Transcript www.ghp.org.uk

Will the new PPRS work?
(And if does, what will it deliver?)
PDIG Summer Symposium, June 11th 2009
David Taylor
Professor of Pharmaceutical and Public Health Policy,
The School of Pharmacy, University of London
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
Professor Sir Michael
Rawlins and Mr Oscar
Wilde
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."
• 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
Charles Medawar and
Professor Joe Collier
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’
Sir Peter Vigger’s privately funded Stockholm duck house
In modern ‘consumer’
societies there is…….
• Increasingly assertive
patient/user behaviour
and greater demand for
personal autonomy
plus assured
medicines safety and
effectiveness
For sources see, for instance, the work of
Inglehart, Giddens, Sennet, Flynn and Salter
• Decreased tolerance of
health inequalities, and
higher expectations of
universal care access
Some key dates
• 1948
The NHS and
I
ABPI established
• 1952 Prescription
charges and the
Korean War
• 1957 The VPRS
• Circa 1960
Thalidomide
• 1967 The Sainsbury
• 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
• 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
0
8.9
8.8
8.7
8.4
8.4
8.3
8.2
8.2
OECD
Australia (3)
Norway
Spain
United Kingdom
Hungary
Finland
Japan (4)
6.4
6.2
Korea
Poland
5.7
6.6
Mexico
Turkey (4)
6.8
Czech Republic
7.1
9.0
Italy
Slovak Republic (4)
9.1
Iceland
7.3
9.1
Greece
Luxembourg
9.2
Sweden
7.5
(1) Public and private components are current expenditure,i.e. investments are not separated.
(2) Current expenditure.
(3) Data refer to 2005/06. (4) Data refer to 2005.
Source: OECD Health Data 2008 , June 2008.
Ireland
9.3
New Zealand
10.0
Canada
9.3
10.1
Austria
Netherlands (2)
10.2
Portugal
9.5
10.4
Belgium (1)
Denmark (1)
10.6
Germany
11.1
4
France
8
11.3
12
Switzerland
United States
15.3
Health spending in the OECD,
2006
Chart 2: Health Expenditure as a Share of GDP, 2006
% of GDP
16
Private
Private
Public
Pharmaceutical spending in total
health spending
Source: Pharmaceutical pricing in a global market, OECD, 2008
Pharmaceutical sector trade
balances, 2003
2009 PPRS main points
Byron Dorgan and Olympia Snowe
• Price cuts of 5.8 %
over 2 years
(balanced by
restoration of
previous temporary
reductions)
• Patient access
schemes
• Other price
flexibilities
• Generic substitution
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
Is pharmaceutical innovation
exhausted?
R&D expenditure
Sales
Number of NMEs
Indexed growth (1991 = 100)
200
175
150
125
100
75
50
1991
1992
1993
1994
1995
1996
Year
1997
1998
1999
2000
2001
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
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?
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
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