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OFT checks PPRS 'value'

The Office of Fair Trading has launched a market study into value and effectiveness to patients of the current pricing mechanism

The Office of Fair Trading (OFT) has launched a market study into value and effectiveness to patients of the current pricing mechanism which caps the profits pharma firms can make from the sale of medicines to the NHS.

The latest Pharmaceutical Price Regulation Scheme (PPRS) - the method by which the Department of Health (DoH) seeks to control the price of drugs sold to the NHS - was negotiated between the government and the UK pharma industry (via the ABPI) last year and is due to run until 2010.

The OFT says the inquiry is designed to check whether the PPRS is meeting its aim of securing the provision of safe and effective medicines for the NHS at reasonable prices, as well as promoting a strong and profitable pharma industry capable of sustaining healthy investment in R&D.

OFT chairman, John Vickers, said: “We want to examine whether the PPRS works well, to ensure that pharmaceutical markets meet the needs of patients, by offering adequate rewards to pharmaceutical companies for developing new and useful drugs, while providing the taxpayer with value for money.”

The decision to launch the study follows a previous investigation by the OFT into the impact of public procurement on competition, leading to speculation that the office may harbour concerns that the voluntary PPRS agreement is anti-competitive.

However, pharma pricing expert Keiron Sparrowhawk, from consultants PriceSpective, said that it would be unfair to label the PPRS as anti-competitive in terms of the drug prices it regulates.

“The only place where the PPRS could be seen as anticompetitive in the way it works is that it is going to give greater benefit to those companies that invest more in the UK than those that don't,” he commented. “The UK is fortunate in that it has a lot of downstream mechanisms such as local health authorities and Primary Care Trusts which take a value-centric approach to drugs and help to ensure that price competition does occur.”

Association of the British Pharmaceutical Industry spokesman, Matt Worrall, said it was too early for the organisation to make a considered opinion of the study: “We haven't had any information on its start point and its frame of reference and until we have that it would be quite difficult to say whether we're worried or otherwise.”

The study will last until at least next spring and could continue until the tail end of 2006, depending on the findings.

30th September 2008

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