EconPapers    
Economics at your fingertips  
 

Regulating drug prices: where do we go from here?

Nicholas Bloom () and John van Reenen ()

Fiscal Studies, 1998, vol. 19, issue 3, 321-342

Abstract: This paper examines the arguments for changing the ways that UK drug prices are regulated. In the UK, NHS pharmaceutical expenditures on branded drugs, currently worth about £3 billion a year, have been regulated by the Pharmaceutical Price Regulation Scheme (PPRS) since 1978. We argue that, in publicly funded healthcare systems, pharmaceutical price regulation is necessitated by a tendency towards excessive government expenditure because of over-prescription and the monopoly power of firms with on-patent drugs. We briefly explain the operation of the PPRS, which is based on rate-of-return regulation, and discuss its merits and drawbacks. We then consider five alternative pricing systems: free pricing, therapeutic benefit pricing, international reference pricing, therapeutic reference pricing and RPI - X price regulation. However, we reject all these alternatives in favour of a reformed PPRS. We suggest three potential reforms of the PPRS: an RPI - X cost allowance if feasible or a widening of the rate-of-return bands otherwise; the introduction of a marketing innovation allowance; and greater regulatory transparency.

JEL-codes: L5 L6 D4 (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.ifs.org.uk/fs/articles/bloom_aug98.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ifs:fistud:v:19:y:1998:i:3:p:321-342

Ordering information: This journal article can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this article

More articles in Fiscal Studies from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Series data maintained by Emma Hyman ().

 
Page updated 2017-10-06
Handle: RePEc:ifs:fistud:v:19:y:1998:i:3:p:321-342