Battle looming between NHS and pharma giants

Feb 20 2007

According to the Office of Fair Trading (OFT) in Britain, the National Health Service (NHS) is paying far too much to drug companies for branded medicines.

The competition watchdog has apparently had it's eye on the system by which the Department of Health spends £7bn on branded medicines, since September 2005.

It appears that a secretive price-fixing scheme operated between the Department of Health and the major pharmaceutical companies, has resulted in the NHS spending millions of pounds more than it should have for drugs.

The OFT has reached the conclusion that the Pharmaceutical Price Regulation Scheme (PPRS) should be overhauled, as the scheme does not allow the NHS to get the best prices.

The OFT is calling for a far more transparent system, which could lead to lower prices for innovative medicines such as Herceptin when they first arrive on the market.

Even though the Department of Health is not obliged to accept the OFT's recommendations, they are unlikely to reject them, as hundreds of millions of pounds of public money are at stake here.

What is to be expected is a major confrontation with the major drug companies, who frequently complain that the NHS does not spend enough on their products.

The PPRS sets a cap on the profits that each drug company can earn on its annual sales of branded medicines to the NHS by way of a voluntary scheme negotiated every five years between the Department of Health and the Association of the British Pharmaceutical Industry.

The price which is set for the NHS drugs is often used as a benchmark by health services in other countries, who frequently negotiate a better deal.

The pharmaceutical industry will inevitably respond that UK drug companies are a world class success and that continued success depends on their being properly rewarded for very expensive and risky scientific research.

The Department of Health says it recognises the importance of the pharmaceutical industry to healthcare and the development of medical advances and that it is in everyone's interest to encourage research, but it is also important that prices are fair and give value for money to the taxpayer.

Critics of the scheme say there is an anomaly when the Department of Health is the sponsor of an industry for which it is the principal customer.

One resolution might be the establishment of an organisation along the lines of the National Institute for Clinical Excellence, which decides how cost-effective drugs are to the NHS and establishes the price of a new drug, according to how greatly it is expected to benefit patients.

An alternative option might allow for prices to be adjusted after the drug has been in NHS use for a period so doctors and health economists had a better understanding of its usefulness.