New reforms to branded pharmaceuticals NHS cost controls proposed

The Department of Health and Social Care (DHSC) has opened a consultation (28-page / 245KB PDF) on plans to set out in legislation the percentage of sales of branded health service medicines to the NHS in England that manufacturers of those pharmaceutical products would have to pay it over the next three years. The rates would only apply should the supply of those products not be subject to voluntary agreement.

Under the plans, the payment percentage rate that applies would jump from 7.8% currently to 9.9% next year, 15.8% in 2020 and 21.7% in 2021.

Although it is the government's intention to set out those proposed payment percentages in regulations, it said the rates would remain subject to annual review.

The measures concern the statutory scheme for controlling the cost of drugs to the NHS in England. Currently, pharmaceutical companies that supply branded medicines to the NHS and do not otherwise participate in the voluntary Pharmaceutical Price Regulation Scheme (PPRS), are subject to rules set out in the Branded Health Service Medicines (Costs) Regulations 2018, unless an exemption applies.

The regulations include a payment mechanism which requires specific branded pharmaceuticals manufacturers to make a payment to the Department of Health and Social Care (DHSC) of a percentage of their sales of branded health service medicines to the NHS. The current percentage rate was set at 7.8%, but the payment mechanism is subject to annual review. The money collected is reinvested in the NHS.

The DHSC said its planned reforms seek to ensure the statutory scheme "delivers a level of savings that balances the government’s objectives of delivering best value for the taxpayer and NHS patients while ensuring both continued support for pharmaceutical research and development (R&D) and the availability of medicines to the health service on reasonable terms".

The change would apply from 1 January 2019 to coincide with the expiration of the existing PPRS agreement on 31 December 2018. The government and Association of the British Pharmaceutical Industry (ABPI) are currently negotiating a replacement PPRS agreement.

The current rate of 7.8% of sales would continue to apply to branded pharmaceuticals supplied to the NHS under a contract with a contracting authority based on a framework agreement or supplied under public contracts where those agreements were entered into on or after 1 April 2018, but before 1 January 2019. Such agreements entered into on or after that date, however, would be subject to the new payment percentage rates proposed.

Also included in the DHSC's plans are proposals to include biosimilars within the scope of the payment mechanism, price controls and information requirements of the statutory scheme. Those plans were not welcomed by the British Generic Manufacturers Association (BGMA) and the British Biosimilars Association (BBA).

Warwick Smith, director general of the BGMA and BBA, said: "It makes no sense for the government to intervene in pricing when competition or tenders already very effectively control prices of branded generics and biosimilars. In particular, the consultation appears significantly to underestimate the savings already delivered by biosimilars where we have seen price reductions of more than 80% for some products. It is therefore wrong to include products which are subject to competition via tendering in the statutory scheme or the PPRS and also apply an additional rebate of up to 25%."

"These proposed changes will significantly impact biosimilars and manufacturers may be unable to launch products as a consequence. This could also impact the potential patient benefits of these medicines and threaten [NHS England chief executive] Simon Stevens’ objective of £300million of savings in the next three years," Smith said.

The DHSC's consultation closes on 18 September.