Drug pricing

Given the high cost of development of new cancer drugs it is often the case that when these drugs are first licensed for use in the NHS they are not automatically available to patients, unless evidence is available to satisfy local healthcare providers that these drugs provide value for money.

There are perversities within the current system that mean that the price of cancer drugs is often set very high”and when local providers, or NICE, come to assess their cost effectiveness they are not found to be worth the extra money over current treatments.

Cancer Research UK has been asking the Government to explore whether or not there is a better alternative to the current system for setting the price the NHS pays for these drugs.

Current arrangements

Branded medicines account for around 80% of the NHS drugs bill: about £8bn a year. The Pharmaceutical Price Regulation Scheme (PPRS) is the method by which the UK Departments of Health seek to control the price of these drugs, by setting a cap on the profits that each drug company can earn on its annual sales of branded medicines to the NHS. The PPRS is usually renegotiated every five years. The Scheme was established 50 years ago and, despite regular updates, it has never been significantly overhauled.

We understand that pharmaceutical companies need to recover the enormous costs of drug development. However, one of the big problems in cancer is the way that the PPRS works in conjunction with the system of NICE appraisal to disproportionately disadvantage cancer drugs and treatments in areas where there are few or no other treatment options.

Future options

In February 2007 the Office of Fair Trading published a report recommending that the UK should adopt a ‘value based’ approach to pricing. Under this system the Government would set a price that it is prepared to pay for each new drug, calculated according to how well the drug performed in clinical trials in comparison to other treatments already on the market.

Recent negotiations

The Government has recently completed a new round of negotiations, which has resulted in the pharmaceutical industry agreeing to aim to reduce the cost of drugs sold to the NHS by five percent. The Government have also announced that this new system will improve patient access to, and the NHS's uptake of, innovative and clinically effective new medicines. However, we are yet to see any details of this.

Critically, we believe that any new pricing system should take account of the overall value of each drug and that expert organisations should be consulted to establish this value.

We are concerned that the recent agreements between the pharmaceutical industry and the Government don’t go far enough. The current system of drug pricing is riddled with flaws and desperately needs an overhaul. The UK is a world-leader in the discovery and development of new anti-cancer treatments, yet is slow to take up these new medicines. We have made our concerns known to the Government in a consultation response on the new arrangements, which can be viewed here .