Readers will be aware that the recent Health Select Committee report on the activities of the National Institute for Heath and Clinical Excellence (NICE) was highly critical of the delay in setting out the essentials of a move to a value-based pricing system for drugs, when the current Pharmaceutical Price Regulation Scheme (PPRS) expires in 2014. A considerable amount of time has been allowed to elapse since the Government consultation on the transition opened in 2010. It therefore comes as no surprise that the DH has now announced that it will hold talks on the role of NICE with the trade body representing the pharmaceutical industry, the ABPI, in a bid to reach agreement on new pricing arrangements.

Some parts of the industry have long been critical of how NICE operates and ABPI chief executive, Stephen Whitehead, described the decision as a "win for all those concerned about medicines access". Mr Whitehead is reported to have said that the industry would like to see greater transparency from NICE about how it makes decisions, more patient involvement and power for the chief executive to overrule decisions made by its committees.

Value-based pricing was proposed in the 2010 white paper Liberating the NHS and was supposed to end high profile rows over NICE’s refusal to approve some drugs for use in the NHS. The idea behind value-based pricing is that decisions on cost effectiveness will be based on a broader concept of value, taking into account factors including wider societal benefit and whether a drug is treating a previously unmet need.

Agreement must be reached by the end of the year when the existing 2009 PPRS, which caps the profits industry can make from the NHS, expires. The latest reports suggest that the most likely outcome will be a hybrid operation with value-based pricing for new drugs running alongside an amended PPRS for existing medications.