"What are your views on value-based pricing?" That is the question I've probably been asked more than any other since I took over as Chief Executive three months ago.

 

In this week’s Daily Telegraph, my views on the subject appeared for the first time.

Plain and simply, I think a value based approach to pricing medicines is a good thing. I welcome any move that will take into account the full range of benefits medicines deliver, including wider societal benefits. In short, more comprehensive value assessments is something I support.

But I also hold the Pharmaceutical Price Regulation Scheme (PPRS) in particularly high regard and I know from speaking with industry colleagues that they do to. In fact, it is so highly valued that I can say, clearly, for the first time, that we should not get rid of a system that has served the Government and industry so well over the last 50 years. But I think it is important to state why I value the PPRS so much, before addressing how value-based pricing (VBP) should fit with our aim of retaining the current scheme.

The key strengths of the PPRS, as I see them, are minimal bureaucracy, a single holistic system that spans all nations in the UK, stability, flexibility, and freedom of pricing at launch. I’ve expanded on each of these points below:

  • Minimal bureaucracy - PPRS keeps regulation to a minimum which translates into low staffing and resource costs for both the Department of Health and industry. A separate VBP system in addition to a new PPRS-type agreement, could create a fifth hurdle to market access.
  • A single holistic system that spans the UK - The PPRS allows medicines to be priced the same across the whole of the UK, while a separate VBP system could lead to differences in cost across the four home nations. This could worsen differences in availability.
  • Stability - With new medicines typically 15 years in development, the PPRS allows investment decisions to be made with much more certainty and within a trusted framework. It also allows the Government and NHS to plan budgets for several years ahead.
  • Flexibility - At each negotiation every five years the needs of the time can be considered and new elements added or removed from the scheme. For instance, the PPRS responded to the need for more of a value-based approach by including Patient Access Schemes.
  • Pricing of medicines - Companies have their profits capped for their whole portfolio of products, but crucially they control the pricing of each individual medicine. This has allowed the UK to make medicines available early as there is no need for protracted pricing discussions which in turn ensures that patients have rapid access to new treatments. The PPRS has also allowed the UK to have amongst the lowest priced medicines in Europe.

The PPRS simply has too much going for it, and scrapping it for the sake of a new VBP system would risk throwing out the baby with the bath water. But running VBP parallel to the existing PPRS is simply not practical - that is why our solution needs to be incorporating VBP in to a single, holistic, integrated, voluntary and negotiated scheme. This allows the strengths of the PPRS to be retained, while its inherent flexibility can be used to include a broader definition of value for the assessment of new medicines. 

Ultimately, I think patients will be better served with a single agreement in place, allowing for a stable environment in which innovation can thrive and medicines are available early.

Stephen Whitehead, CEO of the ABPI

 
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