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David Taylor Professor of Pharmaceutical and Public Health Policy, The School of Pharmacy, University of London Will the new PPRS work? (And if does, what.

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Presentation on theme: "David Taylor Professor of Pharmaceutical and Public Health Policy, The School of Pharmacy, University of London Will the new PPRS work? (And if does, what."— Presentation transcript:

1 David Taylor Professor of Pharmaceutical and Public Health Policy, The School of Pharmacy, University of London Will the new PPRS work? (And if does, what will it deliver?) PDIG Summer Symposium, June 11 th 2009

2 This presentation This contribution discusses issues relating to the history, purpose and performance of the UK PPRS and the challenges and opportunities facing the UK pharmaceutical sector in the next decade The public has multiple, sometimes conflicting, interests in medicines and health care. They range from ensuring optimally affordable access to existing treatments to investing in therapeutic and scientific progress for the future “A fool knows the price of everything and the value of nothing." Professor Sir Michael Rawlins and Mr Oscar Wilde

3 Medicines are atypical high technology products. Once developed and introduced they can normally be copied at low cost. Their supply typically involves high ‘sunk’ costs and low marginal costs of production The inherent complexity of the pharmaceutical sector is a barrier to balanced public debate. A failure today to value pharmaceuticals and pharmaceutical innovation appropriately would impose heavy costs on this country Charles Medawar and Professor Joe Collier

4 Key questions Is pharmaceutical innovation close to exhaustion as a profitable business focus for the UK/EU? How should and can we judge fair prices and profits – does product by product ‘VBP’ offer a better way forward than the established PPRS approach? In the ‘post blockbuster’ age of major community treatment genericisation, has the pharma- marketing problem effectively solved in the UK? If there is a need for further systemic re- engineering, what should it be aimed to achieve and how best might key policy objectives be pursued? Sir Peter Vigger’s privately funded Stockholm duck house

5 In modern ‘consumer’ societies there is……. Increasingly assertive patient/user behaviour and greater demand for personal autonomy plus assured medicines safety and effectiveness Decreased tolerance of health inequalities, and higher expectations of universal care access A shift of aspects of care quality protection from professional to regulatory agency and managerial control For sources see, for instance, the work of Inglehart, Giddens, Sennet, Flynn and Salter

6 I Some key dates 1948 The NHS and ABPI established 1952 Prescription charges and the Korean War 1957 The VPRS Circa 1960 Thalidomide 1967 The Sainsbury Report 1973 The UK enters the European Union 1978 The PPRS The 1980s, from UK blacklists to extended European patent lives The 1990s, exclusion of generic medicines from the PPRS and the establishment of NICE in 1999 2005 The 2005 PPRS and the publication of the OFT study 2006 The Cooksey report 2008 (Feb) DH gives 6 months notice of withdrawal 2009 The 2009 PPRS

7 Medicine pricing across European is set by a variety of comparison based reference schemes – the UK PPRS is an exception to this pattern The PPRS seeks to balance public and private interests in medicines affordability and industry viability by setting a ‘normal’ profit level relative to capital employed and defining allowable cost levels in relation to this the scale of each company’s NHS business In EU countries with weaker research sectors generic/local mature branded medicines tend to be relatively highly priced and international patented products low priced With NICE, the UK may be moving towards a ‘value based pricing’ model for new medicines, based on ICER/cost per QALY affordability thresholds

8 Health spending in the OECD, 2006 Private

9 Pharmaceutical spending in total health spending Source: Pharmaceutical pricing in a global market, OECD, 2008

10 Pharmaceutical sector trade balances, 2003

11 2009 PPRS main points Price cuts of 5.8 % over 2 years (balanced by restoration of previous temporary reductions) Patient access schemes Other price flexibilities Generic substitution from 2010 Support for new medicines uptake Maintenance of negotiated ROC levels, MOTs etc together with R&D and marketing allowances, transfer pricing arrangements etc Operational stability to 2014 (?) Byron Dorgan and Olympia Snowe

12 Overall UK medicines spending has not been high relative to the rest of Western Europe. But its research productivity has in the past been outstanding The overall ratios of NHS trade related marketing costs as compared to research investment in the UK are arguably ‘better’ than anywhere else in the world British rates of voluntary generic prescribing in the community setting are similarly the highest in the world The UK balance of trade in pharmaceuticals has to date represented a valuable success


14 Is pharmaceutical innovation exhausted?

15 Problems with ‘value based pricing’ Implies that the clinical value of a medicine can be determined at around half way through its patent life (ie at the time of launch)? This is not in reality the case, especially with agents such as anticancer medicines Undermines the value of individual and population ‘willingness to pay’ as a market signal? (Gives managers and regulators undue control over defining value) Affordable ICER thresholds are artificial and highly variable between social groups and societies? (If different thresholds used VBP would not solve either EU wide or locality based problems) Methodology for measuring quality of life contestable? For instance, QALY based calculations as currently undertaken by NICE may be considered blind to wider social interests and long term policy goals

16 What future changes – if any – are needed? Is the concept of ‘free market’ pricing for pharmaceutical products viable in countries where demand side purchasers are competent? Would the UK and Europe more widely profit by banning parallel trading in medicines? To what extent would UK/EU/global public interests be served by increasing the duration of pharmaceutical patent protection in the EU/globally, balanced by appropriately agreed changes in pricing and global supply strategies?

17 Conclusions Pharmaceutical pricing is inevitably controversial. Yet there is robust evidence that the research based pharmaceutical industry has contributed significantly to human wellbeing in the 60-70 years of its existence The extent to which the new PPRS represents a break with the past should not be overstated. Failures to take a constructive approach to fostering (bio) pharmaceutical science based industry and therapeutic innovation would impose heavy costs on the UK, and ultimately humanity as a whole In the modern context open and constructive public dialogue between the all the members of the complex network of stakeholders involved in pharmaceutical pricing and wider health policy formation and implementation is needed to protect against damaging errors. There is an emergent case for further strengthening of pharmaceutical IP in return for new price and international supply guarantees from patent holders

18 There is reason to be modestly optimistic that the new PPRS will not cause immediate harm to the (UK and wider) pharmaceutical industry. Nor will it damage NHS interests in medicines affordability Health service patients will probably enjoy better access to innovative cancer medicines in the next five years. But if Britain’s future is to be assured more assertive action to protecting shared public and private interests in maintaining adequate investment in value adding research and manufacturing capacity in an increasingly challenging world will be needed

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