UK: The PPRS is Dead, Long Live the PPRS!

Long awaited details have been announced in the Heads of Agreement for the latest Pharmaceutical Price Regulation Scheme (PPRS).  It’s worth a read in full (and you can find it here) but some highlights are set out here.

A special austerity deal
The biggest change in the PPRS comes in the form of ‘austerity commitment’ from industry (termed as Allowed Growth Rate of Measured Spend).  The industry as a whole has agreed to keep the growth the branded medicines bill at 0% for 2014 and 2015, and with modest growth in later years (1.8%, 1.8% and 1.9%).  If the NHS spends more, industry will be paying back to help balance the books.

The industry-wide commitment is underpinned by quarterly payments from companies on their net sales (with some differences for small companies and exemptions).  Companies will be paying back 3.74% in 2014, and estimated payments in percentage terms are 7.13%, 9.92%, 9.92%, 9.92% for 2015-18.  But only for products on the market at 31st December 2013, new products won’t count towards these company payments.

Retention of traditional PPRS including free pricing at launch
Other elements of the PPRS remain the same: free pricing at launch, profit control and financial returns to the Department of Health (DH).  The returns become more important as there is a need to reconcile all the numbers to make sure companies and industry as a whole pays what it should – an independent audit will apply.

Value-Based Pricing
The agreement also has some elements that relate to Value-Based Pricing (VBP). In practice, VBP will turn into a wider assessment of value undertaken by the National Institute for Health and Care Excellence (NICE) in England and Wales.

The new PPRS says:

• There will be no change to the threshold range for cost effectiveness used by NICE

• NICE can’t change the Terms of Reference (ToR) on VBP set for them by the DH without publicly consulting first.  The ToR cover Burden of Illness (BoI) and Wider Societal Benefits (WSBs)

• No role for NICE in price setting.

Access to medicines
Access to medicines still features too: this time it’s more about embedding the efforts of those involved in delivering on Innovation, Health and Wealth (IHW) but features like Patient Access Schemes stay too. IHW is about accelerating the diffusion of innovation in the NHS, and for medicines it’s led to the Innovation Scorecard to explore variation in uptake of medicines and requirements for local formularies to include positive appraised medicines.  NHS England will be held to account by DH too on access to medicines, reflecting the wider changes to the NHS since the last PPRS was negotiated.

PPRS alternative – the Statutory Scheme
Many companies will prefer to join the voluntary PPRS simply because the alternative, the Statutory Scheme for Branded Medicines, includes a 15% price cut for 2014. And with the option for Government to change that deal every year, more cuts could come down the line.  Both Industry and Government have highlighted the 5-year stability of the latest PPRS.

What next?
The full text of the PPRS is expected soon so that the new PPRS can be up and running by the 1st January 2014.  VBP will follow later as NICE needs to consult and set out how it’s methods will change to accommodate BoI and WSBs.  Plus more can be expected on IHW and work with NHS England and NICE as industry seeks to address access problems.

Leela Barham is an independent health economist. You can find out more about on her website and contact her at leels@btinternet.com