03 November 2004

Billion-pound price cut won for NHS medicine bill

The government has won a billion-pound price cut in key medicines for the NHS, it has emerged today.

The health department negotiated the 7% price reduction – totalling £1.8 billion over five years – for branded prescription medicines following nine months of discussions with the Association of the British Pharmaceutical Industry.

The deal will enable the NHS to save £370 million a year and put it back into frontline NHS services by local Primary Care Trusts. The pay-off for the pharmaceutical industry is the government will now offer greater incentives for companies to research and develop new medicines.

The agreement provides for an increased allowance for research and development (up to 28% of NHS sales) with financial incentives for the introduction on innovative medicines including those for children.

Health secretary John Reid said: "The NHS in England spends around £11 billion on medicines each year. It is vital that this money is spent wisely and that we get good value for money.

"This new deal is a win-win. It is good value for money for the NHS and the taxpayer and it is good for the industry because it provides an incentive for research and innovation."

The deal has been agreed as part of a new Pharmaceutical Price Regulation Scheme (PPRS) agreement with the pharmaceutical industry which is negotiated every five years.

The PPRS agreement covers the price of 'branded' prescription medicines. This means medicines that have been licensed for prescribing on the NHS to which the manufacturer has applied a brand name so that it can be identified without reference to its generic name.

Total NHS drugs bill spend in England is expected to be in the region of £11 billion in 2005-06. This covers medicines prescribed in the community (mainly by GPs), includes generic as well as branded medicines and sales on non-medicines such as appliances.

(gmcg/sp)