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The value of the pharmaceutical industry
'New technology and new pharmaceutical products have
made it possible to treat ailments which could not be treated
in the past and to cure conditions which once were fatal.
We may well be on the brink of huge breakthroughs, which will
save the lives of millions and transform the lives of tens
of millions. I welcome that prospect and want to promote it.'
Secretary of State for Health, May 1998
'I am confident that, given your current strength and
commitment to the science base, the UK pharmaceuticals sector
will continue to be a global leader in the future. You can
also be certain that the Government will be doing all it can
to create a competitive environment in which you are encouraged
to innovate and be successful.'
Minister for Science, February 1999
'More than ever, innovation is the key to higher productivity.
So we must see that inventions which are created in Britain
are developed and manufactured in Britain'
Chancellor of the Exchequer, November 1998
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NHS medicines spending
The annual cost of the NHS across the UK is now around
£50 billion. Of this the highest proportion - about
two thirds - goes on the salaries and fees of staff
such as doctors, nurses and managers. Health service
expenditure on medicines now stands at about £6 billion
- about 12 per cent of the total NHS bill.
Over the past decade the number of prescription items
per head of UK population rose from eight to 10.
Factors that affected the number and cost of prescriptions
include:
- the introduction of new medicines, creating fresh
treatment opportunities;
- population ageing, leading to a greater proportion
of people needing both short and long term medical
care; and
- increasing numbers of patients treated, with less
use of institutional care and in-patient therapy and
more interventions such as day surgery.
Modern health care is relying increasingly on a greater
use of medicines to prevent or treat early stage illness,
and obviate the need for more radical treatments. This
may require additional spend on medicines, but less
overall use of NHS resources than would otherwise have
been needed to obtain the same health improvements.
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For many years Britain has been home to a pharmaceutical
industry that is second to none in Europe and surpassed only
by the United States in its success in developing world-leading
new medicines.
This achievement has helped to ensure that the industry plays
a major part in enhancing both the health and wealth of the
UK. The National Health Service has been a major beneficiary
of the many advances made by the pharmaceutical industry.
Yet this country's domestic spending on pharmaceuticals is
low compared to the value of the medicines produced here,
and when compared with consumption in most other major countries
in Europe and further afield. It is also low in comparison
with the amount spent on research in this country (Figures
1 and 2).
The Pharmaceutical Price Regulation Scheme has played a significant
part in the relationship between the industry, the National
Health Service and the wider economy since the early days
of the NHS, but its mechanisms appear complex to the world
at large, and have not always been communicated clearly. The
ways in which the PPRS protects public interests are not well
understood, even by people in the NHS itself.
The objective of this Briefing is to outline the structure
and working of the PPRS, and the most important aspects of
the new agreement introduced in October 1999.
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