Drugmakers have been stunned by a report from the UK government’s healthcare watchdog which says that the National Health Service is paying way over the odds for branded pharmaceuticals and a radical reform of the system is needed.
The Office of Fair Trading claims that the Pharmaceutical Price Regulation Scheme should be reformed “to deliver better value for money from NHS drug spend and to focus business investment on drugs that have the greatest benefits for patients.”
It notes that the NHS spends about £8 billion a year on branded medicines and has identified “a number of drugs where prices are significantly out of line with patient benefits.” These include treatments for cholesterol, blood pressure and stomach acid and the OFT argues that some of these products which are currently prescribed in large volumes “are up to ten times more expensive than substitute treatments that deliver very similar benefits.”
Specifically the study recommends that the current 'profit cap and price cut' scheme, where companies are free to set their own prices “within very broad profit constraints” need to be replaced with “a patient-focused value-based pricing scheme, in which the prices the NHS pays for medicines reflects the therapeutic benefits they bring to patients.”
This would enable the NHS to obtain greater value for money from its existing drug spend, says the OFT, which estimates that it would release £500 million that could be used more effectively, “giving patients better access to medicines and other treatments which they may currently be denied.”
The PPRS sets a cap on the profits that each drug company can earn on its annual sales of branded medicines to the NHS. It is a voluntary scheme negotiated every five years between the Department of Health and the Association of the British Pharmaceutical Industry.
In a nod to innovative drugmakers, the report then claims that “value-based pricing would give companies stronger incentives to invest in drugs for those medical conditions where there is greatest need,” arguing that because the health services in many other countries base their prices on those in the UK, “additional benefits would arise internationally.” It adds that many countries, including Sweden, Australia and Canada, have successfully implemented value-based pricing and reimbursement systems and the OFT “has drawn on that experience in designing a workable scheme for the UK that builds on existing NHS expertise.”
John Fingleton, the OFT’s chief executive, concluded that a radical change of the PPRS would allow more patients better access to more effective treatments, and “would focus drug company innovation and investment on the areas where patients need it the most, creating more valuable drugs in the future."
The report has taken over two years to compile and has been passed on to the UK Department of Health. However its findings have not proved popular with the branded drugs industry and the ABPI, before it had studied the report in depth, said that "it is very important not just to consider the cost of medicines to the NHS but also the wider need for R&D to help patients."
Leslie Galloway, chairman of the Ethical Medicines Industry Group (EMIG), a trade association representing small-to-medium sized pharmaceutical companies, is also worried and “surprised” at the OFT’s recommendations. He said the EMIG supports the principles of the PPRS “in that it provides a stable and predictable pricing arrangement over a five-year period” and that while there are a number of features of the current PPRS which the EMIG would modify to make the scheme more equitable for its members, “wholesale change, even over a number of years, to the PPRS, is a high-risk strategy that EMIG does not believe is necessary or appropriate."