BioWorld International Correspondent
LONDON - The UK government has opened negotiations with the industry to change the system for pricing drugs that has been in force for the past 50 years. The immediate aim is to cut £500 million off the £11 billion annual drugs bill.
While it supports the overall objective, the UK BioIndustry Association says the current proposals for change are not workable. Aisling Burnand, CEO, said they would run the risk of decreasing research and development investment in the UK.
Under the current Pharmaceutical Price Regulation Scheme (PPRS), companies are free to set their own prices, but there is a maximum level of profit they can earn.
Following an investigation by the Office of Fair Trading (OFT) published in February, the Department of Health (DOH) said last week it wants to create a new system in which the level of reimbursement is based on the therapeutic value of drugs. In its report, John Fingleton, CEO of the OFT, argued that this would not only result in better treatments, but also it would benefit the industry. "It would focus innovation and investment on the areas where patients need it most, creating more valuable drugs in the future," he said.
Announcing that negotiations with the industry have begun, a spokesman for the DOH said, "Whilst we recognize the benefits that PPRS agreements have brought to the UK over the past 50 years, ministers believe it [is] important to update the system so it is fit for purpose in the modern world and contributes to achieving greater efficiency in National Health Service expenditure."
The spokesman added that any new agreement will recognize the contribution of the industry to the UK economy. "It is in all our interests to encourage research and reward innovation, but above all, we want to ensure that the taxpayer gets value for money, and patients continue to benefit from innovative products at a reasonable price."
The BIA believes the interests of smaller biotech companies are not served by the current PPRS system, which fails to reflect research and development efforts, or the trend towards more targeted drugs for smaller markets.
The UK proposal has implications for the biotech and pharma industry beyond the UK. Although it represents four percent of the branded drugs market, UK prices are referenced when setting prices in countries accounting for 25 percent of the global market.
The OFT defines value-based pricing very broadly as a way of setting prices in relation to the benefits a drug produces compared to a similar product. While there are a number of tools for doing this, there is little agreement anywhere in the world on standard methodologies.
The OFT studied drug pricing in 10 countries during two years of research, singling out Australia, Sweden and Canada as role models. Overall, the OFT concluded there is some evidence to suggest that, "for genuinely innovative drugs, relatively higher prices may be possible."
Burnand said the BIA fully supports the principle of investing in drugs that have the greatest benefit to patients, but added that, "the complexity and far-reaching consequences of developing a new value-based model should not be underestimated."
"It is vital that the impact of any radical change is properly assessed and not rushed into. We are encouraged that one of the government's objectives of a future scheme is to reward innovation."
However, Burnand added, "The manner of implementation and the methodology used for calculating cost effectiveness and value will be critical."