The UK's National Health Service is paying over the odds for its drugs, an Office of Fair Trading report claims. Not so, argues Richard Barker

The UK’s National Health Service is paying over the odds for its drugs, an Office of Fair Trading report claims. Not so, argues Richard Barker

Value for money is something we all understand. From our personal lives to our business approach, we all need to ensure that we are getting a fair and reasonable deal - and the National Health Service is no exception. The pharmaceutical industry well understands the need for the NHS to get good value for money in all its purchases, including those of medicines. 


So the basic premise of a recent study by the Office of Fair Trading into the Pharmaceutical Price Regulation Scheme (PPRS) - which caps the profits that companies can make on sales of branded, prescription-only medicines to the NHS - is well understood. What is not accepted is any assumption that the NHS is not already getting excellent value for money from its medicines. 

Indeed, according to figures from the National Audit Office, the PPRS has produced ?1.2 billion in savings for the NHS. And primary care medicines accounted for just 11 per cent of NHS costs in 2005 - the same proportion as ten years ago. Other key facts include: 

  • Medicines prices are 21 per cent lower in real terms than ten years ago. 
  • The cost of medicines averages 56p per person per day compared with expenditure of 89p on alcohol and 74p on dining out. 
  • Advances in medicines have helped free hospital resources by halving admissions for major illnesses (for example, mental illness, infectious diseases and ulcers). The consequent annual saving of nearly ?11 billion is more than the cost of all NHS medicines. 
  • Newer medicines launched as ’first in class’ - in other words, with no current therapeutically equivalent medicine yet available - almost invariably attract a lower price in the UK compared with average prices in France, Germany, Italy, Spain and the Netherlands. Most medicines newly launched into established classes attract a lower price in the UK compared to the average in those five countries. 
  • Medicines that are not able to establish a clear therapeutic advantage over others treating the same condition tend to be priced at a discount to their competitors. 

Nor is it the case that the best way of saving the NHS money is necessarily through the pricing structure. Cost-effective prescribing is also part of the mix, and the ABPI is already working with the Department of Health to develop guidelines and systems to reinforce this - indeed, many of the savings identified in the OFT study can be captured in this way. 

However, despite this good body of evidence about the cost-effectiveness of its medicines, the industry is far from arguing that the PPRS cannot be changed to advantage. Its 50-year existence has been one of evolution, although one constant factor - which must be preserved - is the continuity that a scheme negotiated to last five years offers to an industry that has to plan in the long-term. 

Although the UK’s domestic market makes up 3 per cent of the world’s total pharmaceutical sales, some 10 per cent of global R&D budget is invested here. The stability provided by the PPRS is a major factor in our ability to ’punch above our weight’ and, in an increasingly competitive global environment for R&D investment, it would be foolhardy to put this at risk. After all, some 20 per cent of the world’s top medicines were developed here. Nor must it be forgotten that the industry generates a conservative ?7.5 billion a year to the country’s economy, a figure that exceeds the cost of its medicines to the NHS. 

Finally, in engaging in debate and discussion with the Government on this issue, it is important that any new system does not introduce further delays to patients’ access to new medicines and should not lead to major increases in costly bureaucracy and red tape. We expect the Government to consider very carefully how to make changes to the PPRS so that its existing advantages are not put at risk. 

Richard Barker is Director General of the Association of the British Pharmaceutical Industry