UK pharma to lose
pharmafile | January 8, 2009 | News story | Sales and Marketing |Â Â ABPI, NHS, parÂ
The UK pharmaceutical industry stands to lose £225 million in annual profits under its new pricing agreement with the government.
Ministers forecast the 2009 Pharmaceutical Price Regulation Scheme (PPRS) will allow the NHS to make savings with no loss of health benefits.
But it will force pharma companies to squeeze their spending, and most likely lead to cutbacks in sales and marketing costs.
The PPRS does not set the price of new drugs but instead regulates the overall profits companies can make.
The new version of the voluntary agreement comes into effect on 1 February and imposes a 3.9% cut across the prices of their existing branded medicines, with a further 1.9% cut coming in 2010.
In assessing the fallout from the deal, the government said it could help the industry to offset some of the expected revenue losses by spending some NHS savings on more medicines.
But it indicated that cuts to pharma marketing budgets would be necessary.
The Department of Health analysis states: "These offsetting effects mean that the gains of the NHS will outweigh the profit losses of industry, implying a net beneficial impact."
Beyond the UK
It is not just UK pharma that might feel the effect of the new agreement and when brokering the deal the industry expressed concerns about the potential global fallout.
Sources said it could affect the pricing of drugs in 35% of the global market, as countries often reference NHS prices when setting their own.
The government downplayed this possibility and said that as the country comprises just 3.5% of the global market there will be a negligible effect on the viability of global businesses.
Industry confidence
Other parts of the deal do appear more pharma friendly. In particular it is guaranteed to run its five-year course, ensuring an element of stability that was absent from the previous PPRS.
It also states that the price cut only applies to existing branded medicines, and that companies are free set the new medicine prices – and later raise or lower them – as they choose.
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