The OFT today recommended that the Pharmaceutical Price Regulation Scheme ( PPRS ) should be reformed, to deliver better value for money from NHS drug spend and to focus business investment on drugs that have the greatest benefits for patients.
The NHS spends about ?8 billion a year on branded prescription medicines. The OFT’s study identifies a number of drugs where prices are significantly out of line with patient benefits. These include treatments for cholesterol, blood pressure and stomach acid. Specifically, some drugs currently prescribed in large volumes are up to ten times more expensive than substitute treatments that deliver very similar benefits to patients.
The study recommends that the current ‘profit cap and price cut’ scheme, where companies are free to set their own prices within very broad profit constraints, be replaced with a patient-focussed value based pricing scheme, in which the prices the NHS pays for medicines reflects the therapeutic benefits they bring to patients. This would enable the NHS to obtain greater value for money from its existing drug spend. The OFT estimates that it would release in the region of ?500 million of expenditure that could be used more effectively, giving patients better access to medicines and other treatments which they may currently be denied.
Over time, value-based pricing would give companies stronger incentives to invest in drugs for those medical conditions where there is greatest need. Because the health services in many other countries base their prices on those in the UK, additional benefits would arise internationally.
Many countries, including Sweden, Australia and Canada, have successfully implemented value based pricing and reimbursement systems. The OFT has drawn on that experience in designing a workable scheme for the UK that builds on existing NHS expertise.
John Fingleton, OFT Chief Executive, said:
‘This report provides a comprehensive assessment of the PPRS and identifies a number of areas where the scheme could be improved. Focussing prices on the needs of patients rather than on the costs of drug companies would be good for both patients and for business. It would allow more patients better access to more effective treatments, and it would focus drug company innovation and investment on the areas where patients need it the most, creating more valuable drugs in the future.’
The Department of Trade and Industry and the Department of Health now have 120 days to consider and respond to the OFT’s findings and recommendations.