Pricing should be renegotiated to control research costs and encourage cost effectiveness

The pharmaceutical price regulation scheme1 is a voluntary agreement between Britain's Department of Health and the Association of the British Pharmaceutical Industry in which companies negotiate generous target profit rates from sales of drugs to the NHS (17-21% rate of return on investment in research and development). The scheme's objectives are to secure the provision of safe and effective medicines to the NHS at reasonable prices; to promote a strong pharmaceutical industry in Britain; and to encourage the efficient and competitive development and supply of medicines worldwide.1 The scheme was renewed in 1993 for five years and is currently under review. Although the scheme has been successful in helping to maintain the British pharmaceutical industry, its objectives conflict, and the way the scheme operates pays little regard to other health policy objectives. As the price of renegotiation, the government should request changes to the scheme, to minimise the inherent conflicts and to ensure that the scheme supports other policies.

There is considerable evidence of the scheme's success at achieving a strong industry.2 However, drug prices in Britain are …