Drug price reform in the UK: debunking the myths

Simeon Thornton

Health Economics, 2007, vol. 16, issue 10, 981-992

Abstract: The OFT report into the Pharmaceutical Price Regulation Scheme (PPRS) called for reform of the scheme, replacing existing profit and price controls with a system of value‐based pricing (VBP). The report argued that VBP would be much more effective than the current PPRS both at providing value for money for the NHS and giving pharmaceutical companies the right incentives to invest in drugs in the future. The report has sparked a widespread debate about drug pricing in the UK and has been controversial in some quarters. Some of the more negative responses are, however, based on fundamental misconceptions about the OFT recommendations. In particular, contrary to some claims, the recommended system would provide strong incentives for incremental innovation and the right balance of rewards for first in class and follow‐on products. Nor, as is sometimes argued, would VBP have an adverse effect on investment in the UK. Certainly, real challenges lie ahead if VBP is to be implemented. These concern the definition of value, particularly where patient benefits differ significantly by subgroup or indication, and the level of resource required to implement VBP. The OFT report contains proposals for addressing each of these areas. Perhaps the most difficult challenge is the political one: securing acceptance for a reform package that would create winners and losers among pharmaceutical companies according to their success in producing valuable drugs. Ultimately, however, only a scheme that does precisely this can hope to meet the needs of patients, the NHS and innovative companies in the long run. Copyright © 2007 John Wiley & Sons, Ltd.

Date: 2007
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