Department of Health and Social Care
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Government and Industry in drug price deal

Government and Industry in drug price deal

DEPARTMENT OF HEALTH News Release issued by COI News Distribution Service. 19 November 2008

A new deal reached today between the Government and the pharmaceutical industry means that more patients will benefit from a wider range of innovative drug treatments at a fair price to the NHS.

The flexible pricing scheme agreed will ensure that medicines fairly reflect their value to patients, branded drugs will see their price cut, and industry innovations will be encouraged and rewarded. As a result, patients will have faster access to new medicines that are clinically and cost effective.

Today's agreement with the pharmaceutical industry meets 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.

The headline agreements with industry include:

* a cut in the cost of drugs sold to the NHS: a 3.9 per cent price cut will be introduced starting in February 2009.

* a further price cut of 1.9 per cent will be introduced in January 2010;

* Subject to discussion with affected parties, the Department of Health will also introduce generic substitution from January 2010. There would be further price adjustments on January of each year aimed as the proportion of savings from generic substitution varies with time;

* action to support innovation so patients have faster access to new medicines that are clinically and cost-effective;

* a new non-contractual voluntary scheme providing stability and predictability in Pharmaceutical Pricing for the next 5 years;

* 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; and

* the more systematic use of patient access schemes by drug companies to allow access to medicines which have not initially been assessed as cost or clinically effective by NICE.

Alan Johnson said:

"A more flexible approach to pricing is in everyone's interest. 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.

"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."

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.

"With the Department of Health, we have developed a solution that addresses the immediate needs of patients and their families, and the NHS.

Notes to editors:


1. Today's announcement follows agreement on the new 2009 Pharmaceutical Price Regulation Scheme (PPRS). PPRS is the voluntary agreement between Government and industry on pricing of branded drugs in the UK.

2. The first two measure outlined above are different from the key components of the heads of agreement announced in June 2008. These changes have been made with a view to simplifying the scheme, whilst still ensuring that the intent of the original deal has been met.

3. In September 2005 OFT launched a market study into the PPRS. The OFT's key recommendation is that the Government reforms the PPRS, replacing it with a value-based approach to pricing which would ensure the price of drugs reflect their clinical and therapeutic value to patients and the broader NHS.

4. Companies with sales of £25 million or less in 2007, the first £5 million sales will be exempt from the price cut. As with the current PPRS, companies would have freedom of pricing for new products and be able to modulate prices. There will be an independent dispute resolution mechanism.

5. 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 uptake of clinically and cost-effective medicines starting with a number of drugs positively appraised by NICE, and publication of comparative international data.

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