Branded drugs pricing deal for NHS criticised by biopharma trade body

The Ethical Medicines Industry Group (EMIG), which represents 110 small and medium sized pharmaceutical businesses, said the new Pharmaceutical Price Regulation Scheme (PPRS) will hamper investment in new innovative drugs.

On Tuesday the Government announced that it had finalised details of how the new PPRS framework would operate (133-page / 952KB PDF) with the Association of the British Pharmaceutical Industry (ABPI), which represents 55 pharmaceutical companies operating in the UK. Under the five-year agreement, which will kick in after the existing PPRS ends on 31 December, pharmaceutical companies would absorb the costs of NHS spending on branded drugs above the maximum-capped amount.

The PPRS agreement is voluntary and some branded drugs manufacturers can elect not to sign up to the deal. The Government has, though, separately outlined its intention to cut the price it pays companies through the statutory scheme by 15% from January, and has reserved the right to make further changes to the framework. The statutory scheme is the price control mechanism applying to companies choosing not to join the voluntary scheme. A number of exemptions are set out under both the new PPRS framework and the statutory scheme.

However, EMIG said that it has "considerable concerns" with the new PPRS agreement and said the exemptions to the price cap regime do not sufficiently protect small companies selling branded drugs to the NHS. It said branded drugs already cost less in the UK than they do across most of the rest of the developed world.

"Whilst the previous voluntary pricing scheme protected smaller businesses by having a tapered levy on companies' sales of between £5-25m, under the new scheme, all branded pharma will have to pay a 4% rebate from next year on all sales of their medicines over and above £5m," EMIG said in a statement. "As such, from next year any company earning just £1 over the £5m threshold will have to pay £187,000 to the Department of Health. In addition, smaller companies will face a significant increase in administration costs as companies are required to complete quarterly rebates."

"EMIG believes the new PPRS runs contrary to the Government’s agenda for growth, and the Prime Minister’s commitment to increase pharmaceutical exports from the UK. The new terms of the PPRS will sadly adversely affect the ability of biopharmaceutical SMEs to invest and further innovate. This will be costly to patients and the NHS," it said.

However, the Department of Health has said the new PPRS would give certainty to both the NHS and drugs manufacturers on the cost of branded medicines.

"This agreement ensures NHS patients will receive the most effective, advanced medicines in the world while managing the cost," Health Minister Lord Howe said in a statement. "UK pharmaceutical companies have responded to the challenges we face as a country, both in terms of the increased demand for medicines and pressure on public spending. I hope in return we have given them the certainty and backing they need to flourish as a sector both here and in the global market."

ABPI chief executive Stephen Whitehead said the body was disappointed that the Government had removed an exemption that has previously enabled companies selling branded drugs to the NHS to benefit from discounts on their sales where they amount to between £5 million and £25m. He called on the Government and the NHS to "demonstrate their active commitment to improving patients’ access to the latest innovative medicines" in light of the sacrifices ABPI had agreed to under the new PPRS framework.

"These have been the most complex negotiations we have ever had with Government and it should not be underestimated how difficult this will be for the industry," Whitehead said. "The commercial environment in the UK has an impact on its attractiveness for research and development investment and it’s too early to say what impact this settlement will have on industry investment."