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UK government tables bill on medicine pricing reforms

New scheme proposes single payment mechanism for old and new drugs alike

UKThe UK has set out its stall for controlling the cost of branded medicines, which focuses on introducing a single payment mechanism for both new and old drugs.

The proposed scheme would replace the current 15% price reduction on drugs on sale on 1 December 2013 with a blanket payment by companies against eligible sales of all drugs - proposed as a 10% to 17% range - after deducting discounts and VAT.

A central objective in the shake-up is to remove disparities between the voluntary Pharmaceutical Price Regulation Scheme (PPRS) and the statutory price control system for branded drugs sold by companies who do not sign up to the PPRS, says the Department of Health, which has just tabled the proposals in Parliament via the Health Service Medical Supplies (Costs) Bill.

"The statutory scheme produces lower savings relative to the health service sales covered by the scheme than the PPRS and the gap is expected to widen," says the Department of Health, which has just published its recommendations after a consultation period in which it received 51 responses from a variety of organisations including the pharmaceutical industry, patient groups, NHS organisations and charities.

"We need to re-align the statutory scheme savings with the PPRS in order to promote a more level playing field between the two schemes and in order to encourage companies to remain in the PPRS."

The approach is better than simply cutting the maximum price of drugs, as it would deliver the highest level of NHS savings (estimated at £113m in 2017/18) and would result in "a fairer outcome for companies in the statutory scheme than setting a uniform cut in list price which affects companies differently depending on the discounts they offer".

Other benefits would include limiting the average selling price in secondary care, because the payment percentage will be applied to total sales, and avoiding the problem of having two list prices for the same product as can occur using the present system.

The document also suggests the level system would "help companies to compete globally by providing stability in UK prices”.

Commenting on the report in an emailed statement, the commercial director of the Association of the British Pharmaceutical Industry (ABPI), Dr Richard Torbett, said the organisation is "looking carefully at the bill to ensure that the government's response is proportionate and appropriately targeted”.

"The ABPI acknowledges the need for clarity on pricing on older medicines and has been calling on the government to take action on the issue of significant price rises in a small number of those medicines where a competitive market is not working as effectively," he added.

The proposed system would appear to draw a line under the UK's flirtation with the concept of value-based pricing as a replacement for the PPRS system, which lost momentum on concerns the approach was unlikely to solve issues surrounding new medicines access in the NHS.

Article by
Phil Taylor

16th September 2016

From: Sales



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