The UK Government issued on August 2, 2007 an interim response to the UK Office of Fair Trading (OFT) February 2007 market report on the UK’s Pharmaceutical Price Regulation Scheme (PPRS) (the PPRS Report). The UK Government appears to be very receptive to the OFT’s suggestions for reforming the PPRS, and has also stated an intention to re-open negotiation of the PPRS.1

Background

For details of the current PPRS and the OFT’s recommendations in the PPRS Report, see the Hogan & Hartson Update (http://www.hhlaw.com/files/Publication/f88742be-5af4-42b2-b8c8-0279c106036b/Presentation/PublicationAttachment/2e6daad9-4044-441a-b744-440064e21e81/25-04-07_pharma_biotech_OFTUpdate.pdf .

In summary, the OFT advocates reform of the current PPRS from an overall profit-capping and price control scheme to a value-based pricing scheme which would reward effective medicines with prices determined pursuant to an effects-based assessment system. Upon publication of the PPRS Report, the UK Department of Trade and Industry (DTI) and the Department of Health (DOH) had 120 days to consider and respond to the PPRS Report. In the interim, the DTI has been reorganised and rebranded the Department for Business, Enterprise and Regulatory Reform (DBERR).

DBERR

DBERR’s press release quotes Competitiveness Minister, Stephen Timms, “We agree with the OFT that it is time to develop a pricing system which is fit for purpose for the twenty first century.” The term “fit for purpose” has been a buzz phrase popular with Government ministers in recent months.

“We are undertaking a continuing programme of detailed analysis of the OFT’s proposals, and will discuss this analysis with the industry taking into account their strong concerns about a number of proposals.”

In providing its interim response, DBERR notes the success of the current PPRS, including increasing the total percentage of NHS prescription drugs sourced from generics to 83% (from 51% in 1994), thereby conferring upon the NHS the highest generics prescribing rate in Europe.

The interim response also notes significant changes to the pharmaceutical industry and the delivery of healthcare, commenting that (a) blockbuster drugs have become rare, and (b) there has been a necessary shift in focus to developing innovative drugs for increasingly smaller patient populations.

DBERR will continue its examination of the PPRS over the next months and “will discuss proposals with industry”. DBERR “will then aim to make further proposals as part of the renegotiation of the PPRS.”

DOH

The DOH also issued a press release on August 2nd, 2007 in respect of reopening negotiations on the PPRS.

The current PPRS, negotiated in 2004, covers the supply of drugs to the NHS until 2010. The next PPRS will cover the period 2011 to 2016.

It is not obvious from either the DBERR or DOH press release whether the intention to renegotiate the PPRS is in reference to the current PPRS, or the 2011 to 2016 PPRS which, in any event, would require negotiation before the expiration of the current PPRS (in 2010).

The DOH press release quotes a DOH spokesman, “…the department intends to re-open negotiations about the current [PPRS].”

Given that the 2011 to 2016 PPRS is up for negotiation in the near future, it seems odd that the Government would rush to renegotiate the existing PPRS which expires in 2010, particularly when securing a new PPRS should include: a comprehensive timetable for developing proposals, obtaining industry, NHS and other interested parties’ feedback, considering counterproposals and negotiating a final scheme. However, press commentary appears to suggest that discussion of re-opening negotiations is in reference to the current PPRS (set to run to 2010). The Government may wish to roll any review of the PPRS into the negotiation of the 2011 to 2016 PPRS to avoid difficulties with timing. It may also wish to avoid potential legal challenges to any radical modification of the existing agreed PPRS, particularly given that the current scheme includes a number of provisions permitting a mid-term review, which could, in principle, occur in late 2007 as well as provisions for continual communication between the ABPI and the DBERR intended to permit a review of the operation of the current system.

Participating in the PPRS review

DBERR has expressed its intention to consult with industry on the PPRS reform but has not set out any formal procedure for the submission and consideration of interested parties’ views. DBERR is equally unclear about its specific next steps, other than its continuing general consideration of the PPRS Report, i.e. it is unknown whether DBERR will issue a formal Government response to the PPRS Report (or any other document to which third parties could submit specific comments).

The PPRS is negotiated (voluntarily) between the DOH and the Association of the British Pharmaceutical Industries (ABPI).

Pharmaceutical companies and other interested parties need to consider a strategy for effectively delivering their message to the UK Government. Any strategy should cover communications with DBERR, DOH and ABPI.

We have significant experience in formulating strategies for approaching pharmaceutical pricing reviews and issues in the U.S. and Europe. Hogan & Hartson can assist your company in a number of ways: 

  • Consider and advise on procedural and legal issues, including feedback mechanisms 
  • Assist you in formulating common views and arguments to put forward to relevant governmental authorities, regulators and trade associations 
  • Work with your business people and economists to analyse pricing proposals and develop counter-proposals
  •  Consider how to address general perception issues 
  • Assist you in putting your messages forward to the relevant target audiences