Healthy Skepticism Library item: 13046

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Publication type: news

Jack A
Ministers to scrap pricing deal on medicines
The Finanical Times 2008 Feb 29
http://www.ft.com/cms/s/0/42e0bc3e-e668-11dc-8398-0000779fd2ac.html

Full text:

The government is poised to scrap the pricing mechanism for prescription medicines, setting a deadline of September 1 for the launch of a new deal with drug companies.

In a letter to be sent as soon as today, the Dep-artment of Health will inform the Association of the British Pharmaceutical Industry, the trade body, that it is giving notice on the mechanism, according to people with knowledge of the plans.

The change, triggered in part by Treasury pressure for spending cuts and a series of recent official reports calling for reforms, comes almost 2½ years before the scheduled end of the complex mechanism, called the pharmaceutical price regulation system.

The notification follows indications last year from Alan Johnson, the health secretary, that he wanted to renegotiate the pharmaceutical price regulation system, and was seeking to achieve a significant proportion of a 3 per cent cut in total departmental spending through a reduction in the £11bn medicines bill.

It also suggests significant progress towards agreement on a new set of terms between the government and the industry.

Under the terms of the existing pharmaceutical price regulation system, negotiated in 2005 and due to last until 2010, either the ABPI or the government must give six months’ notice to the other side.

The industry had opposed the calls for change, arguing that the PPRS provided a degree of long-term predictability and stability in pricing, and that it had already imposed an across-the-board price cut of 7 per cent on all prescription medicines.

Government officials are believed to have called for a 10 per cent price cut again this year in their opening negotiations, while the ABPI has argued that any fresh reduction should be compensated by incentives to re-ward innovation and boost the uptake of new medicines.

A revised mechanism may seek savings through scrapping the inclusion of “branded generics” – prescription medicines which have come off patent and which helped to allow drug companies to minimise the impact of the 7 per cent price cut by reducing prices far more on products with lower margins.

It will need to take into account a recent report from the Office of Fair Trading to introduce a pricing system more closely aligned to new medicines, their value in improving treatment and their cost effectiveness.