Frank Dobson's decision against the anti-flu drug Relenza is bad news for Glaxo, but is it in our interest?

A drug that everybody needs is the Holy Grail of the pharmaceuticals business. What better candidate than a medicine for flu, an illness almost everyone, at some point, will suffer from? The drug company with an effective anti-flu drug would have a licence to print money.

A drug that everybody needs is the Holy Grail of the pharmaceuticals business. What better candidate than a medicine for flu, an illness almost everyone, at some point, will suffer from? The drug company with an effective anti-flu drug would have a licence to print money.

That is what Glaxo Wellcome thought until last week, when its great white hope for the winter - Relenza - fell at the final hurdle. Although the drug had obtained a licence and been launched in Britain in September, the new National Institute for Clinical Excellence (Nice) set up by the Government to advise on new drugs and treatments gave it the thumbs down. On Friday the Health Secretary, Frank Dobson, approved Nice's recommendation that it should not be prescribed on the NHS.

Sir Richard Sykes, Glaxo Wellcome's chairman, was outraged and it is not hard to see why. Scientists have been looking for a cure for flu for at least 30 years and with Relenza they believed they had found it. It is the first anti-viral treatment effective against both types of flu - A and B - and represents a genuine scientific advance.

Its design is ingenious. The difficulty of finding a drug to combat flu is caused by the virus's capacity to mutate. Each year there is a small genetic shift which produces a wholly new virus ready to reinfect populations that succumbed in the previous year. That is why the flu vaccine has to be changed each year.

To hit this moving target, scientists in Australia targeted not the virus itself but an enzyme, neuraminidase, that allows it to spread from cell to cell. In the 1970s they had crystallised neuraminidase which allowed them to work out its structure. Using computer-aided design, they produced a molecule that locked on to it, blocking its action. That molecule was zanamivir whose brand name is Relenza.

It is the first time a drug has been developed in this way - by deconstructing the target molecule and designing one to neutralise it. Potentially, Relenza has much to offer, for flu is not a trivial illness. In an average year in Britain it kills 4,000 mainly elderly or vulnerable people and in an epidemic year this may rise to 30,000. Trials of the drug suggest that it not only shortens the duration of the illness, from seven to four or five days, but also reduces the severity of symptoms which, it was hoped, would save lives.

On these grounds, Relenza has been approved and is on sale in the US, Germany, Australia and New Zealand. But it has one major drawback - it has to be taken within 48 hours of the onset of symptoms. Flu is difficult to distinguish from a cold, so targeting the drug on those who need it is tricky, although Glaxo claims GPs can get it right 70 per cent of the time. It also carries a hefty price tag, at £24 for a five-day course. One senior consultant physician said: "Ninety-nine times out of a hundred the patient won't have flu. Relenza provides an enormous opportunity to waste money."

If Nice had reached this conclusion, it would at least have had the merit of honesty. The institute has been set up to examine not just whether drugs work (their effectiveness) but whether they are worth having (their cost-effectiveness) and Relenza is the first drug it has examined.

Instead, however, Nice demanded more evidence that it worked for those at whom it was principally aimed - the elderly and the vulnerable, such as asthmatics. Although trials of the drug had been carried out in more than 6,000 patients, the numbers in these groups were small - too small to be statistically significant. Moreover, the elderly and vulnerable are already offered protection from the illness - through flu vaccination. Until the extra evidence was forthcoming, Relenza should be not be prescribed on the NHS, it said.

An incensed Sir Richard Sykes fired off a letter to Mr Dobson, warning that if the Government took a hostile attitude to the development of new drugs, the industry would move its research base elsewhere. Although 50 per cent of Glaxo's research is done in the UK, 94 per cent of its sales are overseas.

The reason why the evidence of its effectiveness on the elderly was lacking was because too few turned up at the surgeries of the doctors running the trial within the 48-hour window from the onset of symptoms. Glaxo, unluckily, happened also to have picked a year when there was not much flu about to run the trial. The company argued that clinical evidence of its efficacy in the elderly would only come from surveillance after it went on sale.

Sir Richard was backed on Tuesday by two other pharmaceutical giants, AstraZeneca and Smithkline Beecham. In a combined letter to Tony Blair, the three companies denounced the decision and declared that Nice was imposing a fourth competitive hurdle for British companies operating in a global market. In addition to quality, safety and efficacy they now had to prove cost-effectiveness.

Although the British market is small in global terms - estimated at £6 million a year by the company but up to 20 times that by others - approval in the home country is seen as critical to obtaining acceptance elsewhere. The global market for neuraminidase inhibitors, of which Relenza is the first, is estimated at more than £400m, but could grow to several billions if they realise their promise, according to the journal Nature Biotechnology.

In case the Government was left in any doubt about the damage the adverse ruling against Relenza could do, Glaxo announced 3,400 job losses worldwide last week, including 1,700 in Britain following a year-long review of its manufacturing operations. The company insisted that the timing of the announcement - a day after Nice's report was sent to Mr Dobson - was coincidental, but its message served to drive home Sir Richard's warning.

Glaxo has another reason for wanting to get its drug on the market sooner rather than later - it is difficult to take. Relenza comes as a powder in a special device called a Diskhaler and is inhaled direct into the lungs twice a day for five days. There are concerns that patients may be put off by this complex and unfamiliar mode of delivery, unless they have got used to it before a rival drug from a Swiss company, Roche, reaches the market. The Roche drug, Tamiflu, launched in Switzerland last week, has a big advantage - it comes as a conventional pill.

In reaching his decision on Friday, Frank Dobson had to balance the potential harm an adverse ruling might do to one of Britain's most successful industries, against the need to obtain best value for money for the NHS. Backing Nice's advice has opened him to charges that he is rationing treatment. But if he had rejected the advice, it would have delivered a grievous blow to the credibility of the new body.

A spokeswoman for Nice insisted that it was "not about rationing but about the rational use of drugs". But Mr Dobson knows that in calling Sir Richard's bluff he is gambling with more than the NHS drugs bill - his decision could damage jobs and exports, too.