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Rapid Responses: Rapid Responses published:
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Pharmaceutical Price Regulation Scheme
- Richard S Tiner (9 March 2007)
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Economic perspective on prescription pricing
- Timothy D Heymann (26 March 2007)
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Richard S Tiner, Medical Director The Association of the British Pharmaceutical Industry (ABPI), 12 Whitehall, London SW1A 2DY
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Dear Editor It is quite right to suggest that the Pharmaceutical Price Regulation Scheme may benefit from change and that the Office of Fair Trading’s recent proposals form a contribution to that debate, as Prof Joe Collier suggests (BMJ, March 3). However, the PPRS is not “archaic” merely because it has been in existence for a long time – it has undergone substantial evolution during its 50 years of life. During that time, it has maintained two principles which we would all surely support: fair and reasonable medicines prices for the NHS coupled with the good health of the UK’s successful research-based industry. The UK is a world-leader in developing new medicines – it is only 3 per cent of the global market but has 10 per cent of world R&D – and this is of great benefit to everyone in the country, from patient to taxpayer. It is something of a mystery why Prof Collier thinks that the PPRS is a “secret deal” or what he means by his reference to central reimbursement. The full text of the PPRS is openly available, inter alia, on the Department of Health’s website; and annual reports are made on its progress to Parliament so that they can be scrutinised by MPs and peers as well as the public. And while the PPRS certainly determines the rules under which companies can sell their medicines to the NHS throughout the UK, it neither fixes prices nor arranges reimbursement. Nor do I understand his reference to companies sharing the risk of medicines development with the NHS, or expecting reimbursement if things go wrong. R&D costs – amounting to some £500m over 10-12 years per calling – are borne entirely by pharmaceutical companies, and the risk is exclusively borne by them if the drugs fail. Value for money is something the NHS should aspire to – and the pharmaceutical industry would support this unequivocally. However, medicines in the UK already represent excellent value for money, with prices on a par with – or lower than – those of comparator European countries, and the National Audit Office estimating that the PPRS has produced £1.2 billion savings for the NHS. Primary care medicines account for 11 per cent of NHS costs in 2005 – the same proportion as ten years ago – and prices are 21 per cent lower in real terms than ten years ago. The best way of saving the NHS money is not necessarily through the pricing structure. Cost-effective prescribing is also part of the mix, and the ABPI is already working with the Department of Health to develop guidelines and systems to reinforce this – indeed, many of the savings identified in the OFT study can be captured in this way. Finally, in engaging in debate and discussion on this issue, it is important to ensure that any new system does not introduce further delays to patients’ access to new medicines and does not lead to major increases in costly bureaucracy and red tape. We expect the Government to consider very carefully how to make changes to the PPRS so that its existing advantages are not put at risk. Yours faithfully Dr Richard Tiner
Competing interests: None declared |
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Timothy D Heymann, Reader in Health Management Tanaka Business School, Imperial College London
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Dear Editor, In our personal lives spending decisions reflect the relative worth we put on the products or services that we buy. Those companies that deliver the value that customers seek thrive. If companies overcharge, others enter the market: consider the impact that low cost airlines such as Ryanair have had on the cost of air travel. But in healthcare there is marked information asymmetry and arms length purchasing. National Health Service (NHS) purchasers are rarely able to weigh up in detail the merits of competing drugs. And patients themselves do not have to trade off cost against benefit as they themselves pay no more for an expensive drug than a cheaper alternative. For any market to work well purchasers need to be well informed. In the case of pharmaceuticals, Government has a clear role to obtain and share relevant information about drugs’ relative clinical effectiveness. In Joe Collier’s editorial (1) on the recent Office of Fair Trading review of the Pharmaceutical Price Regulation Scheme (2) he applauds the recommendation that drug prices should be negotiated at launch for each drug individually using robust evidence of the product’s perceived clinical value. An independent expert commission may be well placed to identify drugs’ relative clinical worth, presumably much in the way that the National Institute for Health and Clinical Excellence tries to guide health purchasers. But economic theory suggests that once relevant information is shared with purchasers, markets are best placed to determine price. So to ask the proposed commission to also negotiate on price seems inappropriate. Government should be working to eliminate other barriers to the efficient operation of a market in pharmaceuticals. It could facilitate parallel imports if drug companies attempt to price discriminate in markets across Europe. It could encourage new entrants to boost competition as it is doing in the provision of NHS medical services themselves. It may also like to consider reform to the system of patent protection that keeps prices high as Stiglitz, the Nobel laureate, has suggested in this journal (3). Only then shall we be confident that the NHS is paying an appropriate price for drugs on patients’ behalf. 1. The Pharmaceutical Price Regulation Scheme Collier J BMJ 2007 334: 435-6 2. http://www.oft.gov.uk/advice_and_resources/resource_base/market- studies/price-regulation accessed 23rd March 2007 3. Scrooge and intellectual property rights BMJ, Dec 2006; 333: 1279 – 1280 Joseph E Stiglitz Competing interests: None declared |
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