Currently NICE cannot negotiate directly with pharma and all pricing deals must be done through the Department of Health

The government has shown its hand in the drug pricing debate after asking for a 20% price cut on some medicines from next year.

In a statement the UK’s Department of Health revealed that it has launched a five-week consultation, which is seeking views on a price cut on drug prices of between 10% and 20%, “to ensure the NHS is getting good value for money”.

Specifically the DH is looking for savings from the statutory pharmaceutical pricing scheme, which covers the prices the NHS pays for branded drugs not covered by the voluntary Pharmaceutical Price Regulation Scheme (PPRS). This represents around a fifth of all medicines in the country.

The consultation shows that the government is considering applying the price adjustment to average selling prices in hospitals whilst removing some of the current exemptions, and introducing a small firms’ exemption in their place.

Lord Howe, the UK health minister, said: “We cannot simply spend more and more on drugs - this would mean spending less and less elsewhere. A drug that brings a lot of extra benefits may justify the NHS paying more, but equally the NHS might pay less for a drug that does not deliver wider benefits.”

Responding to the news the ABPI’s chief executive Stephen Whitehead, said: “The medicines used in the UK by the NHS, already provide good value for money. The prices of our medicines are amongst the lowest in Europe and the Department of Health’s own research confirms this in their PPRS Report to Parliament, which was published last year.”

Drug pricing debate

This comes as the government and the UK pharma industry enter into the final phases of negotiation over a new drug pricing scheme from 2014.

The UK Government favours a Value-Based Pricing scheme that will give new definitions of value to medicines and remove the PPRS. The UK pharma group the ABPI, however, wants the PPRS to remain largely intact and have this wedded to VBP, putting them at odds with the government.

A finalised policy is expected by the end of the year, but the plans remain dubious at best for all concerned. The government said it would continue to negotiate with the industry on the voluntary PPRS, including how the results of a NICE value assessment will influence the price the NHS pays. “We will have an update on that later this year,” it said in a statement.

In the same statement the DH also reiterated that NICE would have a central role in a VBP system, and had been given a new blueprint to look at the benefits drugs bring to patients and wider society.

From 2014 NICE will work with patient groups, the NHS and the drugs industry to decide exactly how to value new medicines. Currently NICE cannot negotiate directly with pharma and all pricing deals must be done through the DH, giving the body that was once up for removal a wider remit.

The government said that NICE will also “take full account of the benefits of drugs that may bring down the overall cost of treatment in the long-term”.

Myeloma UK chief executive, Eric Low, said: “I am very pleased that NICE will have the central role in the broader value assessment of new treatments. This is something that Myeloma UK has called for since the initial consultation on VBP.

“Most importantly, today’s announcement ensures that patients will be firmly at the centre of these broader assessments of value and that discussions and outcomes will not be determined solely by a bilateral agreement between government and industry.”