The Pharmaceutical Journal
Vol 273 No 7324 p669
6 November 2004

This article
Reprint   Photocopy

  Acrobat Reader

News summary

Related websites
2005 PPRS: Pharmaceutical Price Regulation Scheme (more)

Branded medicines’ prices to be cut by 7 per cent

Branded medicines will go down 7 per cent in price from 1 January 2005, saving the NHS an expected £1.8bn over the next five years.

The reduction, which is the main feature of the new Pharmaceutical Price Regulation Scheme, is considerably more than the 4.5 per cent price reduction agreed when the scheme was last renegotiated in 1999.

The Association of the British Pharmaceutical Industry is taking a gloomy view of the new agreement, which it has been negotiating with the Department of Health for the past nine months.

“The price cut is unnecessary given the fact that medicines prices have fallen in real terms by some 15 per cent over the past 10 years, and that the NHS’s medicines budget is remaining steady at about 12 per cent of expenditure,” said Vincent Lawton, president of the ABPI.

However, the ABPI is recommending the voluntary agreement to its member companies as the best available. Other important aspects of the new scheme, some of which may make the package more acceptable to the industry, are:

· Companies will remain free to set the price of new medicines in the UK, unlike in France, where prices have to be negotiated with the government

· Firms will still be able to choose which products to reduce in price to meet the overall 7 per cent price cut. In some cases, companies will have been planning large price reductions as drugs come off patent, and these can be used to offset smaller or no reductions in the price of newer drugs

· A marketing allowance to replace the previous sales promotion allowance, which companies can set against income. There is no limit to the amount that companies can spend on marketing, but they will be able to offset £1m of their marketing budget, plus 4 per cent of turnover, plus a small additional allowance for each molecule

· An increase in information expenses which can be set against income, from 1.6 per cent to 4 per cent of turnover. This is a useful improvement, particularly since companies can now include the cost of providing information to the National Institute for Clinical Excellence and other government bodies in their information expenses.