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New Drug Pricing System Proposed

Secretary of State for Health Andrew Lansley announced proposals to shift toward a new value-based pricing system for branded medicines in the U.K. The proposed policy would be introduced in 2014 after the current Pharmaceutical Price Regulation Scheme (PPRS) expires at the end of 2013. The PPRS, in existence since 1957 and renegotiated roughly every five years, regulates the profits drug companies are allowed to make on sales in the National Health Service (NHS).

In 1999, the National Institute for Health and Clinical Excellence (NICE) was established to assess the efficacy of individual products. Currently, NICE also evaluates whether new technologies—medicines or medical products—are cost-effective relative to existing treatments, meaning whether the extra clinical benefit of a given drug or product justifies the extra cost. If NICE then "recommends" a product as clinically and cost-effective, the NHS is required to provide funding for reimbursement within three months. If NICE concludes that a drug or product is not cost-effective, it is unlikely that NHS providers will fund these products, although this can be challenged on an individual basis.

According to Lansley's plan, NICE would continue to conduct pharmacoeconomic evaluations of new medicines. However, under the new system, the NHS would use NICE's assessments to determine at what price (or up to what maximum price) a drug is considered to provide value for money, taking into account clinical effectiveness and cost-effectiveness as well as other societal benefits and innovations. By linking a medication's value to its price, the NHS will therefore be able to propose that drug companies make drugs available at prices reflecting their value. This, in essence, would grant the NHS the ability to negotiate and potentially reduce drug prices or for drug companies to increase the price if a technology is subsequently shown to be more valuable.

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