Relief as pharma industry secures ‘pro-innovation’ UK pricing deal
pharmafile | July 16, 2008 | News story | Sales and Marketing |Â Â ABPI, parÂ
Agreement has been reached on a new UK medicines pricing deal which safeguards the industry's ability to set its own prices, and which the ABPI says is 'pro-innovation.'
The deal seems to satisfy both pharma and the UK government, with a 5% cut in the NHS drugs bill offset by a number of industry-friendly measures, including moves to encourage greater uptake in new medicines.
Both parties say some important details have yet to be decided before the deal is introduced on 1 January 2009, but agree that it represents a breakthrough after months of uncertainty.
The deal will come as a great relief to the UK industry, which had feared the introduction of a far less predictable pricing system of a kind seen in many other European countries.
Health secretary Alan Johnson said: "I am delighted that the government and the pharmaceutical industry have been able to make such encouraging progress. We have a duty to ensure that patients continue to benefit from innovative products at a reasonable price and that the taxpayer gets value for money.
"We also recognise the industry's important contribution to the economy, developing new medicines, and to the UK's research capacity."
Chris Brinsmead, president of the ABPI was careful not to sound a triumphant note, and said the agreement was a victory not for the industry or government, but for patients.
"This outline PPRS will not only offer benefits to the NHS and to the industry, but most of all patients, with a raft of measures designed to eliminate delays in providing the most modern medicines."
The 5% cut in the NHS drugs bill represents a one-off saving worth around £500 million – the amount the Office of Fair Trading (OFT) had claimed the NHS could save by switching to a completely new pricing system.
The Department of Health had been under pressure from the Treasury to produce cost savings, but decided it would achieve these by enforcing a price cut within the existing PPRS system rather than follow the OFT's recommendations for a 'value based' pricing system.
The deal to cut NHS drug costs by 5% is more favourable than some previous deals, in that only 2% will come from branded drugs, with the remainder coming from price caps on off-patent drugs.
'Pro-innovation' measures
In addition to retaining the highly-valued ability to set its own prices at launch, the new PPRS will also include measures to encourage faster uptake of new medicines. The ABPI call this an 'innovation package' and includes:
* A new single horizon scanning process to allow the NHS to anticipate the launch of new drugs more effectively
* Pilot projects to extend prescribing incentive schemes with PCTs to promote uptake of innovative products and 'better use of existing levers' in Payments by Results, the NHS' internal budget system
* League tables of uptake of 'clinically and cost-effective medicines', beginning with selected drugs which have NICE approval; publication of comparative international data
Smaller companies
Smaller pharmaceutical companies had complained that the existing PPRS was designed with larger companies in mind, and that the periodic price cuts of 5-7% were a far more significant loss of revenue for them.
The new agreement takes this into account, and companies with sales of £25 million or less in 2007 should be exempt from the new price cut on their first £5million in sales. Companies with less than £5 million in sales, meanwhile, are completely exempt from price cuts.
ABPI director general Richard Barker, who led the negotiations with the government on behalf of the industry, welcomed the agreement saying: "We believe we have secured for patients a pro-innovation system" and that he believed the price cuts had been shaped to be bearable for ABPI member companies.
Asked about the OFT proposals to introduce 'value based' pricing which had been the original catalyst for the new deal, Barker said it was clear that no-one but the OFT had been convinced that its plans could work.
A central plank of the plans had been that NICE would take on responsibility for setting prices in addition to assessing cost and clinical effectiveness of drugs. Barker said it was 'an open secret' that NICE itself had opposed these plans, and a major reason why they had not been taken up.
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