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UK backs away from ‘value-based pricing’ for drugs

The UK government seems to have rowed back on plans for a radical new pricing system for medicines that would have used independent assessments of their worth to limit costs. But some elements of the pharmaceutical industry are still warning that a new agreement on how much the country pays for drugs will drive research overseas.

Previously the government had said it would seek a ‘value-based pricing’ for medicines. However, in a deal with the pharmaceutical industry announced today, companies will still be allowed to set prices for new products, and as part of the deal the total amount the UK spends on drugs will be controlled.

Deepak Khanna, the president of the Association of the British Pharmaceutical Industry, says he hopes the deal will increase take up of innovative new medicines in the UK’s National Health Service.

But, “if we don’t see an improvement in the adoption and availability of that innovation, we will see an impact on the UK being a strategic market,” says Khanna — and that could mean research investment heading overseas.

Steve Bates, the head of the BioIndustry Organisation, which represents UK bioscience companies, was more blunt. In a statement, he said he feared that the agreement “will have a negative impact on industry investment here”.

The deal is part of a new ‘Pharmaceutical Price Regulation Scheme’, which is agreed every five years by the Department of Health and the Association of the British Pharmaceutical Industry (ABPI). As part of the new scheme – which starts in 2014 – the industry has agreed to keep the current £12 billion spending on branded medicines in the UK’s National Health Service (NHS) flat for two years. Increases will be limited to less than 2% in the following three years. If the NHS drug bill does go higher than these agreed amounts, the industry will pay back the difference.

The UK is an important market for the drug industry, as many other countries take their lead from its prices and uptake, and it is an important base for medical research. But the pharmaceutical industry has sometimes seen it as an unfriendly environment because the NHS generally will not pay for products that do not represent value for money — based on reports from the National Institute for Health and Care Excellence (NICE).

A value-based pricing scheme would have seen the NHS dictating prices to companies — as opposed to deciding whether or not to take the companies’ offers. The change had concerned some in the industry, which has already been under serious pressure to cut the cost of medicines in the face of the European financial crisis.

Today’s announcement appears to remove the most radical part of the UK’s value-based pricing plans. The Department of Health has not yet responded to a request for comment.


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