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Value-based pricing "not in patient interest"

Think-tank 2020health calls for rethink of UK drug pricing plans

Value-based pricing: the wrong medicine for the nation?

The UK government's plans to introduce a new system of drug pricing that takes into account the wider value of a new medicine is neither in the patient interest nor national interest, according to a leading healthcare think-tank.

2020health said it approached the subject from the patient's perspective and concluded that the current PPRS system for drug reimbursement has kept UK medicine prices below the average in advanced countries and also supported R&D.

However, if the government goes ahead with a planned 2014 switch to value-based pricing (VBP) – which would take into account wider societal benefit, extended cost savings and the medical value of a drug to different patients – it could harm both access to drugs in the UK and the country's research environment.

The report will be welcome news for UK trade body the Association of the British Pharmaceutical Industry (ABPI), which has been vocal in its concerns with VBP – originally introduced by former health secretary Andrew Lansley – and is currently in talks with England's Department of Health about how the proposed system will work in practice.

Little has been heard from either camp on the practicalities of how VBP will work since negotiations started in September last year, although the ABPI's chief executive Stephen Whitehead has said he is in favour of an updated PPRS that better supports innovation.

This would tie in with the 2020health report, which said that companies should be able to continue to fix their own prices for individual drugs, as is currently achieved within PPRS through a profit cap, but new controls, such as a revenue cap, should be available to ensure that the total NHS drug sales for all companies are “acceptable and affordable”.

Keeping drug pricing decision in this format would also help prevent drug pricing becoming a political issue, with VBP likely to result in government-set prices for drugs.

“The public have been told that politicians are staying out of the NHS, so this change could seem like hypocritical interference,” said the report's main author, Barbara Arzymanow, who has spent 25 years as an investment analyst specialising in the pharma industry.

This increased political influence could also harm the UK's R&D environment, according to the report.

“It is tempting to believe that high prices for drugs favoured under VBP will encourage R&D directed at the discovery of such products,” it claimed. “In fact, drug companies are already fully aware of the benefits of innovative R&D.

“We can encourage companies to base R&D in the UK, but this becomes harder if the government tries to influence the nature of R&D politically.”

Other potential problem areas for patients highlighted by the report included the expectation that patients could mistake VBP for a commitment to make more medicines available.

In fact, the opposite is likely to be true, according to the report, with the introduction of VBP possibly leading to fewer patient access schemes.

These schemes allow pharma companies to provide their drug at a discount when used on the NHS in England and Wales as part of a recommendation from the National Institute for Health and Care Excellence (NICE).

NICE's deputy chief executive Professor Gillian Leng has previously said these schemes are likely to remain under VBP, although the 2020health report says that in the more transparent pricing environment of VBP, these negotiations would not be able to be conducted privately, reducing the willingness of pharma companies to cooperate.

Instead of switching to VBP, 2020health recommends more patient access schemes, to help make drugs available to patients on the NHS.

Its other recommended changes to the current pricing system include lowering the price of older drugs so that companies are given the leeway to sell new medicines at a higher price, while bonuses should be offered to companies marketing drugs for less common conditions.

Read the full report

9th May 2013

From: Sales

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