What's the Future of the UK's PPRS?

June 1, 2016

NHS England head Simon Stevens believes the UK's PPRS needs significantly updating.

NHS England (NHSE) is a key agency in the English NHS. They are responsible for setting the priorities and direction of the NHS.  They also decide how much money to allocate out to the local NHS, but also how much to allocate to themselves to cover national NHS activity, including specialized services and buying the medicines within these. Specialised services cover those services that need particular expertise and where there are relatively few patients who need them across the country as a whole. Spend on specialized services accounts for around 14 per cent of NHS spend in England.

Specialized services are subject to a current inquiry by the Public Accounts Committee; a committee of Members of Parliament who have a responsibility to scrutinise value for money of Government activity. The committee ran an oral session on May 9, 2016 asking questions of NHSE’s Chief Executive Simon Stevens, and the National Director of Specialised Commissioning of specialised services, Dr Jonathan Fielden.

You might be surprised that the Pharmaceutical Price Regulation Scheme (PPRS) - a voluntary agreement that sets the framework for the pricing of branded medicines - came up. It’s the Department of Health (DH) - not NHSE - who has responsibility for the PPRS. And high-cost medicines are just £2.6 billion ($3.8 billion) of the £14.6 billion ($21.2 billion) of spend on specialized services, so a small - albeit important - part of spend. However, high cost drugs (and devices) are seen as a particular pressure to spend more.

Simon Stevens suggested that the PPRS, National Institute for Health and Care Excellence (NICE) technology appraisals and funding requirements on NHSE are not interacting optimally. NHSE is legally required to find the money to fund drugs approved by NICE. He went on to say that, “there is an issue about the way the cost-effectiveness hurdle interacts with the pricing negotiations and with the affordability considerations, and the danger is that things that have come through the NICE pipeline then pre-empt other potential investments that might have offered higher value for patients in the round.” That signals some dissatisfaction from the NHS’s most influential person - as rated by the Health Service Journal - with the current situation.

The cost effectiveness threshold was retained at the £20,000–£30,000 ($29,000–$43,500) cost per Quality Adjusted Life Year (QALY) level in the 2014 PPRS, including some flexibilities for end of life treatments. Stevens comments imply that things will need to change; realistically a lower cost effectiveness threshold and a tougher pricing negotiation will be more likely that spending more on the NHS, to balance the three areas Stevens sees problems with.

Stevens went on to add that, “the voluntary PPRS, which has served this country well since the 1950s, is getting a bit leaky around the boundaries, so thinking about how to deal with that is something we have also got to pay attention to.” Not explicitly said, but presumably he believes that the NHS is not getting the best deal through the current PPRS which has a number of exemptions including parallel imports, brand equalization schemes, central procurements and small company sales.

David Williams, Director General, Finance, Commercial and NHS from the DH was also at the same oral hearing. He picked up on the PPRS too - after it was first mentioned by Stevens - suggesting that the DH are already thinking about “whatever follow-on arrangement might look like.” The 2014 PPRS is not even half way through yet.

Although there might be a few ways to interpret Williams thoughts on the future PPRS, his mention of the DH setting a framework but seeing “volume of demand as really an NHS England responsibility, and getting the best commercial deal” could signal a stronger role for NHSE in some, way, shape or form for the next negotiation on the PPRS.

Stevens suggests that NHSE are already doing just what Williams suggests in terms of getting good commercial deals. Stevens said that, “by being a constructive but hard nosed negotiator with the relevant pharmaceutical company we have secured very substantial discounts.” So if NHSE are around the negotiating table for the successor to the 2014 PPRS, a tough stance against industry will be a given.

NHSE’s approach to procurement of some new drugs was also covered at the oral session, particularly the example of hepatitis C drugs. This is one of the examples of where a NICE yes has proved difficult for NHSE; at the margin new hep C drugs are value for money, but with a lot of potential patients who could be prescribed them, the budget impact is significant. NHSE is legally required to fund NICE approved drugs, usually within 90 days. The fix? A fudge. NICE has permitted slower adoption to help NHSE manage the budget impact. Stevens has implied that if such a situation were to arise again that a phased approach to adoption would be taken. So much for speedy adoption of cost effective new medicines. Perhaps it also means that there will be pressure for NICE to consider budget impact, and not just value for money at the margin, another change that NHSE might table for negotiation?

In addition, NHSE is running six monthly procurements to try to achieve what Stevens describes as “getting as good a deal as we can” for hep C drugs.  He describes the job of NHSE as to “winnow through the hype from the reality and, for those new medicines that really are effective - genuinely innovative - where manufacturers are willing to price reasonably, to make sure that we get those into the system quickly.” This could re-open the painful debate about defining innovation that was part of discussions on the implementation of value-based pricing (VBP) that got dropped by the time the 2014 PPRS came out.

Whatever the future holds for the PPRS, perhaps we can expect Stevens and NHSE to be influential in shaping the successor to the PPRS - whether inside or outside of the negotiation.

Leela Barham is an independent health economist and policy expert. You access her website here and contact her at leels@btinternet.com