UK government may end free drugs pricing

As the UK’s Conservative/Liberal-Democrat coalition government announces its NHS reform agenda there are indications that free pricing for drugs may come under threat as part of a cost-cutting process.

The UK is one of the last few free-price markets in the world – most other countries have price controls for medicines. IHS Global Insight believe that while a price-control policy has not been fleshed out in the policy statements at this stage, the fact that it has been mentioned in the context of NICE reform should be considered as the main—and perhaps inevitable—threat to the pharmaceutical industry in the UK, going forward.

Administrative costs and the number of health quasi-autonomous non-governmental organisations are due to be reduced, but unexpectedly, reform of the National Institute for Health and Clinical Excellence (NICE) and a “move to a system of value-based pricing” are also on the agenda.

IHS Global Insight’s senior healthcare analyst, Milena Izmirlieva, gave PMLiVE this response to the pricing measures: “Particularly interesting from the pharmaceutical industry’s point of view are the policy measures focused on the price control of pharmaceuticals. There are two such measures mentioned: one in terms of NICE reform and the move towards ‘a system of value-based pricing’, and the other in terms of boosting the role of the Care Quality Commission.

“NICE has been involved in value assessments of course, but these assessments have resulted in reimbursement recommendations, not price-level recommendations. Pharmaceutical manufacturers in the UK have been free to set the price of their products up until now, making the UK an attractive first-tier launch market for innovative drugs. Should a price-control function of NICE be introduced going forward, the free-pricing days for pharmaceuticals in the UK may well be numbered.”

With regard to the outlook and implications of the possible reforms, IHS Global Insight told pmlive.com that among the different reform measures, the two focused on price control are the main issues to watch for as they make their way through the regulatory review and implementation process. This is partly because cost-control measures tend to be more readily achievable when administered as a price-control mechanism, whether this is a price cut, price cap, or reference-pricing mechanism.

A price-control mechanism, on the other hand, tends to be straightforward to implement and administer over time. Price control of medicines also does not immediately conflict with any of the other pledges in the coalition government’s policy programme.

Price control, it can be claimed, will allow greater access to healthcare and the transfer of some resources to much-needed front-line services at a time of a deficit-reduction-dictated squeeze in spending amid the growing treatment needs of an ageing population. This claim, if well defended by the coalition government, may gain support from both Conservative and Liberal Democrat party supporters.

The focus of reforms is expected to remain firmly on cost savings, despite some potential boosts for funding of cancer drugs and children’s hospices.

The policy plans represent a compromise between the respective policies set up in the Conservative and Liberal Democrat party manifestos. With nearly all policy areas discussed in the 34-page document, a limited amount of detail is provided on the upcoming health-sector reforms, but the highlights are as follows:

Health spending is guaranteed to increase in real terms during each year of the parliament. 

Top-down reorganisations of the National Health Service (NHS), including centrally dictated closures of A&E and maternity wards, will stop.

The number of health quasi-autonomous non-governmental organisations will be cut. These health service organisations, some 23 in total, include NICE and the Medicines and Healthcare products Regulatory Agency (MHRA), among others.

The cost of NHS administration will be reduced by one third, with resources transferred to front-line services.

Patients will be given the right to choose their general practitioner (GP), without being restricted by where they live.

Urgent-care services operating 24 hours a day, seven days a week, will be provided in every area of England, including GP out-of-hours services, while ensuring that every patient can access a local GP.

GP contracts will be renegotiated.

The role of the Care Quality Commission will be strengthened so it becomes an effective quality inspectorate. Monitor (the independent regulator of NHS Foundation Trusts) will be developed into an economic regulator that oversees aspects of access, competition, and price setting in the NHS.

An independent NHS board will be established to allocate resources and provide commissioning guidelines.

The coalition government will “reform NICE and move to a system of value-based pricing, so that all patients can access the drugs and treatments their doctors think they need”.

A Cancer Drugs Fund will be set up and paid for using money saved by the NHS through the government’s pledge to stop the rise in employer National Insurance contributions from April 2011. The fund will aim to enable patients to access cancer drugs recommended by their doctors but not currently available on the NHS. 

£10m (US$14m) per year will be provided beyond 2011, from within the budget of the department of health, to support children’s hospices.

Although the remainder of the healthcare policy document talks about cost cuts, it is well known that such cost cuts can be difficult to achieve without undermining some of the other policy promises contained in the document. An example of this is the promise to cut administrative costs by one-third while boosting front-line services: front-line staff have already issued a warning this week, as reported by the BBC, that the savings being sought of £20bn over three years make it inevitable that doctors’ and nurses’ jobs will be affected and that patient services will suffer as a result.

Similarly, the pledge to allow patients to choose a GP regardless of distance from their home will be difficult to reconcile with the pledge contained in the policy document to provide each patient with access to a local GP.