PPRS Payments Now Worth £150m in the UK

A second payment has now been made under the UK’s Pharmaceutical Price Regulation Scheme (PPRS). Adding a further £76m to the £74m for the first quarter of 2014, the payments received by the Department of Health (DH) now total £150m (US$244m). 

Payments are a new feature of the long-standing voluntary PPRS. The 2014 agreement between the Association of the British Pharmaceutical Industry (ABPI) and the DH set a tough allowable growth rate on the annual NHS spend on branded medicines of 0% for 2014. It’s the same flat growth for 2015, but spend is permitted to rise in the later years of the scheme. The payments made so far are based on a fixed 3.74% of net sales, calculated using returns from the companies.

Future payments
It’s still not clear exactly how much companies will need to pay back for the rest of this year, or in future. Payments will be set for 2015 after the DH has seen the figures for quarter 3 of this year. You can bet that all 134 member companies of the PPRS are keeping an eye on the payments and considering their position if the payments keep going up.

Companies who chose not to be in the PPRS know their position; they should have cut their prices by 15% as required by the Statutory Scheme for Branded Medicines. What their price cut will be for next year isn’t clear. The Statutory Scheme can be changed by the Government and who knows if they will ask for the same, or more of a price cut next year.  Plus price cuts should be visible on the list price with international reference price implications.

Where does the money go?
Just what the money will be spent on is subject to a lot of discussion. Payments have been made to the Department of Health in the past under previous incarnations of the PPRS, essentially a cash payment to ensure savings equivalent to previous headline price cuts were delivered, and where that went was never clear.  The new PPRS doesn’t, on the face of the agreement at least, say where PPRS payments should go.

Stephen Whitehead, Chief Executive of the ABPI, points out that it’s not about the spend on medicines.  He said; “there are a number of commitments in the agreement to improve the usage of innovative medicines”.  Presumably making some of the money flow into prescribing could help. And unlike many wider NHS initiatives, like Quality Innovation Prevention and Productivity (QIPP), the money is real money, and not just elusive (or dare I say it, illusionary) efficiency savings.

Others in industry, such as Johanna Mercier from Bristol-Myers Squibb, suggest that the PPRS provides a “right to prescribe” for innovation according to reports in the media.

There may well be some difficulties getting money to those who actually hold budgets in the NHS, and there are still reports of concerns about spend on medicines where the PPRS, and the millions it is bringing in, aren’t mentioned at all. This suggests there is still a long way to go for everyone to understand the implications of the PPRS and make sure it works.

Leela Barham is an independent health economist. You can find out more about on her website - http://leelabarhameconomicconsulting.blogspot.co.uk - and contact her on leels@btinternet.com