The Government and the pharmaceutical industry today announced a significant deal on parts of the new Pharmaceutical Price Regulation Scheme.


​The package agreed between Government and industry strikes a reasonable balance. Pledges to support uptake of new medicines - ensuring that patients benefit from access to innovative treatments as well as industry – helped secure a deal that will also deliver stability and predictability for the industry and achieve better value for money for the taxpayer.

The Department of Health has also launched a consultation on statutory proposals to control the price of branded medicines with effect from 1st September 2008. These measures would be introduced for any companies that choose not to sign up to any new agreement as a result of the ongoing Pharmaceutical Price Regulation Scheme negotiations.

The headline agreements with industry include:

  • A saving of 5% in the cost of drugs sold to the NHS : In addition, a further price reduction of 2% will be available if growth in the drugs bill exceeds an agreed threshold. The 5% savings will be made up of a base price cut for all branded medicines of 2%, combined with measures to reduce the price of out of patent drugs (where a generic equivalent exists) and a further variable price cut to deliver 5% overall.
  • Action to support innovation so patients have faster access to new medicines that are clinically and cost-effective.
  • A new non-contractual voluntary scheme providing stability and predictability in Pharmaceutical Pricing for the next 5 years.

Secretary of State for Health, Alan Johnson, said: “I am delighted that the Government and pharmaceutical industry have been able to make such encouraging progress. We have a duty to ensure that patients continue to benefit from innovative products at a reasonable price and the taxpayer gets value for money. We also recognise the industry’s important contribution to the economy, developing new medicines, and to the UK’s research capacity.”

Chris Brinsmead, President of the ABPI said: “This outline agreement provides an excellent platform from which we can work to strengthen our relations with the Government and the NHS, and further to improve the access to innovative medicines for patients.

“The outline PPRS will not only offer benefits to the NHS and to the industry, but most of all to patients, with a raft of measures designed to eliminate delays in providing the most modern medicines.”

Encouraging research and rewarding innovation for the benefit of both patients and industry will both be key factors in reaching the agreement, which aims to achieve four principles set out by the Government in its interim response to an OFT report on the Pharmaceutical Price Regulation Scheme:

  • Delivering value for money
  • Encouraging and rewarding innovation:
  • Assisting the uptake of new medicines
  • Provide stability, sustainability and predictability

Further negotiations on the detail is required over the next few weeks, including on making sure that access to medicines reflects their value to patients, before the new scheme can be finalised and implemented. Both the Government and the industry are committed to taking this forward and reaching agreement.


  • Savings of 5% will be delivered through a combination of measures. A base price cut of 2% will be combined with additional measures to reduce the price of out-of-patent branded medicines where generic equivalents exist (in a similar way to proposals in the OFT’s recommendations on the PPRS). Because this action on older medicines varies with time, there will be additional price cuts that vary year by year to ensure a 5% saving. These measures will apply from January 2009.
  • If the actual rate of growth in the drugs bill in primary and secondary care in England exceeds 6.7% in either 2008 (compared to 2007), or in 2009 (compared to 2008), there would be a further, once only, price cut of 2% in 2010 or 2011.
  • Companies with sales of £25 million or less in 2007, the first £5 million sales will be exempt from the price cut. As with the current PPRS, companies would have freedom of pricing for new products and be able to modulate prices. There will be an independent dispute resolution mechanism.
  • Provision be made to freeze prices on 31 st August 2008 until the price cut on 1 st January 2009.
  • The negotiations on a new scheme are making good progress on agreeing arrangements that include the measures that better reflect the concept of value, but discussion is ongoing and further details will be released in due course.
  • The innovation package includes:
    • establishment of a single horizon scanning process for new drugs in development, with more systematic industry involvement, to support better forward planning;

    • piloting extension of prescribing incentive schemes with PCTs, to promote uptake of innovative products and better use of existing levers in Payment by Results;

    • development of new metrics for uptake of clinically and cost-effective medicines starting with a number of drugs positively appraised by NICE, and publication of comparative international data.

The consultation document is available online

For media enquiries only, please contact the DH Newsdesk on 020 7210 5221. All other enquiries to 020 7210 4850. 

About the ABPI:
The Association of the British Pharmaceutical Industry (ABPI) has 150 members including the large majority of the research-based pharmaceutical companies operating in the UK, both large and small.  Our member companies research, develop, manufacture and supply more than 80 per cent of the medicines prescribed through the National Health Service (NHS).  For further information visit:

Media contact: ABPI Press office, 020 7747 1410.

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