the public has a place.

Lord Oxburgh

  492. It would be interesting to hear about some of the problems that might be involved in bringing, for example, a diagnostic test to market but, more generally than that, can you separately give us a glimpse of what new technologies might in fact add to coping with infectious disease? We have heard about the difficulties of bringing some of these things to market and you have touched on the difficulties of the low profitability of diagnostic tests and the difficulties associated with vaccines, but what is there? One hears about a much broader spectrum of possibilities, near-patient testing, for example, which could have very significant public health implications, with the possibility of off-the-shelf testing incentives, for example, in high street pharmacies. What are the possibilities that we should be looking at out there which might affect the infectious disease general scene over the next decade and what are the problems associated with implementing that?
  (Dr Reeders) I tell you what: next time I get an upper respiratory tract infection I would like to be able to go to a pharmacy, grab a small diagnostic device, prick my thumb and know that I have a viral infection and I do not need to go to the doctor or to wonder if I have to take antibiotics. Ultra rapid point-of-care testing has to have a huge value in avoiding people contacting the health service when they do not need to but more likely for general practitioners to be able to make triage decisions as to whether to refer people or to give them antibiotics, which obviously can have significant drawbacks from a public health standpoint.
  (Professor Borriello) There are three big questions in there. On near patient testing, certainly that is an area where a drive to diagnostics has happened but it has happened for commercial reasons. People who have produced therapeutics are keen to join with diagnostic manufacturers to get a diagnostic that is sharp and to couple it with their therapeutic. That is the main driver. The advantages are as indicated: if a GP can do a throat swab on a child between the ages of two and 15 and say it is a streptococcus, he can give the appropriate antibiotic quickly, so it has application there. Until very recently, the opportunities to pull through near patient testing into general practice were low because they were not the budget holder, but with the advent of primary care trusts they are now the budget holder for diagnostics and can commission their diagnostics and so there is a great opportunity for that sort of testing to come into the market place. The influenza near patient test is one that is on the market, but again that is for a very good reason. It is because you can sell anti-flu drugs. Will they reduce the burden or increase the burden on diagnostics in main laboratories? They will probably increase it because most GPs would want some sort of confirmation. Most patients who diagnose themselves across the counter would probably want some confirmation. They could be exceptionally useful in difficult-to-reach population groups, particularly in the Third World and particularly, say, in Australia with remote population, and that could also be true in the Hebrides in the UK. It would also be true of drug abusers. If you could couple a near patient test for Hep B and have a rapid answer and then give them therapeutic vaccine instead of saying to a drug addict, "Come back next week", then you would have a public health advantage. The same could be true of immigration services, rapid screening of particular infectious diseases, as well as the veterinaries. These are not really near patients tests. They are near target. The target could be a cow as much as a human. There are implications also for surveillance. If the diagnostics are made remotely you may not get feeding back of information. That is something which has to be looked at.

  493. We have heard previously that the market opportunities here are not great because margins are small; on the other hand there are various companies about but you only have small volumes with them. Could I ask Dr Reeders whether he sees opportunity here if this expands?
  (Dr Reeders) Yes. We very actively look for exactly this type of technology to invest in, high volume technology that could be used by relatively unskilled people which generates high volumes for something that people really care about where they would be prepared, let us say, as a consumer or as a GP, to pay three pounds to know the answer. We have not seen those technologies yet and they have not been developed to my knowledge. There are lots of people working on it but the significant breakthroughs I think are not there at the moment.

  494. There are a number of US patents in this area and there are prototype devices for HIV over-the-counter testing and TB and one or two others. You are familiar with these, I imagine.
  (Dr Reeders) I am familiar with many of them.
  (Professor Borriello) There are many in the market place in America and Japan. That is because the health funding is different there and they are nearly all based on the original pregnancy testing technology, so it is well proven, old technology.


  495. Where the market has failed to develop some of these, what can the public sector do to stimulate this?
  (Professor Borriello) The other part of the key question, apart from near-target testing, was also new technology diagnostics and by that I am talking about normal diagnostic laboratories. There are a number of problems there. One is that they are exceptionally price sensitive. What a company might consider as not an unreasonable cost per test a routine laboratory would see as exorbitant because pathology as a whole is very poorly funded in the UK. Until they can link good pathology services with bed occupancy turnover and improved therapeutics, you will not get investment in that area and that is going to have to be the trick in terms of securing the funding to improve the pathology. Modernising pathology or rationalisation of pathology is exceptionally slow in the UK. It really still has not happened. There is all sorts of resistance to that, mainly along professional lines. Where the new technology can have a big impact is that you will get more rapid diagnosis but the proof that that leads to improved patient care still is not in the public domain. Where the real benefit has come and where the evidence exists is where you have new technology that can better characterise individual pathogens and type them, fingerprint them; it is forensic microbiology. On that basis, when you are involved, for example, in trying to get a company to withdraw a product because you are saying that the botulism in their baby food is the one that infected the child, to be able to say definitively, "This is not a coincidence. This is the exact same strain", that is exceptionally powerful and companies respond very quickly. That technology has been used in product withdrawal at least three times over the last two years where five years ago it would have been much more difficult to prove. I will give you a very brief anecdote. When we had the huge tinned salmon botulism outbreak the company raised the possibility that the botulism came from the can opener and got into the tin; it did not come from the tin to the can opener. You have those trails of evidence problems which new technology can start to unravel.
  (Dr Reeders) There is one other issue which is adoption of standards. One of the problems that companies face when deciding how big a market is going to be is how fast adoption will be. One of the problems in the UK particularly is that it is not clear often what standards are going to be adopted by physicians or the NHS, and therefore it becomes dangerous to enter the market. In the US it is more regularised so often the professional bodies or the government or the insurance companies or the fear of liability will drive a certain behaviour and it will become rapidly adopted and it will become uniform very quickly. Then companies can go into that market knowing that the standard, say, is to swab a child's throat for streptococcus and you will not be reimbursed for the antibiotics if you do not do the swab, or whatever. One of the things that would help in this country is more consistent standards across the country for testing.

Baroness Walmsley

  496. How do you think new technologies should be evaluated and how do you think information about them should be disseminated so that worthwhile ones are taken up and who do you think should be responsible for those two things?
  (Professor Borriello) There have to be two levels of evaluation. First, there has to be the specialist laboratory evaluation that under ideal conditions this product does have this level of sensitivity and specificity and can cope with this particularly problematic specimen, or not, whichever the case is. There then has to be a proper field evaluation. That is an area where having a network of NHS trust laboratories as well as public health laboratories in the recent past under single management (which is soon to disappear) has never properly been utilised for field evaluations of diagnostics. That has been a tremendous missed opportunity, but very frequently a diagnostic or any new technology will have 98 per cent sensitivity and 99.99 per cent specificity and negative predicted and positive predicted values which are very high, and in the field they are always about 65 per cent because you are taking it from a specialist evaluation and putting it into the front line where you have got for example a brand new MLSO, a training MLSO, an MTO who has not used it before, it is four o'clock Friday afternoon, nobody has cleaned the machine properly, those sorts of problems, so there is the opportunity to have proper co-ordinated and regulated field evaluations as well as the specialist evaluations which the Medical Devices Agency undertakes in the UK and that opportunity still exists but it does not happen. Pushing out information is much more difficult. We have a good system for adverse events report but we do not have a good system for collating and making publicly available everybody's evaluations or having some proper analysis of those. The fact that somebody has done an evaluation does not mean to say that it was done properly or well. We do need to put guidance out. The problem is, would certain companies cry "foul" if you recommended that a particular product was not purchased for a particular diagnostic, particularly if they already had their kite marking from the In-Vitro Diagnostics Laboratory? There are some problems but I do not think they are insurmountable. Who should deliver it? Maybe the MDA in its new combined agency role with the MCA or maybe it should be the Health Technology Assessment Panel or some combination of these. It should involve a full range of professionals. It should involve users, it should involve the Veterinary Laboratories Agency, it should involve the National Blood Agency, because they all have an interest in diagnostics and shared experience.

Lord Patel

  497. Who makes the decision which new diagnostics to adopt or not even after the evaluation is carried out. Is there a co-ordinated strategy about that? Can you give me examples of the new diagnostics? Some of them you mentioned, like diphtheria.
  (Professor Borriello) What currently happens as far as I am aware is that the decision as to whether or not to adopt a particular diagnostic technology is a local one with the laboratory director or the chief technician or chief technician equivalent within the laboratory in response to information available and also in response to opportunity. Have they suddenly been told they have some capital and funding available for equipment? Which companies have recently been round to talk to them or which meeting did they go to when they saw something explained? It is a very local decision with little possibility of going to a single repository of greater sources of information and comparative data. How could it be done? Possibly we do need a NICE equivalent for diagnostics, impartial, with full professional involvement with everybody who has an interest, making some sort of guidance.

  498. NICE can do it itself, technology assessment.
  (Professor Borriello) It could, absolutely. It would not be able to do it for every single possible diagnostic available or for every diagnosis one would wish to make but they really should concentrate on high volume where it is important to make accurate early diagnosis. An example of the problems would be, let us say, the urinary antigen test for pneumococcus. It is only £12 to £15 a test. Actually, that is a lot in the local laboratory. Should they use that or should they use some generic PCR approach or should they use an immunoassay platform or should they use a black box. I do not know, but that is the sort of choice that they are facing locally, not only when should they test but also what test should they use. There is no guidance at all.

  499. It is certainly correct that there is no strategy whatsoever.
  (Professor Borriello) No, there is no procurement strategy. The NHS has a huge potential leverage in terms of getting the best kits at the best price and also having a role in stimulating appropriate evaluations. The body for the NHS is called PASA. They have no role as far as I am aware in procurement of diagnostics of any sort, including laboratory consumables. That has to change.

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