Biotechs back change to UK pricing system
pharmafile | September 16, 2005 | News story | |Â Â Â
The current UK medicines pricing system discriminates against smaller biotech companies, and should be altered to take this into account, the sector's representatives have said.
The UK BioIndustry Association has raised the issue following news that the Office of Fair Trading is to review the Pharmaceutical Price Regulation Scheme (PPRS).
The PPRS system is a voluntary agreement between the industry and the UK government and allows companies to set their own prices in return for controls on profit.
The agreement was re-signed just last November, but the OFT's new investigation will be a fundamental review of how well it provides value for money for medicines to the NHS and promotes competition between companies.
John Vickers, OFT chairman, said: "Healthcare and the interaction between government and markets are two of the OFT's priority areas – both are at the heart of this study. We want to examine whether the PPRS works well to ensure that pharmaceuticals markets meet the needs of patients by offering adequate rewards to pharmaceutical companies for developing new and useful drugs, while providing the taxpayer with value for money."
Larger pharmaceutical companies were generally happy with the renewal of the PPRS, despite a 7% price cut enforced by the government. But biotech leaders say the system has a 'disproportionate impact' on those companies who have just one or two products on the market.
The BioIndustry Association (BIA) says while the big pharma companies can choose which products to cut prices on while maintaining others, small firms do not have this freedom.
"The BIA's main concern with the PPRS is the disproportionate impact it has on innovative bioscience companies, which have often just one or two marketed products, and therefore unable to split price cuts across a portfiolio. We will be making this point constructively in our communications with the OFT," said Aisling Burnand, chief executive of the BIA.
Meanwhile, pharma's representative body ABPI says it will fully co-operate with the investigation, and stressed the PPRS already operated in a very open and transparent manner, including annual reports to Parliament.
While some of its members are in a similar situation to the smaller biotech companies, ABPI spokesman Richard Ley said it did not share BIA's view.
He said there had been a 'bit of a fuss' around this subject when the deal was being negotiated a year ago, but pointed out that a special provision has been made for smaller companies.
"None of us like that 7% price cut – though in cash terms, the bigger companies like GSK lose more," he concluded.
The 7% price cut applied to all companies selling prescription medicines, but those with sales of under 10 million pounds were exempt from the price cut on the first 1 million pounds in sales.
In addition, the new agreement says the Department of Health will use 'a degree of discretion' in assessing financial reports from smaller companies, including R&D, marketing and information costs.
The study is scheduled to continue until at least Spring 2006, but could extend until the end of the year, depending on the OFT's findings.
Related features:
In return for a 7% price cut, the new Pharmaceutical Price Regulation Scheme brings stability and recognises pharma's contributions to the UK economy, says Thoreya Swage.
