Pharmaceutical Price Regulation

Pharmaceutical Price Regulation

The prices of branded pharmaceutical products which are supplied to the NHS are controlled in part by a voluntary agreement, known as the Pharmaceutical Price Regulation Scheme (PPRS).

The PPRS is agreed between the Government (through the Department of Health) and the Association of the British Pharmaceutical Industry (ABPI). Any supplier which supplies branded pharmaceuticals to the NHS may elect to sign up to the PPRS.

The overarching principles of the PPRS include supporting the NHS by ensuring that branded medicines remain within affordable limits for the public purse, and supporting the Government’s growth and innovation agenda for life sciences. 

Heads of Agreement for the new PPRS were announced recently, and will come into force on 1 January 2014. They will replace the existing scheme (implemented in 2009 and due to expire at the end of this year). Key points include:

  • Under the 2009 PPRS, there was no upper limit on NHS expenditure on branded medicines. Under the 2014 PPRS the growth rate of NHS spending on branded medicines is capped, and set at 0% for the first two years and marginally short of 2% for the following three years.
  • Although the allowed growth rate of NHS spending on branded medicines is flat, actual growth rate for forecast to increase yearly by between 2% and 4% over the lifetime of the 2014 PPRS.
  • In order to make up the difference between the allowed growth rate and the actual growth rate, each company participating in the scheme will be required, subject to certain exemptions, be required to make quarterly payments in arrears to the Department of Health. This is set at 3.74% of net sales for 2014, rising to 9.92% for years three to five, subject to adjustment depending on actual spend in each year.

A link to the heads of agreement for the 2014 PPRS can be accessed here

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