Discretion to set prices for new medicines free of government intervention is heading toward extinction in Europe, with the
UK looking set to follow Germany in a race to an ill-defined destination it calls "value-based pricing." On target for phase-in
at the end of 2013, the prospective new regime—dubbed by critics as a stealth system of payer-based value controls—will impact
pricing beyond the UK, if only because most industrialized countries outside the US references UK prices in setting their
own drug tariffs. Combined with controversial reforms to the National Health Service (NHS), an eroding base in clinical trials,
and a politically charged debate on patent incentives linked to industrial policy (see sidebar), the price changes are likely
to contribute to further erosion of the UK's reputation as a stable and predictable market for Big Pharma investors.
There is Value—in the Patent Box
The reform is much more than a simple endorsement of value-based pricing (VBP). What the government intends is to abandon
one of the most venerable structures for P&R in Europe, the Pharmaceutical Price Regulation Scheme (PPRS), which was introduced
more than a half century ago and, as negotiated at five-year intervals, stands as a symbol of close policy coordination between
politicians, the health bureaucracy, and industry. In its place looks to be a far more hierarchical arrangement in which industry
will basically function as price takers in a process administered exclusively through the Department of Health.
One reason why the changes have attracted less attention than they deserve is the larger debate over reform of the NHS, which
is being reorganized under a bill now making its way through Parliament. Ironically, the NHS reforms promise more autonomy
to local physicians in funding patient care and introduce more private sector competition in service delivery—just as the
demise of the PPRS removes what is left of pricing freedom in medicines, in favor of outright controls. And although the NHS
reform is expected to cut $8 billion in costs to the $160 billion system by 2015, none of the savings are pledged to improving
access to medicines.
Speak softly, industry
In addition, industry itself is taking a low profile on the drug proposal, with the Association of the British Pharmaceutical
Industry (ABPI) declaring basic support for VBP as a framework for evaluating a future pact with government. Rob Walton, an
analyst for Wisper Public Affairs, noted in a recent blog that the industry position was "so uncontroversial" that the Department
of Health was able to cite it in responding to critics of a PPRS overhaul during the first public consultation on its plans
ABPI Director Stephen Whitehead's support for VBP—"it provides significant opportunity to both improve patient outcomes and
stimulate the development of new and innovative medicines of the future"—did feature prominently in the government's press
releases. But the language is highly nuanced and accompanied by a number of important caveats; like many other aspects of
the debate on access and pricing in Europe, the way the industry speaks in public can be open to interpretation.
It is also true that there is little consensus on exactly what the government intends to do, and—more importantly—how and
to what effect the new regime will be implemented. The discussion itself has been exhaustive to the point where all parties
think they have heard back at least some of what they have said. VBP has been on the reform docket since 2007 and the Conservative
coalition government formally presented it as a replacement to the PPRS in 2010.