The government has published full details of the new Pharmaceutical Price Regulation Scheme (PPRS), which, for the first time, will introduce an agreed limit on NHS spend on branded medicines, with all additional expenditure above this level paid for by industry.
Under the five-year voluntary scheme, the branded medicines bill will stay flat over the first two years and grow slowly afterwards, with the industry footing any overspend (within agreed boundaries), except those companies pulling in annual sales of less than £5 million.
According to the government, the "breakthrough deal", which has been agreed with the Association of the British Pharmaceutical Industry (ABPI), will "provide predictability and certainty to both the NHS and industry on the spend for branded medicines", as well as "encourage the use of innovative and cost-effective treatments".
Those on the other side of the fence, however, are not so sure, with the removal of the threshold taper for SMEs a key sore point.
ABPI chief executive Stephen Whitehead said industry has agreed to keep medicines spend under control given the financial challenges being faced by the NHS. But, he pointed out, "it's government’s role to create an environment that encourages industrial growth and therefore we are disappointed that [it] has chosen not to maintain a taper for companies with NHS sales between £5 and £25 million", a crucial life-line for SMEs.
It is widely accepted that SMEs are responsible for about 80% of innovation, but, in a potentially very damaging move, the £5 million exemption threshold taper for companies with net sales between £5 million and £25 million has been removed in the new PPRS.
As Leslie Galloway, chairman of the Ethical Medicines Industry Group, explained to PharmaTimes World News, this means that a company with net sales below £5 million in 2013 will pay no rebate on NHS sales in 2014, while one that books £5,000,001 will now have to pay £187,000 to the Department of Health next year.
In another blow to SMEs, he notes that the new PPRS also now calls on companies to pay a three-monthly rebate, which doesn't sit well with the government's repeatedly restated aim of reducing bureaucracy.
Moreover, companies paying the rebate within one month of the end of the quarter may be doing so before they have received payment from the NHS, which could cause "serious cash flow problem", Leslie told PT, noting that "only time will tell the extent of the impact on SMEs and innovation".
Downward modulation affecting parallel imports
Elsewhere, the British Association of Pharmaceutical Wholesalers (BAPW) expressed concern over the degree of downwards price modulation allowed by the new scheme and disappointment that it does not contain ‘obligations to supply’ to address issues with the medicines supply chain.
Modulation describes the freedoms given to companies to hitch up or take down drug prices following their launch. The BAPW is claiming that downwards price modulation "is now used more widely and in a more targeted fashion than previously".
"We believe that some pharmaceutical companies reduce the prices of branded products that have the greatest parallel import competition in the UK, rendering PIs less economic, so they are no longer imported; this then reduces the availability of some medicines for pharmacies and patients," it said.
When details of the 2014 PPRS first emerged last month Pfizer UK managing director Jonathan Emms - who has just been unveiled as the new president of the ABPI - was quick to voice his criticism of the deal, calling it a "missed opportunity for patients, industry and the UK economy".
"Whilst the UK Government wants new medicines to be researched and developed here, it is not prepared to pay for the life changing and life-saving medicines that result from this investment," he said.
Further criticism of the PPRS was outlined in an open letter by nine global pharmaceutical companies published by the Daily Telegraph, which stressed that it has "failed to break down the barriers which are currently preventing patients from being treated with the most cutting edge and effective new medicines available", and that "action to manage costs should be matched with action to drive better health outcomes".