Value-Based Pricing: Too High a Price for UK Pharma? - Pharmaceutical Executive

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Value-Based Pricing: Too High a Price for UK Pharma?


Pharmaceutical Executive


More missing links

For Catchpole, the loss of the PPRS presents a potentially twofold problem.Its current objectives are geared both to the promotion of a strong pharma industry and to governing the healthcare system. "It ensures value for money for the NHS and it permits fair and reasonable prices for medicines, so that industry is, at a minimum, able to cover its R&D costs," he says. But the stated objectives for VBP "don't make any reference to industry requirements with regard to fair and reasonable prices—only to the needs of the health service."

What's more, the government has said the VBP will only apply to new medicines launched after 2014. Says Catchpole: "There are only 20 to 30 medicines a year that will go through that process." But there are many thousands of existing medicines already on the market that will not be subject to VBP. "There has to be a system in place that will also cover those medicines." Significantly, the government plan is silent on that score, but wider "genericization" of the market is a possibility because the Department of Health has been pursuing that approach for the oldest drugs, for some time.

Reference price ripples

And finally, what are the consequences for UK pharma on the international stage? Might the introduction of VBP see the UK competitive position further eroded? Rob Walton, pulling few punches, believes so. "We should prepare for a period of significant retrenchment in the UK pharmaceutical base once the PPRS has gone," he writes. Tacitly, the ABPI agrees. "Historically, the UK is one of the first launch markets in the world for new medicines because it has rapid freedom of price setting at launch," says Catchpole.

And UK prices are used commonly as a benchmark in many other markets: Twenty-five percent of markets that have some kind of price referencing system reference the UK price in their own processes, and another 15 percent of countries indirectly reference UK prices. The UK's position as a commonly referenced market means that the reforms will "likely be met with manufacturers reconsidering how quickly they want to launch their products there," adds Healy.




If assessments were to accurately measure the value of medicines to society in the UK, this would not be too problematic, given that manufacturers would be delaying or not launching products that society values less. But, says Healy, "as VBP in the UK would not be considering all factors of value, patients may be forced to endure longer waits for some innovative medicines to be launched here." Similarly, Schoonveld warns that "companies will now have no choice but to deny access to new drugs where accepting a substantially lower price in the UK would impact business in the rest of Europe, Canada, and Japan." Thanks to the PPRS, the NHS already pays relatively low prices for medicines when compared with other developed countries. "If VBP assisted the NHS in extracting even further reductions," says Healy, "this could have a global effect on revenues and consequently on global investment in R&D."

Overall, most experts believe that reforms in a slow growth market such as the UK are unlikely to drive the global strategies of the Big Pharma players. But this does not mean that changes in the UK will not shape what other countries do to control price and access to medicines in the future. Schoonveld notes that while European countries have looked at the UK's cost-effectiveness-based system, most countries will probably not adopt the UK model as its approach is fundamentally different. "The messiness of the UK decision-making is hardly inspiring."

Nevertheless, the bottom line is that the UK denominator is trending down, not up—and Big Pharma will have one less country to cite in making the case that innovation must be rewarded.


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