The PPRS: A Happy Compromise
pharmafile | July 16, 2008 | News story | Sales and Marketing |Â Â Â
After more than a year of uncertainty and months of tense negotiation, the ABPI looks to have secured a very good deal for the industry last month; but the final details are yet to be thrashed out, and the industry was careful not to dub it a victory.
What has been agreed?
The existing pricing system, the Pharmaceutical Price Regulation Scheme, will remain but in modified form. So far, only the top-line principles are agreed, but the industry and UK government seem to have achieved a win-win: control over prices and price stability is guaranteed to pharma in the long-term, while the Department of Health sees its drugs bill reduced.
The deal gives the NHS a guaranteed 5% cut in its medicines bill, which should equate to a one-off saving of around £500 million a year. This is roughly the same amount the OFT said a value-based model could achieve.
The deal comes into force on 1 January 2009 and will last for five years.
Is it still the PPRS?
Yes, though the ABPI say substantial additions to the agreement means it could be seen as a totally new deal. For the first time, the government has included in the agreement measures which are aimed at encouraging the uptake of new medicines.
The 5% cut isn't all from branded medicines – how will this work?
Previous PPRS schemes have demanded price cuts from only branded drugs, but the new scheme includes price cuts for off-patent medicines – which will be in competition with generic equivalents – amounting to a 5% saving overall for the NHS.
Price cuts to branded medicines will contribute 2% from the 5% total with the remainder coming from 'branded generics.' If the actual rate of growth in the drugs bill in England exceeds 6.7%, there will be a further one-off price cut of 2% in 2010 or 2011.
The deal has been dubbed 'pro innovation' – how meaningful is that?
The ABPI appears happy with the package of new measures it has secured from the government, but its too soon to say whether they can really help boost uptake of new medicines.
A single horizon-scanning process for new drugs in development will be developed and there will be more forward planning to ensure patients have access to cost and clinically effective drugs more quickly. New metrics for NICE drug approvals aimed at increasing the number of drugs recommended for use by the NHS and there will be further piloting of prescribing incentive schemes with PCTs to promote uptake of innovative medicines.
What about the OFT's idea of a value-based pricing scheme?
The OFT said prices should be linked to the clinical value offered by drugs – in particular, whether they offered significant improvements over existing treatments. The government has deemed this model too complex to introduce, and the new pricing scheme is based broadly on previous PPRS schemes.
Are smaller pharma companies happy with the deal?
Yes. Companies with sales of £25 million or less in 2007 will be exempt from price cuts for the first £5 million sales.
Will everyone see the deal as a success?
Inevitably, the deal will have its detractors. In particular a number of health economists welcomed the OFT's proposals as a rational (if somewhat untried) way forward.
Most notably, York University's health economist Karl Claxton published a paper in February this year which suggested value based pricing was 'an opportunity not to be missed' – he and others will undoubtedly conclude that the rejection of the model is indeed an opportunity missed.
Related stories:
Relief as pharma industry secures ‘pro-innovation’ UK pricing deal
Monday, June 30, 2008
PPRS reaction – small-medium sized pharma and biotech
Monday, June 30, 2008
Background to the deal:
Government seeks 10% cut on NHS medicines bill
Monday, January 07, 2008
Wednesday, August 15, 2007
Radical overhaul of NHS prescription drug prices recommended
Thursday, March 01, 2007
Investigation into UK medicines prices to continue
Friday, March 24, 2006
Biotechs back change to UK pricing system
Friday, September 16, 2005
