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UK drug pricing: ABPI wants evolution, not revolution

Published on 14/06/12 at 03:04pm
Deepak Khanna
Deepak Khanna - ABPI president


As the ABPI prepares to negotiate a new pricing scheme for the first time in 50 years, its new president tells InPharm that he wants to see evolution from the old system, not a revolution from the new.

Deepak Khanna, currently managing director of MSD in the UK, became the new ABPI president in April and has walked in at a crucial time for the industry in the UK.

He says the ABPI’s three main aims are: membership engagement; partnering with the NHS; and being at the table for the new drug pricing negotiations.

And it is these Value-Based Pricing (VBP) negotiations that will be taking up much of his time as president.

VBP is set to come into place on 1 January 2014, and will replace the 50-year old PPRS pricing system, which allows pharma to set its own prices and then have its treatments’ cost assessed by NICE.

But this will all change in 18 months’ time, and VBP will mean that the government will be setting prices based on how it values a drug, with NICE’s HTA status to be downgraded.

Value in this context includes whether a drug can ease the burden of illness, has a societal benefit and/or is a step change in innovation.

Khanna was cautious about denouncing the plans, but said he would rather see elements of VBP contained within the current PPRS system - an evolution of what we have, not the revolution proposed by the government.

“What we really want are elements of today’s system with elements of tomorrow’s,” Khanna said. He added the PPRS provides “predictability, stability and the ability to re-invest in innovation”, and does not want to lose this system altogether.

He also adds that allowing pharma to set its own prices is key for the industry’s future in the UK, something that VBP will take away.

“What makes the UK very attractive is great quality scientists, a good infrastructure to be able to do trials, and importantly - having a free pricing regime. It’s essential to remember that we are a reference country for 25 other markets, and this makes having a free pricing system ever more important.”

This is true - health secretary Andrew Lansley recently said that some drugs could be priced lower if they do not meet VBP standards.

The concern for pharma is that these lower prices will hit them not just in the UK, but also across the reference markets, further eroding its revenue.

Khanna was also keen to state that having a free pricing system ensures that the UK remains as an early launch market - all the signs are that the industry is not happy with the current incarnation of VBP, and the ABPI will be negotiating hard come autumn.


As a compromise, the ABPI says it will accept some elements of VBP, but would prefer the PPRS remain. 

“What we want out of VBP is to broaden the definition of value from pure cost effectiveness to include other elements, such as burden of illness and innovation, etc., and wed this to the current PPRS system,” Khanna says.

“If you can combine those two into a future scheme, then you are going to make [the UK] a more attractive place to support innovation.”

Khanna said the ABPI would be asking the government for this system when it enters into discussions about VBP this autumn. Many of the details of how VBP will work remain unclear, but this could bode well for the ABPI as it means there is still room for manoeuvre.

But Khanna said that we are running out of time to get this right  - the plans were first published in autumn 2010, but there has been no movement since then.

He said that if VBP were to go ahead in its planned form from 2014, there would have had to have been pilot schemes testing the system since 2010 in order to determine how the industry can work toward finding these new definitions of value that the government want.

Without this kind of lead time – and because the plans remain so ambiguous – it would not be surprising if the ABPI got its way by having a much more diluted form of VBP.

New partnerships

The industry is looking to create bigger and better partnerships with the NHS and academia, Khanna said, adding that joint working is key for pharma firms in the UK.

“The need to partner between the industry, the NHS and stakeholders has never been greater,” Khanna says.

“If you take a look at the changes going on in the NHS, these are unprecedented: you’ve got new stakeholders, new gatekeepers such as CCGs who we have to work with, and coupled with that you’ve also got the anxiety of not knowing what that future system will exactly look like.

“But with that comes opportunity – the more that we can focus on these joint collaborations and joint ways to allow CCGs to achieve their goals, then both the NHS and the industry wins.”

Partnerships will also be the new way of doing R&D. Khanna says that the future “may not be the bricks and mortar R&D facilities that we use to have, but we need a collaboration with academia in different ways to be able to foster this new type of R&D.”

By doing this, jobs can be kept and created in the UK, whilst also helping to harbour innovation.

Cancer Drugs Fund

The Cancer Drugs Fund has proven a hit with the press – notably with the Daily Mail and the Daily Express. But the CDF has been less successful in winning over pharma and even some patient groups.

Their contention is that the Fund is not equal - given that it funds only one therapy area - and that the problems surrounding uptake are not limited to oncology medicines.

This was echoed by Khanna, who said that a ‘systematic approach’ is needed to increase uptake, rather than boosting funding in one area.

“We have uptake issues across most of our therapeutic areas, so [the CDF] is just going after one specific area,” he explained.

“In order to really fix the adoption of innovation issue in this country, it’s got to be more systematic, wholesale changes to the entire infrastructure. This should be from everything: from when you get NICE guidance to it being implemented locally and everything in-between that.”

“I think the CDF is great to focus on the one piece that is cancer, but the issue of the uptake of innovation goes broader.”

The government is considering whether to continue injecting an extra £200 million a year to fund new cancer drugs not recommended by NICE after its proposed end date of 2014. The plan was originally to drop the Fund when VBP came into play from 2014, but public success has led ministers to re-consider.

But seemingly this would not be a popular move in the industry – any future pricing system would need to increase uptake across all areas to really get the backing of pharma.

Pro business government

When the coalition government came into power in the UK in May 2010, the industry held its breath to see just how supportive it would be, but it seems there was little to worry about.

Khanna says: “I would say that the UK government has been very supportive and publicly value us - they clearly view the pharma industry as one of two industries that will help the economy and support jobs.”

He said the government has been supportive in everything from tax credits, R&D credits and giving a focus to the future of R&D: “We are fortunate from that perspective,” he said.

“I don’t think every government is as supportive as the UK government is right now and I think that’s a recognition from the government about the value the industry can bring to the economy.”

This healthy relationship will be a good platform for the industry to work from when the VBP negotiations start in earnest this autumn, and will be the biggest test for the ABPI and its new team



Deepak Khanna is the current president of the ABPI, having been appointed to the role in April 2012, taking over from Simon Jose, head of GlaxoSmithKline UK.

Since taking on the UK appointment of managing director at MSD in November 2009, Deepak has played an active role in industry-wide affairs, notably as board member of the ABPI and chair of the American Pharmaceutical Group (APG).

In his previous role, Deepak was senior VP and general manager of Merck/Schering-Plough. Deepak began his career at Merck in 1988 in field sales and progressed to positions of increasing responsibility within the US human health division.

In 1996, Deepak joined the worldwide human health marketing division working with rheumatology products; he later assumed responsibility for the marketing planning activities to support early stage central nervous system products.

Deepak holds dual nationality, both British and American and currently lives in London with his young family.

He earned a Bachelor’s degree in biochemistry and economics from the University of California, Berkeley and an MBA in marketing from Santa Clara University.

Ben Adams

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