Drugmakers in the UK have been stopped in their tracks following the news that the country’s Department of Health is looking to re-open negotiations about the current Pharmaceutical Price Regulation Scheme (PPRS).

The department noted that the health secretary, Alan Johnson, holds talks with representatives of the pharmaceutical industry on a regular basis but at their most recent meeting, he said that renegotiation of the PPRS was needed. Drugmakers signed a five-year deal in 2004 offering price cuts in return for increased allowances to encourage R&D of innovative products.

The Health Ministry said that “whilst we recognise the benefits that PPRS agreements have brought to the UK over the past 50 years, ministers believe it important to update the system so it is fit for purpose in the modern world and contributes to achieving greater efficiency in NHS expenditure”. It notes that since the last agreement was reached, the Office of Fair Trading has published its controversial report on the PPRS, which concluded that the scheme should be reformed and that “the pricing system should have a more value-based approach in order to deliver greater benefit to patients”. The OFT report said the NHS could save up to £500 million a year by choosing the cheapest alternative on a range of widely-used medicines.

Competitiveness Minister Stephen Timms said: "We agree with the OFT that it is time to develop a pricing system which is fit for purpose for the 21st century [as] we must ensure that any future pricing scheme delivers value, rewards innovation and ensures a fair deal”. He added that “we are undertaking a continuing programme of detailed analysis of the OFT report's proposals, and will discuss this analysis with the industry, taking into account their strong concerns about a number of the proposals. This is a highly complex area and there are a number of different models for taking work forward”.

Taking a placatory line, the Health Ministry said that “any new agreement will recognise the contribution of the pharmaceutical industry to the UK economy through the provision of healthcare and the development of medical advances. It is in all our interests to encourage research and reward innovation”, it adds, “but above all we want to ensure that the taxpayer gets value for money and patients continue to benefit from innovative products at a reasonable price."

The response from the Association of the British Pharmaceutical Industry was a cautious one. It said that it “recognises the Government’s need to gain best value for money from all aspects of NHS services, including medicines” but pointed out that the system already benefits “from one of the most cost-effective medicines policies in Europe, with high levels of generics prescribed, prices of branded medicines in line with other major European countries, and schemes being introduced within the NHS to maximise the use of generics”. This means that the UK medicines bill is low both in terms of cost per head and as a share of NHS expenditure, it said, adding that it “welcomes the assurance from the Government that any new agreement will recognise the contribution of the pharmaceutical industry to the UK economy.

Stable, voluntary agreement needed, says ABPI

The ABPI continued by saying it believes that “a stable, voluntary agreement is crucial” to retain the industry’s major R&D investments, the UK’s largest, and president Nigel Brooksby stated that the PPRS has brought many benefits to the NHS and to the UK as a whole, and these can be summed up in the Government’s own words as providing stability, sustainability and predictability. It is essential that these remain integral to the PPRS as it evolves”.

Aisling Burnand, chief executive of the BioIndustry Association, said that “whilst we fully support the principle of investing in drugs that have the greatest benefit to patients, the complexity and far-reaching consequences of developing a new value-based model should not be under-estimated." She added that “it is vital that the impact of any radical change is properly assessed and not rushed into,” claiming that the proposals in the OFT report “were not workable, and would run the risk of decreasing R&D investment in this country." Ms Burnand concluded by saying that “we look forward to further constructive discussions with Government, to ensure that their objectives do not have destabilising consequences for the bioscience industry and the development of new medicines for patients in the UK”.