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Major progress on PPRS

The ABPI and the Department of Health have unveiled details of an outline deal on the pharmaceutical price regulation scheme

The Association of the British Pharmaceutical Industry (ABPI) and the Department of Health (DH) have unveiled details of an outline deal on the pharmaceutical price regulation scheme (PPRS).

While the package on the table details agreements made on parts of the PPRS, it is not yet definitive and further negotiations are needed before the scheme is finalised and implemented.

According to the ABPI and the DH, part of the outline agreement includes a 5 per cent reduction in the price of all branded medicines sold to the NHS. However, if the NHS drugs bill surpasses a 6.7 per cent threshold rate, a further 2 per cent cut will be made, bringing the total price reduction to 7 per cent. The 5 per cent saving will be made up of a base price cut for all branded drugs of 2 per cent, combined with measures to reduce the price of patent-expired medicines (where a generic equivalent is available) and a further variable price cut to deliver savings of 5 per cent.

Other stipulations include:

  • action to support innovation to ensure that patients have speedier access to new medicines that are efficacious and cost-effective; and
  • a new non-contractual voluntary scheme providing stability and predictability in product pricing for the coming five years.
  • As part of the outline deal, the ABPI and government have agreed that smaller pharma companies, the NHS sales of which total less than £5m, will be exempt from any price cuts stipulated by the terms of the PPRS. In addition, any firms that record NHS transactions below £25m will not have to apply the price reductions to the first £5m of sales.

Dr Richard Barker, director-general of the ABPI, who said negotiations over the PPRS were "long and tough," hailed the development in talks between the government and the industry as a victory for patients.

"It really is a key step to restoring stability to the UK environment," he said. "Nobody in industry will be enthusiastic about price cuts, but what we have done is to shape this in a way that is bearable for the industry."

Barker did not confirm whether the government had set out to seek a higher price cut than had been so far agreed, despite unsubstantiated rumours that the DH was angling for a 10 per cent price reduction of branded medicines.

The new PPRS is being put forward as a non-contractual scheme, but the DH has launched a consultation on statutory protection to control the price of branded medicines made by companies that do not sign up to a new PPRS agreement.

Chris Brinsmead, president of the ABPI, said that the proposals from the PPRS negotiations show that the pharmaindustry is acting responsibly, despite having to contend with a troubled UK economy. He explained that the deal with the government will restore confidence in the economic status of the sector and help eliminate delays in getting new medicines to patients.

"This outline agreement provides an excellent platform from which we can work to strengthen our relations with the government and the NHS, and further improve access to innovative medicines for patients," he said. "The outline PPRS will not only offer benefits to the NHS and to the industry, but most of all to patients."

Secretary of State for Health, Alan Johnson, said that the government is delighted with the progress made so far in the negotiations and said the DH recognises the important contribution pharma makes to the UK economy.

"We have a duty to ensure patients continue to benefit from innovative products at a reasonable price and the tax payer gets value for money," he said.

The ageing UK population has put pressure on the NHS and the DH to reduce the costs of the drugs bill to minimise further financial strain, as the need for drugs to treat older people with long-term illnesses increases. Barker believes there "should have a national debate" on this subject and addressing the issue said:

"The idea of medicine being a fixed share of the health bill is a bizarre notion. If we address this problem, we will have more valuable medicines then we have ever had before and there will be a better way of dealing with the situation than putting them [the elderly] in care homes."

18th June 2008

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