DH PRICE CONTROLS

1. DH PRICE CONTROLS Implications for the Future Pricing and Supplyof Branded Medicines within NHS Hospitals

2. Overview of the PPRS. • A Voluntary Scheme which has gradually evolved over a lifetime of some 50 years. • Generally regarded as having been a series of stable and flexible schemes associated with flexibility and a low bureaucratic burden. • Based on price and profit controls. • Allows freedom of pricing for New Active Substances and rapid access to the NHS Market. • Has provided a framework for the inclusion of such new ideas as Patient Access Schemes.

3. A More Detailed View The current Pharmaceutical Price Regulation Scheme is a voluntary Scheme agreed between the Department of Health and the branded pharmaceutical industry represented by the Association of the British Pharmaceutical Industry (ABPI). The PPRS is the mechanism which DH uses to control the prices of NHS branded medicines by regulating the profit that member companies of this Scheme can make on their NHS sales. The current PPRS came into operation with effect from 1st January 2009 to operate for not less than five years after that date with the condition that either DH or the ABPI may request termination or renegotiation of the scheme after four years DH gave notice that at the end of 2013 the 2009 scheme would terminate and negotiations between DH and ABPI have been ongoing for some considerable time opened for a new scheme. Negotiations are unlikely to be concluded before November. No announcements were made by either the ABPI or DH concerning any amendments until yesterday Wednesday 6th November.

4. Regulations associated with the PPRS • The Health Service Branded Medicines (Control of Prices and Supply of Information) (No. 2) Regulations 2013 were proposed to come into force in October 2013. They did not. • The Regulations should form the statutory alternative to the voluntary arrangements. In other words they should not apply to manufacturers which are members of the voluntary PPRS

5. Shocks to the PPRSWhy is this all happening? • An OFT review on 2007 that recommended Value Based Pricing. • A High Court Case brought by GSK concerning the contractual nature of the PPRS. • A series of Dispute Resolution Hearings concerning differing interpretations of the meaning of the Scheme , including whether it is a formal contract. • The determination of whether PPRS price cuts and modulations actually delivered the savings required by the PPRS. • The introduction by Regulations of an option to fall under Regulatory price control arrangements, rather than continue voluntary membership of the PPRS

6. Future Arrangements.What might we expect? • A new flagship PPRS . • Amended Statutory Regulations. • Value Based Pricing. • An overall cap to the cost of NHS branded medicines.

7. Possible PPRS changes affecting the cost of NHS branded medicines • Yet another (list) Price Cut? But apparently not!! • Clawing back of savings not delivered by PPRS members under previous schemes. If so where will the money go? • Profit controls: more or less? • An overarching cap on the cost of total expenditure on NHS branded medicines? • Shoehorning Value Based Pricing into the PPRS framework?

8. Price Cuts under the new regulations? These might include: • Introducing a new price cut which may or may not be the same as the percentage price cut under the new PPRS. But some surprising news was issued yesterday! • Establishing revised reference prices for the purpose of a price cut either based on NHS list prices or based on Average Selling Prices within hospitals.

9. Some Implications for Hospital Pricing and Supply • Contracts will continue to be the key means of controlling expenditure on NHS branded medicines. • Price Cuts might lead to increased parallel exports and further shortages of NHS medicines. • There will be a greater administrative burden on all involved to calculate the total costs of NHS medicines . • It cannot be assumed that any claw back of excess expenditure will be channelled back to budget holders.

10. The Impact of Value Based Pricing This is uncertain insofar as the new arrangements will have to deal with new and interactive mechanisms dealing with such aspects as: • Burden of illness, QUALYS, other value elements and weightings. • Engagement of many stakeholders: NICE, MRC, Academics, GP Consortia , Patient Groups and Hospital specialists. • A bureaucratic burden considerably greater than current arrangements. • Coverage of Orphan drugs • Impact on the Cancer Fund • VBP appears to have the potential to delay access to or uptake of new or innovative medicines.

11. NEWS!!! Key announcements issued on 6th November: • 15% list price Cut under the Regulations. • PPRS members to make payments to DH based forecast and actual “rates of measured spend”. The initial payment will be 3.74% of net sales. • Some exemptions for small companies • Companies have an option to request a Value Based Price appraisal.

12. REVISIONS TO THE REGULATIONS • 15% list price cut for those companies which are not members of the PPRS • Small companies with annual sales of less than £5M exempt will be exempt from price cut and provision of information. • The introduction of Average Selling Price calculations will be delayed for an unspecified period of time. • The low cost presentation exclusion of less than £450K removed- if companies need a price increase then they can apply for one (but there are no details clarifying how a price increase may be calculated.)

13. REVISIONS TO THE PPRS • The NHS branded medicines bill will stay flat over next two years . • However, there will be no price cuts and control over the cost of NHS branded medicines will be achieved by industry making payment to DH if spending exceeds “ the allowed growth rate” • The percentage forecast growth rate of measured spend for each year of the PPRS will be: 3.87 %– 3.52% – 3.86% – 2.14% -3.09% The allowable percentage forecast growth rate of measured spend for each year of the PPRS will be: 0.00% - 0.00%- 1.80%- 1.80% - 1.90% • An initial amount will be payable in 2014 based on estimated net sales in 2014 of 3.74% • Estimated annual percentage payments for each year thereafter will be : 7.13% – 9.92% - 9.92% – 9.92% • Small companies with sales of branded medicines less than £5M will be exempt from making the above payments. • DH has not explained how or whether the above payments will be channelled back to budget holders!

14. OTHER ISSUES • Patient Access Schemes will continue with some tweaks. • Value Based Pricing has been kicked into the long grass: essentially up to NICE with an elective option for companies. • A broader definition of Value will be introduced in due course. • Treatment of Homecare sales unresolved

15. Manufacture Rebates • “With the exemption of Patient Access Schemes, NHS England will seek to bring to an end initiatives by NHS commissionaires (NHS England or CCGs) to arrange for rebates to be made by manufacturers to the Commissioning body for the supply of medicines with a positive NICE technology appraisal to providers of NHS services in primary or secondary care” !!!

16. The Same old Same old? • The PPRS will continue to provide an overarching framework for the negotiation of various pricing and control policies and mechanisms. • Mainly driven by a few large companies and representative organisations who have experience in influencing DH policy. • No effective engagement with Hospitals or any other budget holders. • No clarity about the extent to which the new arrangements will impact on budget holders throughout the NHS.

17. Thank you • Thank you • Good night • And good luck!