UK to implement five-year absolute limit on drug spend
The UK's pharmaceutical industry has agreed a new pricing system for branded medicines, which will see drug makers covering any NHS overspend above pre-agreed limits for the next five years.
The new system is different from the previous scheme, which was a profit-capping arrangement, because it sets a limit on how much the NHS spends on drugs. The PPRS is a voluntary, rather than statutory agreement but covers nearly all the UK's branded drugs by sales.
Above this limit, the pharma industry has agreed to provide a rebate to the NHS covering the cost of any overspend.
The new PPRS will allow pharma companies to maintain higher headline prices for certain drugs - regardless of any later repayments - with knock-on benefits across the rest of Europe given that the UK is a key reference pricing (basket pricing) country, according to a source close to the negotiations on the deal.
At the same time the deal ensures that drug spending remains capped at a time when the government is under pressure to keep NHS costs under control. The agreement will allow the government to make pharma cover any increase in the drugs bill above a pre-agreed limit, the source stressed.
APM understands the limit is around 11 billion pounds for 2014, a threshold that will remain fixed through 2014 and 2015 and will increase by 1.8% in 2016 and 2017, and by 1.9% in 2018. At 11 billion pounds the 2014 limit appears to be around the expected 2013 spend.
Medicines priced under a new value-based assessment scheme due to be implemented by NICE in 2015 will be factored into the overall drug spend figure, but will not be subject to the clawback in a bid to stimulate innovation, according to sources.
The drug spend used to see if the ceiling has been breached will be calculated taking into account the NHS spend on medicines included in the voluntary PPRS and the statutory scheme, sources said.
According to early calculations of how drugs are likely to be priced, the rebate on net sales for 2014 is expected to be in the region of 3.74%, APM has been told. In return, the pharma industry said it has received a commitment from the government to ensure the NHS uses recently approved drugs, the source continued.
The industry is hopeful that its agreement to cover any overspend will stimulate NHS organisations that were previously concerned about an increased drugs bill to use the latest treatments.
APM understands that the Department of Health is to send out a directive to NHS organisations informing them of the changes and urging them to prescribe the latest medicines when appropriate.
In a statement from the DH, health secretary Jeremy Hunt said:
"This agreement ensures NHS patients will receive the best and most advanced medicines in the world while managing the cost.
"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 in a statement:
"We have five years to fix the access problem so that NHS patients get the best quality healthcare they deserve and to address the long history of low patient usage of innovative medicines in the UK."