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New PPRS drugs price scheme announced: no value-based pricing set by NICE, but an 'austerity' price cap

12/11/2013

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United Kingdom

The PPRS is a voluntary scheme agreed between the Department of Health and the ABPI which regulates Government spending on branded prescription medicines.

The PPRS is a voluntary scheme agreed between the Department of Health and the ABPI which regulates Government spending on branded prescription medicines. On 6 November 2013, a new Pharmaceutical Price Regulation Scheme (PPRS) was announced which will take effect from 1 January 2014 and last for five years.

New PPRS

In the initial value-based pricing proposals for the new PPRS, the National Institute for Health and Care Excellence (NICE) would have set a price for new products. However, under the new PPRS as announced, the pricing of new products will now remain as it is under the current PPRS.  Significantly, industry has retained the right to set their own prices and NICE will not "negotiate, publicly set or publicly indicate prices". NICE will instead "undertake all elements of assessment for a broader definition of value", and the PPRS heads of agreement states: "The assumption is that prices at launch will be set at a level that is close to their expected value as assessed by NICE." 

There have been material changes made to the PPRS. Under the new PPRS, NHS spending on branded medicines will remain flat for two years. This will be followed by increases of 1.8% in 2016 and 2017, and 1.9% in 2018.  Steve Bates, BIA Chief Executive Officer, has said "The austerity price cap for the whole branded medicines bill is a big change from previous PPRS deals and I fear this agreement will have a negative impact on industry investment ...".  Companies that sign up to the scheme will have to make an initial rebate payment in 2014 of 3.74% which is intended to represent the difference between allowed growth in sales to the NHS and the actual increase in sales. Thereafter, the payments are estimated at 7.13% in 2015 and 9.92% from 2016 to 2018.  Firms with sales of £5 million or less will be exempt from the rebate payments, as will products launched after 1 January 2014. 

The current PPRS rules will continue for flexible pricing, meaning companies can increase or reduce the original list price only where there is significant new evidence that changes the value of an existing indication or where the company proposes a new major indication whose value to the patient is "significantly different from the original indication". This will only apply when medicines are subject to a NICE appraisal, and a review by NICE will be needed to determine whether the proposed revised price offers value to the NHS.  The existing rules on target return on capital and return on sales will also remain as they are under the existing PPRS.

Changes to the Statutory Pricing Scheme

At the same time, the Government has also announced changes to the statutory pricing scheme. The scheme is the alternative for companies that choose not to join the PPRS and currently applies to about 10 per cent of the branded medicines used in the UK. The changes to the statutory introduce a 15 per cent price cut to the price the NHS pays for its medicines. Commenting on the changes, ABPI Chief Executive Stephen Whitehead said: “We are extremely disappointed by the Government price cut of 15 per cent inflicted on the industry in the statutory scheme. Asking companies who enter the statutory scheme to contribute even more at a time when the industry has already made huge savings is excessive and unnecessary."

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