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All things Pharma

The new pharmaceutical pricing deal

The prices of drugs sold to the NHS will be cut as part of a new agreement between the DH and industry, which is expected to save the health service £350 million.

A new drug pricing deal that will reduce the price of medicines sold to the NHS has been agreed between the Government and the pharmaceutical industry.

It is hoped that the deal will ensure that more patients benefit from a wider range of innovative drug treatments at a fair price to the NHS. It is also expected to save the NHS a considerable amount of money: around £350 million in 2009/10 and £550 million every year after that.

The deal will introduce a flexible pricing scheme, designed to make sure that medicines fairly reflect their value to patients, branded drugs will see their prices cut, and industry innovations will be encouraged and rewarded. As a result, it is hoped that patients will have faster access to new medicines that are clinically and cost effective.

The new agreement aims to meet the commitments set out both in Lord Darzi’s review of the NHS earlier this year and the National Cancer Director’s review of access to medicines. It also reflects the Office of Fair Trading’s recommendation that value should be better reflected through the PPRS.

Dr Richard Barker, Director General of the ABPI said: “This landmark deal marks a turning point for patients, the NHS and the pharmaceutical industry. For the first time, the PPRS is much more than a simple economic agreement that looks at price alone. It is an all-encompassing package that encourages the discovery of new, more effective medicines, while at the same time allowing NHS patients to access these treatments more quickly.”

Flexible pricing

The most significant change under the agreement will be the introduction of new and more flexible pricing arrangements that will enable drug companies to supply drugs to the NHS at lower initial prices, with the option of higher prices if value is proven at a later date.

The price of drugs sold to the NHS will also be cut across the board, with a 3.9% cut in February 2009, followed by a further cut of 1.9% in January 2010. This varies to the initial Pharmaceutical Price Regulation Scheme agreements made in June, which suggested a base price cut for all branded medicines of 2%, combined with measures to reduce the price of out-of-patent drugs (where a generic equivalent exists) and a further variable price cut to deliver 5% overall.

There has been provision for smaller companies in the new agreement, as for those with sales of £25 million or less in 2007, the fi rst £5 million sales will be exempt from the price cut.

“For the first time, the PPRS is much more than a simple economic agreement that looks at price alone. It is an allencompassing package that encourages the discovery of new, more effective medicines, while at the same time allowing NHS patients to access these treatments more quickly”
Dr Richard Barker, Director General, ABPI

Similarly to the current PPRS, companies will have freedom of pricing for new products and be able to modulate prices.

“A more flexible approach to pricing is in everyone’s interest,” commented Health Secretary Alan Johnson. “It gets clinically and cost effective drugs to more patients – providing cheaper options where clinically appropriate – delivers value for money for the NHS and the tax payer, and creates a better market for the pharmaceutical industry while supporting research and innovation.”

The new scheme has been welcomed by patient groups, such as Cancer Research UK and Beating Bowel Cancer.

Harpal Kumar, Cancer Research UK’s Chief Executive, described the deal as a “signifi cant step forward”, adding: “Importantly, this deal adds flexibility to drug pricing, so NICE will be able to recommend more new cancer drugs for use in the NHS. We believe that pharmaceutical companies with confidence in the new treatments they are developing shouldn’t be frightened of schemes aimed at pricing treatments according to their benefit.”

Encouraging innovation

The agreement includes action to support innovation, so that patients have faster access to new medicines that are clinically and cost-effective.

The innovation package includes:
• establishment of a single horizon scanning process for new drugs in development, with more systematic industry involvement, to support better forward planning
• piloting extension of prescribing incentive schemes with PCTs, to promote uptake of innovative products and better use of existing levers in Payment by Results
• development of new metrics for the uptake of clinically and cost-effective medicines starting with a number of drugs positively appraised by NICE, and publication of comparative international data.

Patient access schemes

The new agreement:

• 3.9% cut in the cost of drugs sold to the NHS
• further price cut of 1.9% January 2010
• introduction of generic substitution from January 2010
• action to support innovation
• new non-contractual voluntary scheme for the next five years
• new and more flexible pricing arrangements
• more systematic use of patient access schemes

The agreement also encourages the more systematic use of patient access schemes by pharma companies, to allow access to medicines which have not initially been assessed as cost or clinically effective by NICE.

Alan Johnson added: “Patient access schemes together with flexible pricing of pharmaceuticals will also enable the NHS to offer more patients a wider range of more expensive drugs as recommended by the National Cancer Director Mike Richards in his recent report on improving access to medicines for NHS Patients.”

However, critics such as Shadow Health Minister Mark Simmonds have alleged that the new agreement has failed to address the issue of patient access to treatments that are currently available in Europe but not in the UK.

Generic substitution

As another clause of the agreement, the DH plans to introduce generic substitution from January 2010, which would mean pharmacists are allowed to prescribe the generic version of a drug even if the branded version is named on the subscription.

The Royal Pharmaceutical Society of Great Britain (RPSGB) has welcomed the new scheme, but has suggested that the real test will be whether it meets its aims of improving access to new medicines and creating savings for the NHS.

President Steve Churton said: “Generics substitution is routinely carried out and works effectively in most hospitals in the UK. There is also already a high level of generic prescribing in General Practice in the UK. However, a number of medicines either have no generic equivalent, or generic substitution is not appropriate, e.g. in slow release formulations.”

He added: “The RPSGB intends to bring together subscribers, pharmacists, Government, industry and patients to develop unified professional standards on generic substitution and to ensure that effective treatment is not compromised.”

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