The UK Government and the pharmaceutical industry shared many objectives throughout the recent drug pricing negotiations. For example, there was always broad agreement that:
- The total future drug bill needed to be affordable in the context of other spending in the NHS and elsewhere in the wider economy.
- As many valuable drugs as possible should be available for doctors to prescribe.
- Research and Development/innovation should be encouraged because of the major potential benefits to mankind.
- The pricing scheme would be attractive enough to enable companies to feel comfortable investing in production and R&D in the UK.
- The realities of international trade, for example parallel importing and exporting, had to be taken into account.
The main danger in negotiations was a risk of losing sight of the main goals in a misguided rush to implement value-based pricing (VBP). All possible VBP systems are controversial and many important pitfalls are difficult to avoid in a VBP environment.
The outline agreement reached between the Government and the industry has accepted all of the main suggestions that I have put forward in my past blogs written for the think tank 2020health. Further links to relevant material can be accessed through my website www.researchideas.co.uk . The new agreement is complex but in summary:
- The existing drug pricing system, known as the Pharmaceutical Price Regulation Scheme (PPRS), will be modified to reflect current needs. It will not be replaced for new drugs or any other products by a pure value-based pricing scheme. The PPRS has served well and adapted to changed circumstances under successive governments since its introduction in 1957. The scheme has many merits not possible with a pure VBP system. Change will be by evolution, not revolution.
- The threat to pricing systems from parallel importing and exporting has been met by exempting these from the main controls of the PPRS. Parallel exporting does of course not affect the NHS drug bill whilst parallel importing reduces it.
- The main controls will relate to the sales growth of the entire NHS drug bill, subject to certain exceptions. In general, total sales to the NHS will be calculated by adding up the sales of companies supplying the NHS. Growth in this industry-wide sales total will be capped at the following levels:
2014 2015 2016 2017 2018
0% 0% 1.8% 1.8% 1.9%
If the industry achieves sales in excess of these targets the excess will be paid back to the Government with each company contributing in proportion to its sales to the NHS.
- The launch prices of new drugs will be at the discretion of the companies involved, although a drug can have too high a price for the NHS to afford it.
- Companies with drugs launched after January 2014 will have their rebates paid to the Government adjusted to exclude the amounts relating to the new products. The reduction in payments will effectively be made up by other companies with no or lesser dependence on new drugs. The effect of this provision is similar to permitting higher prices for new drugs at the expense of older ones and therefore to encourage innovation.
- Patient Access Schemes will continue to be allowed when in the interests of the NHS to secure better value for money or to secure supplies of a product on acceptable terms.
One of the prime objectives of Government has been to control the growth in drug spending. This goal has been achieved directly through the caps and rebates. The revised PPRS, like all previous versions, aims to give companies considerable freedom over the pricing of individual products so that account can be taken of international market forces. A second aim is to make as many products as possible available. This is made easier because companies can effectively subsidise dearer products by charging a higher price for cheaper ones. The measures relating to new products will help innovation.
The most important outstanding price-related debate is over the future role of NICE (National Institute for Health and Care Excellence). A public consultation will be held. It is right and proper that an independent expert body should give independent advice on drugs to the NHS, Government, doctors and the Public. NICE is the best-placed body to do this. However, NICE needs new directions and a culture change. The organisation was originally established under Labour with an aim of blocking excessively expensive drugs. NICE acquired a reputation for rejecting drugs too readily. In some cases NICE later reversed its own guidance. In the case of cancer the Government set up a special fund to help patients benefit from expensive drugs. In reality, NICE can only function in valuing drugs with a political input. Awkward questions arise daily. Is the life of a murderer worth the same as a Nobel Prize winner? Which is worse: Alzheimer’s disease or terminal cancer? Moral and political decisions should not be the role of NICE. Issues such as whether to permit smoking in hospital gardens are not about professional debate. The medical facts are well known. The debate is about people’s values.
Two changes could transform NICE. First, in order to help change its ethos NICE should be instructed to include in societal benefits: employment in R&D, maintaining a technology base in the UK, achieving exports and other financial benefits. My second proposed change is that where decisions are economic rather than medical, NICE should decide on the basis of what is likely rather than on conclusive proof.