Govt finalises deal to cap state drugs bill

Reuters/London

The cost to the National Health Service (NHS) of these drugs will be held flat for two years under the latest version of the pharmaceutical price regulation scheme, or PPRS, the department of health said yesterday.

Pharmaceutical companies will be required to rebate the difference between the allowed growth in the drugs bill and the estimated actual increase in the cost of treatments, which is expected to be 3.74% in 2014. Costs will be allowed to rise by 1.8% in 2016 and 2017, and by 1.9% in 2018.

The pharmaceutical industry said the new arrangement would be difficult for companies and was based on a “myth” that Britain paid a high price for its drugs. It is the first time that Britain has set a fixed limit on NHS drugs spending and the government argued there would be significant savings for taxpayers, since medicine costs have increased by around 5% annually in recent years.

The cost of branded drugs tends to rise faster than off-patent products, where competition drives down prices. Governments across Europe have been taking a tough line on drug costs as stagnant economic growth hits their healthcare budgets.

In Germany, Chancellor Angela Merkel’s conservatives and the centre-left Social Democrats agreed on Monday to maintain a similar tight rein on prescription drug costs via legally mandated price discounts.

The deal struck between the government and the Association of the British Pharmaceutical Industry (ABPI) follows several months of negotiations, which the ABPI described as the most complex ever. It also includes a statutory price cut of 15% for any companies that do not sign up to the voluntary PPRS scheme.

“This agreement ensures NHS patients will receive the best and most advanced medicines in the world while managing the cost,” said Health Minister Jeremy Hunt.

But ABPI President Deepak Khanna said it should not be underestimated how tough the deal would be for companies.

“The negotiations were built on a myth that medicines are expensive in the UK, which is not true. The UK already spends amongst the lowest on medicines as a percentage of GDP and has some of the lowest prices in Europe,” he said in a statement.

Pfizer’s British arm said the deal was “a missed opportunity for patients, industry and the UK economy”, arguing that the over-riding focus on managing costs represented a short term and damaging approach.