Government seeks 10% cut on NHS medicines bill

pharmafile | January 7, 2008 | News story | Sales and Marketing  

News that the government plans to cut the NHS medicines bill by 10% has taken UK pharma industry leaders by surprise.

Health Secretary Alan Johnson has revealed the plans in an interview with the Financial Times, opening up the government's position in what had been confidential negotiations until now.

Talks between the government and industry were begun behind closed doors last autumn in response to the Office of Fair Trading report which recommended scrapping the current pricing system the PPRS.

The watchdogs report recommended that the PPRS be scrapped in favour of a new Value-based Pricing (VBP) system by 2010 – a move that would see medicines priced according to their longer-term benefit to patients.

The government had held its silence over whether or not it would follow the OFT's suggestions, or retain the PPRS system, but Johnson's remarks suggest the current system will remain.

The enforced price cut is typical of earlier PPRS negotiations, including the last, which was agreed just three years ago but was intended to last until 2010.

If this does prove to be the government's course of action, it is likely to produce a mixed reaction from the industry. On one hand, the UK pharma will consider a retained PPRS a victory – on the other hand, it will undoubtedly rail against a 10% cut in prices.

The reduction in spending would represent about £1 billion (of an £11 billion NHS medicines bill) and is understood to be part of larger targets to cut 3% each year from the Department of Healths budget.

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