New payment mechanism to be introduced to address disparity in pricing of branded drugs to the NHS

The new payment mechanism will serve to reform the current statutory price control mechanism, which regulates the prices of branded medicines supplied to the NHS in England by companies that do not participate in the voluntary Pharmaceutical Price Regulation Scheme (PPRS).

The Department of Health said (16-page / 341KB PDF) that there is a disparity between the savings NHS bodies can make by procuring branded medicines through the statutory scheme compared to under the PPRS. It said it will press ahead with plans to introduce a new payment mechanism under the statutory scheme to help lower costs to the NHS.

It said its plans, however, would provide sufficient flexibility to allow for price increases in the supply of medicines under the reformed statutory scheme. This will help secure adequate long term supply of the drugs the NHS needs to be able to access, it said.

The DoH said: "One of the aims and benefits of the voluntary scheme is to provide stability and predictability to the government and pharmaceutical industry. However, if the statutory alternative offers a very different commercial proposition and makes significantly lower savings in relative terms, as is the case now, the result is that there is inequity between the financial impacts of the two schemes. This also means the NHS loses out on the level of savings anticipated in the PPRS agreement."

"We propose to base payments on company sales data which is then independently audited to a standard specified in regulations and can be checked for accuracy against administrative data," the DoH said. "This should result in estimates which are as accurate as they could reasonably be expected to be. This system has worked relatively smoothly for the PPRS."

The sale of over-the-counter medicines prescribed by NHS doctors will be excluded from the payment mechanism proposals, it said.

The DoH said that by changing the law it will end any doubt as to whether the government has sufficient power to introduce its proposed payment mechanism. It said some bodies within the pharmaceutical industry had threatened to challenge the government over its powers before the courts.

Expert in life sciences Helen Cline of Pinsent Masons, the law firm behind Out-Law.com, said the government's plans could open up a fresh discussion on access to medicines.

Cline said that one of the issues that could be looked at again is where money collected in rebates from drugs companies should be channelled. She said that rather than the money going into a central pot within the Treasury, the rebates could be aggregated in a dedicated medicines fund, perhaps along the lines of the New Medicines Fund in Scotland, to pay for new innovative medicines. That approach to rebating might be more palatable to industry, she said.

Cline also said that a major indicator of the government's approach to speeding up patient access to innovative treatments is likely to come out of its Accelerated Access Review. The final report on the review is expected to be published within the next fortnight, she said.

"The medicines commissioning system will need to meet the challenges of accelerated access," Cline said. "Hopefully the accelerated access review will be a lever for the establishment of a clearer access pathway for getting innovative medicines to patients."