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The UK’s new five-year pricing agreement

Pharma has agreed to capped growth again - in exchange for uptake promises


The UK has a new five-year Voluntary Pricing and Access Scheme (VPAS) for branded medicines, which came into force on 1 January 2019.

The deal includes a cap of 2% growth on the total medicines bill for each year of the agreement, with any NHS spending over this limit being repaid by the industry.

This is a little higher than the 1.1% rate the medicines bill growth rate has been kept to over the past five years – but much lower than the overall NHS spending growth rate.

The government estimates this will result in £930m in savings. However it says new measures to speed-up decision-making on new medicines mean they could reach patients up to six months earlier than at present. This low rate of growth, combined with new price controls introduced by NHS England on new innovative medicines, means the pharma sector isn’t jumping for joy over the deal. Nevertheless, it provides some stability and predictability for the UK sector, where the uncertainties of Brexit continue to threaten the overall attractiveness of the UK market.

Industry leaders who have voiced their support for the deal include Novartis’ UK country president Haseeb Ahmad and EMIG’s chairman Leslie Galloway, who says the ABPI’s negotiating team had to battle against the government plan to set the growth rate even lower (read Leslie’s commentary here).


Haseeb Ahmad, UK country president, Novartis

The industry has secured assurances that new medicines will benefit from fast-tracking from NICE, and that NHS England will also promote faster uptake – examples of this include recent deals on CAR-T therapies, plus a new expansion in the use of Keytruda in lung cancer, announced late last year. There are new ‘greater flexibilities’ in the deal aimed at helping small and medium-sized pharma companies, including reintroducing ‘the taper’ on rebate payments to reflect the different revenue levels across the sector, which is welcome news for these firms.

Mike Thompson, Chief Executive of the ABPI, said: “This agreement is a commitment by the government and the NHS to work with us to support innovation for the benefit of patients. This means that people across the UK should see better and faster access to the most effective new medicines and vaccines.”

Mike Thompson

Mike Thompson, chief executive, ABPI

Having agreed a ceiling on growth, the question of speed of market access for novel treatments will undoubtedly be the key metric preoccupying UK industry leaders over the next five years.

The Department of Health and Social Care (DHSC) overview

The affordability mechanism

  • Industry agrees to contribute to NHS financial sustainability through an overall cap on growth on NHS-branded medicines sales at a nominal rate of 2% per year, with member companies making payments based on net sales
  • A new cap mechanism to improve ‘stability’, which takes into account overall branded medicine sales across the voluntary and statutory schemes and parallel imports, although scheme members only pay for the voluntary scheme share
  • Support for innovation through a rolling 36-month exemption from payments for new active substances and a significantly improved exemption for smaller companies
  • The payment rate for 2019 is set at 9.6%, with subsequent years’ payments to be determined by actual sales growth.

Uptake, access and outcomes

  • NHS England to provide more proactive uptake support and implementation planning for innovative, cost-effective medicines that provide a significant health gain, including committing to the objective of reaching the upper quartile of uptake for the five highest health gain categories
  • Government, the NHS and industry to continue developing data infrastructure, including developing the ‘innovation scorecard’.

Value assessment

  • More and faster NICE appraisals for new medicines including speeding up the appraisal of non-cancer medicines to be in line with cancer medicine appraisals – cost-effective new medicines will be available faster for patients and come with guaranteed funding
  • NICE basic cost-effectiveness threshold to be retained at the current range (£20,000 £30,000 per quality-adjusted life year) for the duration of the voluntary scheme
  • NICE committed to scoping and, where appropriate, initiating a review of technology appraisal methods.

Commercial arrangements

  • Opportunities for greater commercial flexibility for those companies that offer the best value new medicines, negotiated with NHS England. NHS England, with input from NICE and ABPI, committed to develop and publish a ‘commercial framework’, which will set out further operational detail once the voluntary scheme is in place
  • Confidential sharing of commercial arrangements across the UK, with all four countries to reduce duplication and work towards comparable commercial arrangements.

Routes to market

  • A single, shared approach to horizon- scanning to support better financial and service planning
  • Opportunity for companies to engage earlier with the NHS or government through a single route, including case management where appropriate.

Scheme operation

  • Continued support for innovative medicines in the first three years post-licensing, including freedom of list pricing for new active substances and immediate line extensions
  • Reduced bureaucracy for companies, with routine annual financial reviews (AFRs) no longer being required other than to support applications for price increases, and offering the option of a one-off settlement for historic cash payments
  • Discontinuation of modulation, although existing modulated prices can remain
  • Price increases will continue to need approval from DHSC, with a new provision for price increase approvals if there is evidence that a medicine is no longer economic to supply and where discontinuation would have a negative impact on patient health.

The new UK government-pharma industry pricing agreement – welcome news, but there are lessons to be learnt

By Leslie Galloway, chairman, Ethical Medicines Industry Group EMIG, whose 270 member companies supply 50% of branded medicines by volume in the UK

The deal is done. After undoubtedly tense negotiations, the heads of terms for the new Voluntary Scheme for Branded Medicines Pricing and Access have just been published, and although some among our sector may grumble, I for one am not a critic.

In my mind, the industry negotiating team has achieved what once looked to be impossible. It has achieved a 2% annual growth rate in the 2019 PPRS: a rate better than in each and every year of the 2014 PPRS. It moved what I know for a fact was intended to be an absolute government red line which would have set the growth rate even lower than this. And for my members, it brought back the taper that grants relief to smaller companies.

That is all welcome news. Yes, of course, when the negotiations started we hoped for more. We wanted the budget impact test and highly specialised technologies thresholds to be abolished. We hoped that it might be possible for new assessment pathways, based not on NICE’s approach but something more sophisticated, to be introduced. We called for the rebates from industry to be recycled back into spending on the latest treatments. But these lofty ambitions were always that: just ambitions.

These negotiations took place in an environment of immense economic uncertainty, clouded by the prospect of a no-deal Brexit. And they were undoubtedly a shotgun negotiation: the publication, during the process, of a consultation on a punitive statutory scheme put paid to the belief that this was in any way a negotiation between genuine equals. And that is why I think the industry negotiating team should be congratulated on the job it has done.

Three lessons to learn

Amid the plaudits, nonetheless, we must reflect on the lessons that can be learned, so that we do all that we can to maximise our advantage heading into the next negotiation. And, to me, there are three. The first is that the government has threatened the industry during every recent PPRS negotiation with a reduction in the standard NICE cost-effectiveness threshold. This is an entirely empty threat, and in the future the industry must treat it as such. There is no conceivable scenario in which any government would accept the political risk of reducing the threshold: every patient denied access to a drug as a result would be a vivid demonstration of the direct impact of government cuts.

Opposition parties, whatever their colour, would reject the change. Threatening to reduce the threshold is therefore a bluff, and we should call it out as such. Without doing so, we will never be able to achieve through negotiation the more generous thresholds the industry needs to continue to invest in innovation.

The second lesson for industry is to resist the urge to develop its own, detailed policy solutions to challenges that it sees, when policymakers do not perceive that these challenges exist. Policymakers do not, after all, welcome solutions to problems they do not have. Much time has been spent by industry over the last few years developing alternatives to the NICE appraisal process, or considering ways in which the HST process can be reformed, without first convincing policymakers that this work is even needed.

We now have perhaps just a few months before the already-announced reviews of the NICE process commence. Unless we work constructively with parliamentarians, policymakers and charities to persuade them that there are genuine problems that need to be solved, these reviews will simply conclude that the existing systems are fit-for-purpose, and they will reject any need for change.

The final lesson relates to a more existential threat. It is abundantly clear after this year’s negotiation, if it was not before, that the statutory scheme is used by the government as a weapon to force the industry to acquiesce to its demands during negotiations on the voluntary scheme. Having done so on multiple occasions in the past, we know it will not hesitate to proceed in the same way in the future. Industry must find a way of escaping this trap.

My own view is that the government’s threat to the industry of either having to accept a voluntary outcome on terms the government dictates, or forcing all companies into a statutory scheme, is as false as the threat to reduce the cost-effectiveness threshold. I do not believe the government wants to be trapped in a situation where it is directly regulating the prices of drugs, and where every drug denied to a patient is therefore a problem which lies at the minister’s door.

When the government launches a consultation on the statutory scheme during the next PPRS negotiation – as it will surely do – my counsel to industry negotiators will therefore be to walk away, challenge the government to force all companies into the statutory scheme, and negotiate on equal terms when the government returns to the negotiations after its bluff is called.

Talk is cheap, of course, and I know it is easier to comment on the negotiations than to participate in them. Ultimately, the PPRS deal announced is a good outcome for industry. But it might have been better, and if we reflect candidly on the lessons learnt from this negotiation, we can do better for industry, the NHS and patients in the future.

16th January 2019

16th January 2019

From: Sales


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