NHS medicine spend to remain flat for two years

After almost two years of negotiations, the UK Government and pharma industry have agreed a revision to the system for drug pricing of branded medicines in England to commence from January 1, 2014.

One of the main points of the note in the new Pharmaceutical Price Regulation Scheme (PPRS) is a price freeze on NHS medicine expenditure in England over the next two years in order for the service to help claw back part of the £12bn annual drug budget amid wider cost-cutting measures.

This comes despite previous growth forecasts in NHS medicine spend of 3.87 per cent and 3.52 per cent for 2014 and 2015 respectively, meaning that pharma companies effectively have to face a price cut on branded medicines to stick to the revised budget.

Prices will then be allowed to increase over the next three years, although at a rate less than previously forecast.

The agreement, which was negotiated between the Department of Health (DH) and the Association of the British Pharmaceutical Industry (ABPI), also clarified that pricing assessment for new drugs could take into account the wider value of a medicine.

From 2014, the National Institute for Health and Care Excellence (NICE), which assesses the cost-effectiveness of drugs for NHS use, may perform an appraisal of a new medicine that takes into account its wider societal value if requested to do so by the manufacturer.

This stops short of a complete overhaul of PPRS to a value-based pricing (VBP) system that the industry had been wary of.

NICE will also keep its cost-effectiveness threshold at its current level for new drugs for the next five years as further means to support lower drug costs.

The ABPI's CEO Stephen Whitehead said the deal allowed both parties to move forward, but said the Government still needs to recognise the value of medicines for patients.

“We have agreed to play our part, recognising the financial challenges facing the NHS,” he said. “We now need the Government and the NHS to respond positively to this unique opportunity to demonstrate their active commitment to improving patients' access to the latest medicines.”

His colleague, ABPI president Deepak Khanna, was critical of some of the foundations the negotiations were based on as well the impact on the pharma industry.

“The negotiations were built on a myth that medicines are expensive in the UK, which is not true,” he said.

He added: “The commercial environment in the UK has an impact on its attractiveness for research and development investment and it's too early to say what impact this settlement will have on industry investment.”

His comments come against a backdrop of industry cutbacks in the UK, including the announcement yesterday that Novartis is discussing the future of its site in Horsham.

Despite these concerns, the Government described the agreement as a “breakthrough” that will allow the NHS to increase the availability of branded medicines.

“UK pharmaceutical companies have responded to the challenges we face as a country, both in terms of the increased demand for medicines and pressure on public spending,” said health secretary Jeremy Hunt.

“I hope in return we have given them the certainty and backing they need to flourish as a sector both here and in the global market.

In addition to the PPRS announcement, the DH also published details of its plans for statutory medicines - branded drugs sold by companies who do not sign up to the voluntary PPRS.

As previously announced, the cost of these medicines will be cut by 15 per cent, a decision that ABPI CEO Stephen Whitehead described as “disappointing”.

“Asking companies who enter the statutory scheme to contribute even more at a time when the industry has already made huge savings is excessive and unnecessary,” he said.

Read the revised PPRS policy