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UK government and pharma clash over drug price cuts

The UK government is seeking a cut of 10 per cent in the prices the NHS pays for prescription medicines by the middle of 2008

The UK government is seeking a cut of 10 per cent in the prices the NHS pays for prescription medicines by the middle of 2008.

In an interview with the Financial Times (FT), the UK health minister Alan Johnson said he planned to generate substantial savings in the drugs budget during talks with the pharmaceutical industry to be completed by June on the Pharmaceutical Price Regulation Scheme (PPRS).

The government wants to cut the annual NHS drug bill, which currently stands at GBP 11bn, by 10 per cent, or approximately GBP 1bn.

The move comes as the Department of Health is looking to make savings of three per cent a year, imposed by the Treasury as part of the comprehensive spending review announced in 2007.

Unsurprisingly, Pharma is unhappy. The industry agreed to an average seven per cent cut back in 2005, as part of the last renegotiation of the PPRS, which was meant to run until 2010.

The industry says that the government is concentrating only on reducing costs without taking into account the savings drugs make in driving down health and social care costs.  Others say that if the cuts are instituted, R&D will be negatively affected.

Pharma is predicted to ask for the removal of generic drugs from the PPRS, but will demand higher prices for biologic and other novel drugs. The industry is also expected to demand that the NHS quicken its uptake of novel products, as the UK is slow to adopt new pharmaceuticals, compared with other countries.

The current situation is also being driven by reports from the Office of Fair Trading. One is calling for a value-based approach where the amount the NHS pays would be much more closely related to the benefit the drug produces, while the other is criticising distribution channels.

Another issue is the 2007 ruling in favour of GlaxoSmithKline against the Department of Health, which stated that the PPRS was an informal agreement and not a formal legal contract.

7th January 2008

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