[Ip-health] UK: Pharma industry will pay £550m of NHS 2016 drugs bill

Jamie Love james.love at keionline.org
Tue Dec 22 09:59:41 PST 2015

Under the UK's Pharmaceutical Price Regulation Scheme (PPRS), drug
companies will make rebates of about £550 million in 2016, according to
this story.

The PPRS system provides an interesting model.  Suppose it involved
mandatory rebates, whenever the total drug bill exceeds the government's
budget?  Then the allocations to the industry would be a zero sum game,
just as in the Sander's Medical Innovation Prize Fund approach.  Drugs with
higher prices would be claims on a greater slice of the fixed budget, at
the expense of other less pricey drugs.  The government expenditures would
not be changed, even if they shifted to broader access to the more
expensive drugs, but drug manufactures would be impacted, because more for
Peter leaves less for Pauline.

This is probably a feasible way to transition to the optimal delinkage
models, which would have more efficient incentive structures. Companies
could not claim a loss of revenue, because the government budgets would be
fully spent out.  Access would improve.

Policy makers would then begin to ask the right questions, which include,
most importantly, which set of prices/rewards provide the best incentives
to investors in R&D, rather than "how much is this drug worth?."  When you
only ask, how much is a drug worth, but ignore the budget constraint, the
conversation generally leads in the direction of rationing and access



Pharma industry will pay £550m of NHS 2016 drugs bill
Published on 22/12/15 at 09:44am

Since it was first negotiated by the ABPI in 2014 the industry has paid
around £1 billion to the Government

A new financial agreement announced this week as part of the Pharmaceutical
Price Regulation Scheme (PPRS), will see the pharmaceutical Industry pay
around £550 million in 2016 to help pay for medicines for NHS patients.

The ABPI and the UK Department of Health announced the PPRS payment
percentage for 2016 will be 7.80%, a fall of 2.56% on 2015’s level, but
more than double that of 2014. The level is based on the growth of
medicines expenditure.

This latest deal means the payments are restructured, so that around
£200million of the estimated payments for 2017 and 2018 will be brought
forward to 2016 to help the Government achieve its promises of additional
NHS funding.

The PPRS is a non-contractual scheme through which pharmaceutical companies
contribute towards the cost of medicines, with the aim of making the latest
treatments affordable for the NHS. The ABPI says pharma made a contribution
in 2015 of £202million to the Department of Health under the PPRS, bringing
2015's total to £619million. The industry has paid around £1 billion back
to government since the inception of PPRS in 2014, and over the five years
of the agreement expects to pay a total of £3 billion.

Meanwhile the forecast spend for the Cancer Drugs Fund for 2016/17 is £340
million, representing a £70 million drop on the previous year as the Fund
is reformed in April 2016.

Acting ABPI chief executive Alison Clough says: "By agreeing to bring
forward these payments, our industry is showing its commitment to patients
so they get the medicines they need and also to improving the flow of new
and innovative medicines into the NHS. We know that access to new medicines
is patchy across the UK and that there are still barriers in the system.

"The PPRS is unique; combined with the UK having some of the lowest costs
for medicines in Europe, it provides us with a real opportunity to use new
medicines to help improve health outcomes. We hope today's agreement will
help us to make faster progress."

 The ABPI reiterated the industry’s call for more focus on modernising the
medicines used in the NHS, to accelerate the use of those medicines which
are recognised as offering the highest standards of clinical and
cost-effectiveness and which have been recommended for use by NICE.

Joel Levy


James Love.  Knowledge Ecology International
KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
+41.76.413.6584, twitter.com/jamie_love

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