Medicine rebates in the NHS. What are the issues? (Or why is it so difficult to give the NHS a discount?) Kevan Wind (DSA) Medicines Procurement Specialist Pharmacist London & East of England

Definition Any discount which is given (or offered) subsequent to the raising of the invoice, or invoices, to which it relates. There are two traditional types: - Settlement Discount, which is a discount offered for prompt payment - Volume Discount, which is given once certain turnovers, or volumes, have been achieved (also known as Over Rider Discount).

Retrospective Discounts offered routinely in secondary care E.g. Wholesaler settlement discounts PAS Schemes Volume Based Schemes

Features for industry 1.Low risk. Discount not paid until performance achieved. 2.Cash Flow. 3.Protection of actual price paid against reference pricing. 4.Allows reaction to currency variations (different effective prices in different countries) 5.Administrative Burden Features for NHS 1.Offer discounts not available in other ways. 2.Cash Flow. 3.Discount a separate payment so difficult to link to medicines price [may be an advantage]. NB PBR excluded medicines. 4.Administrative burden of administering scheme. (E.g. Cancer Drug Fund, PBR medicines, PAS)

More Recently Retrospective Discounts Offered to Primary Care. This more problematic for series of reasons. Disclaimer. Whilst I have consulted widely (industry and NHS) to prepare this talk I intend to talk in generalities and not be specific about any scheme or any NHS response. Also I am NOT a lawyer but have attempted to interpret various legal advice. AND It is early days in this area with everyone learning as they go along. Also for PCT read CCG. There appears to be little to distinguish them on this issue

History The profile of these schemes has been raised by a number of factors The need for primary care to save money. Reference pricing of medicines in primary care. Activity from commercial agencies promoting these schemes. Led to ABPI and DoH statements Legal opinions (variety from both sides) Setting up within NHS of centralised approval / scrutiny. Development of a series of principles.

So What are the Issues for Retrospective Discounts in Primary Care Post NICE Appraisal 1.Bribery Act 2.Public Procurement Law 3.Competition Act 4.Incentive to Prescribe? 5.Undermining of PPRS 6.Financial Governance & Audit requirements 7.Administrative Burden

Presentation Content 1.Give examples of the types of schemes being offered. 2.Work through the legal and procedural issues as they affect these schemes. 3.Explain the types of NHS responses to the schemes being offered. 4.List the principles that are evolving over time and that people are applying.

Types of Schemes on Offer 1.Standard Discount (X%) based on sales of product from EPACT data. 2.Discount paid on increased sales above historic level. 3.Discount paid on a banded system. I.e. there are volume sales thresholds for increasing levels of discount. 4.Discount paid on market share of product within a defined market segment. Schemes are being offered on a variety of types of medicines. As part of a new medicine introduction. To boost sales on an existing medicine. Medicines with a positive NICE TAG Medicines where evidence is less compelling.

The Issues 1.Ability of PCT to undertake such schemes The NHS (Pharmaceutical Services) Regulations 2012 and the NHS Act 2006 explain that PCTs are to make arrangements which are “necessary and expedient” to supply medicines to patients. That is so long as they do not contravene any other laws there is nothing in these regulations to prevent rebates being accepted by PCTs.

2.Medicines Advertising Regulations 1994 Section 21(1) states that where medicines are being prescribed “no person shall supply offer or promise ….. Any gift, pecuniary advantage or benefit in kind unless it is inexpensive and related to the practice of medicine or pharmacy” I.e. you can only bribe us with cheap stuff! Section 21(5) states that doctors or pharmacists should not “solicit or accept any gift, pecuniary advantage, benefit in kind, hospitality or sponsorship” Rebate should not benefit individuals (or probably GP practices). It may be wise to avoid volume targets (e.g. thresholds for payment). [NB Opinion varies on this] NHS should not solicit these types of arrangements. [Means potentially no tendering]

3. Bribery Act 2010 It is criminal to “improperly perform a relevant function or activity in return for financial or other advantage” This could relate to rebates so Prescribers should be instructed to follow GMC guidance. Formulary decisions should not be influenced by the availability of a discount. Transparency and good financial governance arrangements are key, preferably with some audit facility.

4. Public Procurement Legislation Public contracts regulations 2006 apply to the award of a public contract. That is the contract for supply of goods or services to the PCT. Medicines are goods so might be seen to apply. However agreement is a guide to the prescriber. If anything the service is provided by the PCT to the manufacturer (to advise GPs about an arrangement with the manufacturer). So is probably not necessary to tender these arrangements NB see Competition Act & inability of NHS to solicit schemes later

5.Medicines Act and Professional Duties It is incumbent on a GP to prescribe the most appropriate medicine for their patient. If they take into account other factors they may have to obtain informed consent from the patient. But they can act on general advice from the PCT Schemes should apply to licensed medicines only. Individual GPs or probably practices should not sign up for these arrangements.

6.Competition Act The Competition Act applies to undertakings, i.e. entities engaged in an economic activity. Companies pricing policies would be covered by this act particularly if in a dominant market position. Within these schemes the PCT only advises the GP (who can ignore the advice in individual circumstances). So is probably not an undertaking in this instance and therefore not covered by the act. BUT Don’t enter any exclusive arrangements that exclude competitor products Don’t enter agreements based on market shares or switching to a competitor product. Don’t enter bundled arrangements for a range of products. Don’t charge prices below cost.

7.PPRS The Crunch! PPRS is a voluntary agreement with the DoH that sets limits on profit of a manufacturer which affect branded licensed medicines for companies signed up to the scheme. Retrospective Discounts are mentioned in chapters 7.27 and Chapter 6 on PAS schemes states that “Pharmaceutical companies may continue to offer schemes or discounts to the local NHS outside NICE appraisals as long as they do not contravene any aspects of PPRS but decisions on whether to participate in such schemes and the terms on which they are offered are mattered with the relevant pharmaceutical company and the local NHS” Further Chapter 7.20 states “the department accepts the right of member companies to change discount allowed on sales”

PPRS (Cont) Paragraph 10.6 recognises: "…the right of companies unilaterally to offer or withdraw competitive trade discounts at any time". Chapter 3.4 states “ The UK health department does not support additional or alternative initiatives by health authorities in respect of pricing of such supplies” (medicines) PPRS also discourages the promotion of brands over generics. Schemes offering discount are allowed within PPRS The NHS should not solicit schemes Schemes promoting the use of a brand over a generic should be considered with caution.

ABPI Statement ABPI policy does not support tendering initiated by the NHS for branded medicines in primary or secondary care, subject to procurement legislation. This is because such tenders can restrict the availability of medicines which in turn can: present a risk to patient safety, because not all medicines suit all patients; curtail individual clinician choice, with prescribing being driven by cost factors, rather than individual patient’s needs; undermine ongoing investments in innovation; lead to “therapeutic tendering” contrary to requirements of the Public Contracts Regulations 2006.

NB PPRS supports on line and retrospective discounts given as Patient Access Schemes as part of a NICE appraisal. There is a fundamental difference between a discount given as part of a NICE appraisal and one given after a NICE TAG. Presumably the ABPI are concerned that if one company offers a discount then others might be forced to do so even though their pricing is in agreement with PPRS.

DoH Statement PPRS controls the price of branded medicines Local schemes may “fundamentally undermine” the integrity and intent of PPRS Schemes are unlikely to fulfil the objectives of PPRS (as companies will make up the losses elsewhere). Consider Administrative burden Longevity of scheme Resilience of product supply

The NHS Dilemma Schemes do exist and offer savings potential to NHS A central approach to governance offers several advantages Transparency about governance arrangements Consistency across the NHS Reduction in administrative burden in Assessing schemes Administering schemes Security in numbers. Across the NHS 1 region has an established scheme and 2 have proposals to introduce similar. One has devolved decision making to PCTs with a set of guiding principles developed regionally. Rest are considering their position. Scotland has not allowed such schemes. A number have produced principles under which they will assess schemes.

Principles 1.There should be an established clinical need for the medicine and a clear place in care pathways. Bribery Act 2.The decision to prescribe the medicine should be made by clinicians who do not directly benefit from the scheme and should be directed at individual patient need. Medicines Advertising Regs, Bribery Act, Medicines Act 3.The administrative burden of the scheme should be considered. 4.Arrangements should be robust, transparent and for the longer term and the benefits clear and easily identifiable. Bribery Act 5.Medicines should hold a UK or EU product licence. Off label usage probably excluded. Medicines Act & Professional Duties 6.Governance arrangements for the scheme should be robust and transparent Bribery Act

Principles 7.Arrangements should be made with an NHS statutory body and not GP practices or individuals. Medicines Advertising Regs, Bribery Act 8.There should probably be no link to volume thresholds or market share implicit in the scheme. Medicines Advertising Regs, Competition Act 9.Arrangements contingent on market shares or on exclusivity arrangements should be avoided. Competition Act 10.Schemes should not be linked to individual indications for a medicine. Medicines Act and Prof Duties 11.The exit criteria for the scheme should be clear before entering. 12.No data should be provided to industry other than the volume sales of its product. 13.The NHS Reacts to offered schemes and does not solicit them. PPRS, Public Procurement Legislation