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Dispensing: Price regulation - Interim pricing scheme explained

The Pharmaceutical Price Regulation Scheme 2008 replaces the 2005 rules, writes Annette Arthur.

The Pharmaceutical Price Regulation Scheme (PPRS) is a voluntary, non-contractual scheme that ensures the NHS has access to good-quality branded medicines at reasonable prices, and promotes a healthy, competitive pharmaceutical industry.

The scheme must be looked at in conjunction with the NHS environment with which it interacts, representing the price regulation scheme for branded prescription medicines across all four countries of the UK.

There have been suggestions that the NHS pays too much for its drugs, but the Association of the British Pharmaceutical Industry (ABPI) strongly disagrees, claiming that prices are 21 per cent lower in real terms than they were 10 years ago.

The PPRS exists to ensure reasonable prices for the NHS combined with a strong research industry

Common interest
The PPRS exists because the ABPI and the DoH have a common interest in ensuring that safe and effective medicines are available at a reasonable price to the NHS and that the pharmaceutical industry in the UK remains strong, efficient and profitable.

The industry must also be capable of sustained research and development to ensure future availability of new medicines. At present, the UK accounts for 4 per cent of global drug sales, but many of the key pharmaceutical manufacturers have their research and development facilities here, producing a fifth of the world's most used medicines.

The 2008 scheme (an interim scheme) is effective from the termination of the 2005 scheme on 31 August 2008 until the 31 December 2008. There is already a 2009 scheme in the planning stage.

Value-based approach
The changes are the result of recommendations made by the Office of Fair Trading in 2007. It proposed reform of the PPRS that had been in place since 2005, stating its belief that 'replacing the current price and profit controls with a value- based approach to pricing will provide value for money for the NHS, better incentives to invest for companies and a more sustainable, stable system.' 1

In response, some large multi-nationals announced that they were putting investment into research and development on hold until negotiations were concluded.

First in class
Newer drugs, particularly those with no current therapeutically-equivalent medicines - usually referred to as 'first in class' - invariably attract a lower price in the UK compared with average prices in Europe. The ABPI, however, has recognised that there should be some agreement on a pricing structure and has recommended a range of measures to secure compliance.

Under the PPRS 2008, companies have freedom of pricing for new drugs but have to agree not to take unreasonable action to prevent a generic entry when the patent on the drug expires. Increased strengths of existing formulations may not be priced at more, pro-rata, than the original. Freedom of pricing of new, reduced strengths should not be linked to product deletions to achieve hidden price increases.

Companies that are moving to the new scheme will still be expected to meet the obligations arising from the 2005 PPRS: they will still have to provide an annual financial return, provide additional information relating to the sale of branded medicines, if so required, and deliver the 7 per cent price reduction as laid down in that scheme.

Under the NHS Act 2006, the health secretary may impose penalties, take other enforcement action or serve notice on a manufacturer if the scheme member has shown to breach the provisions of the PPRS.

The PPRS applies to all branded, licensed medicines which are not excluded from prescription on forms FP10 (GP10 in Scotland; HS21 in Northern Ireland). The exclusions are those packs designed for OTC sale, but bearing the same brand name; sales of medicines which are predominantly from private prescriptions; and the medicines that are sold both OTC and are prescribable.

In the latter case, only the proportion that is prescribable is subject to the provisions of the scheme. Unlicensed products supplied on an individual patient supply basis are also excluded.

From 1 September 2008, the medicine price covered by the PPRS may not exceed the NHS list price, as used by the Prescription Pricing Department on 31 August 2008. However, scheme members may make temporary price reductions.

In exceptional circumstances, and only to ensure continuity of supply of medicines to patients, members can apply for the DoH's agreement to increase prices. Products transferred between companies remain subject to the original restrictions.

It is likely that more pharma companies will follow Pfizer, AstraZeneca, GSK and others and offer restricted discounts through named suppliers only. Dispensing GPs may notice a reduction in brand discounts offered, and thus a reduction in overall profit, as companies seek to protect their own profit line.

  • Annette Arthur is a consultant to dispensing practices

Key Points

  • The interim scheme became effective on 1 September 2008.
  • 2009 scheme at planning stage.
  • Basic principles from the 2005 scheme still apply.
  • GPs may seek a further reduction in discounts offered.

The DDA
The DDA is the only organisation that ensures the views of dispensing practices are heard by the government and key negotiating bodies. We also provide telephone advice to members and essential updated information via our website, and email alerts. To find out more call Jeff Lee on (01751) 430835 or visit www.dispensingdoctor.org
The DDA does not necessarily support or endorse the opinions or information contained on this page.

Resources

Reference

1. Office of Fair Trading, August 2007. www.oft.gov.uk/news/press/2007/115-07

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