Global Report: A Hope and a Payer

If current trends continue, the United Kingdom will spend 12.7 percent of its GDP on healthcare by 2050. Maybe that means it's time to reform the National Health Service's notoriously complex drug payment scheme.
Apr 30, 2006


Sarah Houlton
Who should pay for healthcare, and how much should they pay? That's the question currently before the UK government's Health Select Committee, which is holding an inquiry into National Health Service (NHS) charges, looking at everything from hospital parking and telephone fees to prescription drugs and the cost of dental care.

The committee's motivation is straightforward: If current trends continue, the Organisation for Economic Co-operation and Development (OECD) predicts that the cost of health and long-term care in the United Kingdom will rise to 12.7 percent of its gross domestic product (GDP) by 2050. (Today, it accounts for 7.2 percent.) The equivalent figures for the 30 member nations of the OECD are 6.7 percent of GDP today and just below 13 percent by 2050.

A key target for reduced spending is prescription drugs—one of the largest items on the healthcare bill. Among other things, the committee wants to encourage the use of cheaper generics over branded alternatives. And that has the committee asking hard questions about NHS' byzantine prescription charge system.

In principle, NHS has a co-payment system. Patients pay a flat fee of £6.65 (a bit more than $11.50) for each item prescribed, regardless of whether it's something cheap, like low-dose aspirin, or something as expensive as a newly introduced biologic. Some drugs, such as oral contraceptives, are always free.

A whole raft of patients don't have to pay: schoolchildren and people over 60, the unemployed, those with low income, and pregnant women and nursing mothers, for example. Medicines prescribed in a hospital are free. And people with certain medical conditions, such as diabetes, escape the charges for all prescriptions—not just those directly related to the condition. Overall, it is estimated that 87 percent of NHS prescriptions are free. (Scotland and Wales have their own systems.)

An obvious solution would be a two-tier system with free generics and a co-payment for branded drugs. Gill Morgan, chief executive of the NHS Confederation (which represents all organizations within the NHS), argued for that approach in her testimony. "There is a great [cost] difference between a generic version of the drug and the branded version of the drug when things come off the patent," she said. "The cost difference can be absolutely phenomenal."

But as a spokesperson for the Association of the British Pharmaceutical Industry pointed out, two-thirds of prescriptions in the United Kingdom are written generically anyway, even if the medicine in question is still on patent.

"How much more can you do without giving old medicines—and therefore, potentially less appropriate treatment—to patients?" he said. "Patients are entitled to the best treatment available—not merely the one that happens to be the cheapest. If a modern, more expensive medicine is the right one for them, then that is what they should be prescribed."

Incentives for Doctors

A health insurance company in The Netherlands has gone a step further: Groningen-based Menzis offers doctors a financial incentive to prescribe generic statins and proton pump inhibitors instead of the more expensive brands. Doctor and patient groups complained, but a court in Arnhem ruled that the company was within its rights to offer such inducements for prescribing these medicines in a "more efficient" way.

As part of the insurance company's new contract with doctors, they will get bonuses if they hit annual targets of 85 percent of new patients choosing simvastatin, and 95 percent picking omeprazole. The company claims that the bonuses would, on average, come to around €2,000 a year, to be spent on improvements in patient care.

While doctors will still look at the individual patient's needs, they will also be expected to take into account the costs of the medicines, and then prescribe cheaper ones when possible; they will still be able to prescribe more expensive drugs if there is no suitable alternative. "This is good for the premium payers," said Menzis' director of care, Bas Leerink. "They get the best care for the best price."