Global Insight Perspective | |
Significance | The U.K. government and the Association of the British Pharmaceutical Industry have invited manufacturers of Pharmaceutical Price Regulation Scheme (PPRS) medicines to sign a new medicine pricing deal that will bridge the four-month period between the expiration of the 2005 PPRS and the implementation of the 2009 agreement. |
Implications | Over the four-month period spanning 31 August to 31 December 2008, a medicine price freeze will be effected in the country. Profit controls will also be suspended over the course of the interim agreement. |
Outlook | The interim agreement is expected to be endorsed by the innovative industry. Attention will remain focussed on the finer details of the 2009 PPRS, which are yet to be unveiled. Present turmoil over allegations of medicine over-pricing is not expected to significantly affect the outcome of the negotiations. |
The Association of the British Pharmaceutical Industry (ABPI) and the U.K. Department of Health (DoH) have agreed on a voluntary interim Pharmaceutical Price Regulation Scheme (PPRS), which will be effective between 31 August 2008 and 31 December 2008. In broad outline, the 2008 PPRS scheme makes provisions to ensure National Health Service (NHS) medicines’ price stability for the period and suspends profit controls and prices re-modulation for the period. Specific details are as follows:
- From 1 September 2008, PPRS drug prices cannot exceed the NHS list price;
- Profit controls are suspended under the 2008 PPRS but manufacturers will still have to submit Annual Financial Returns for the period 1 January to 31 August 2008;
- Manufacturers will be prevented from modulating their prices for the period 31 August to 31 December 2008. The DoH will require data on modulation returns for the full year. Target discrepancies will be corrected in 2009;
- PPRS medicine manufacturers cannot increase but can cut the price of their drugs over the duration of the interim scheme. Derogations to increase prices are nevertheless available from the DoH;
- Scheme members can restore temporary price reductions prior to the scheme implementation, as outlined in the 2005 PPRS;
- Free pricing still applies for new active substances and line extensions, pending that they were obtained within five years of the original marketing authorisation;
- Manufacturers are allowed to re-evaluate discounts granted to NHS hospitals;
- 1999 and 2005 PPRS price cuts may be achieved through a payment to the DoH;
- The scheme covers all branded, licensed NHS medicines including innovative drugs, branded generics, vaccines, in vivo diagnostics, blood products, dialysis fluids, branded products supplied through tenders or contracts, and biotech drugs;
- Signatories to the 2008 PPRS will not be subjected to statutory price controls but non-signatories will be.
Signatories to the 2008 scheme will remain bound to their 1999 and 2005 PPRS-associated rights and obligations, provided they were part of those schemes. Those rights and obligations include delivering agreed price cuts and providing the appropriate financial information. The interim scheme will bridge between the 2005 PPRS, which was called off by the government at the beginning of the year and expires at the end of the month (see United Kingdom: 7 March 2008: Dispensing Fee to Rise by 3.65% in England, Government Notice on PPRS Confirmed) with a new PPRS for 2009. The finer details of the new scheme, due to come into effect on 1 January 2009, are currently being negotiated between the ABPI and the U.K. government (see United Kingdom: 19 June 2008: Innovative Industry Strikes Damage-Limitation Deal in PPRS Negotiations).
Outlook and Implications
The present interim agreement sets the details of the four-month price freeze announced together with the working outline of the 2009 PPRS. Interestingly, profit controls, one of the foundation pillars of the PPRS, are suspended for the duration of the agreement. In the meantime, a price increase, although regulated by the 2005 PPRS, can take place before its implementation. This may work to the advantage of some industry players, although for a very limited period of time as the 2009 PPRS is tipped to shave 5% off the NHS’ branded drugs bill over its course. Under the terms of the interim deal, the industry is expected to sign into the scheme.
The present interim deal will not steal attention away from the anticipated finer details of the 2009 PPRS deal. The chairman of the U.K. cost-effectiveness watchdog NICE has pointed the finger at the industry, accusing it of over-pricing innovative drugs (see United Kingdom: 18 August 2008: NICE Top Management Accuses Industry of Drug Overpricing in U.K.). Nevertheless, his allegations have little chance to make a difference over the course of the 2009 PPRS negotiations. The government appears to have limited room to manoeuvre as it is keen on reaching a voluntary agreement with the U.K. industry as the latter significantly contributes to the domestic economy.