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UK pharma pays out £150m in drug rebates

Published on 12/09/14 at 11:27am

The UK pharma industry has paid £150 million back to the government as part of its rebate to “underwrite the growth of the medicines bill”.

The sector made a £74 million payment to the Department of Health in the first quarter of this year and has just released details of the second quarter, where it has paid marginally more totalling £76 million.

This brings the total for the first half of the year to £150 million, putting pharma on course to pay out around £300 million by the end of 2014.

The rebate is part of a broad package of reform under the new PPRS drug pricing scheme, which came into place at the beginning of the year.

Under this five-year deal, pharma companies will make percentage payments based on any difference between the allowed growth from the PPRS and actual growth in NHS spend on branded medicines.

The total NHS patented drugs bill for 2013 was £12 billion, and this must remain flat for this year and next, and rise by no more than just under 2% for the remaining three years of the deal.

The £150 million is the amount the UK industry as a whole has spent about the agreed limit for this year so far. The Department of Health says that the payment percentage expected from pharma for 2015 will be ‘published in the autumn’.

The first year payments have been fixed at 3.74% of companies’ net sales. How much this will be is going to be in the coming years is calculated on the growth in sales between the first three quarters of 2013, and the first three quarters of 2014.

Underwriting the drugs bill?

But there is still confusion as to just what these payments mean for the industry. In August, railing against the rejection of its new £90,000 breast cancer drug Kadcyla (trastuzumab emtansine), Roche made public its assumption that the new PPRS deal, along with the repayments, had effectively given them a blank cheque for new drugs.

The Swiss firm went as far to say that NICE’s negative decision underlined the ‘systemic failure’ to implement the PPRS deal.

The firm explained a statement: “NICE has declined to factor in the cost assurance guaranteed by the PPRS in its calculations which would mean the future drug bill cannot be overspent and would remove the burden of additional cost to the NHS.”

But NICE’s chief executive Sir Andrew Dillon challenged this claim, saying that Roche was mistaken in its belief that the PPRS includes an expectation that NICE will ‘ignore the price’ a company asks for its product.

He said the “agreement does not contain this expectation because both the ABPI and the Department of Health agree that obtaining value for money from new drugs is in the interests of the industry and the NHS”.

The ABPI, which represents the UK pharma industry, later released a statement saying it agreed with Sir Andrew. Roche is not currently a member of the ABPI.

Speaking to Pharmafile in an exclusive interview recently, the new head of Bristol-Myers Squibb in the UK and Ireland Johanna Mercier, said that the multi-million pound rebate to the government was ‘not a small payment’.

She explained: “But I do think the intent of that payment is that the NHS is almost given a ‘right to prescribe’ for innovation. This is because anything that will go over their budget will get covered by the industry as we’re essentially underwriting the NHS medicines budget.”

She says that this ‘all sounds great’, but warns that if you follow the rebate money, “it’s not clear that it goes back into the right areas of the NHS”.

She goes on: “If you think about Clinical Commissioning Groups [the new local health authorities in charge of the NHS budget] they still have a budget, but they have no leeway – they can’t go over that budget.

“The NHS as well is not, culturally at least, always pro-innovation, but more about making short-term savings, which often means not spending on new medicines. So I’m not sure that this money is going back to the right people, or that it can practically underwrite the medicines bill as we want it to.”

NICE reform

NICE is also in fact undergoing a restructuring of its processes this month in line with the PPRS reform package, which is set to create a new ‘value-based’ assessment on new medicines.

This reform was seen by many as a placation for the payment of the rebates, which many smaller pharma companies complained about bitterly when it was announced last year.

A consultation on how NICE would achieve this has been out for most of the year, and the publication of its response and proposes to creating a VBA system will be made next week.

NICE has already said, however, that it is looking at adding two new ‘weightings’ to its current assessments when looking at new medicines. These could, in theory, allow NICE the remit to pass more drugs through its system, notably higher priced medicines for areas such as cancer.

The two new value elements are: ‘wider societal impact’ and the ‘burden of illness’, both of which will be added to NICE’s cost-effectiveness formula QALY (quality-adjusted life years) in an attempt to allow more medicines through the system.

Prof David Haslam, chairman of NICE, recently said at a Health Select Committee meeting that for the wider societal benefit weighting, this will mean “extracting the QALY expected from those with a certain condition compared to those without.

“So essentially, we may look at: how much does having a disease stop someone from being able to contribute to society?”

And for the second weighting, NICE will try to assess what it is to carry a burden of an illness throughout someone’s life, rather than not having it, and apply that to our QALY.

Full details of what this could look like will be released on 17 September and covered here on

Ben Adams

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