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Explores the merits of mega-deal in contrast to a more measured portfolio growth strategy

National pharmaceutical pricing and reimbursement is a complex and ever-changing area. In a rapidly evolving market it is essential that executives are briefed on the regulatory systems that determine the way in which your company operates and sells its products.

The Pricing & Reimbursement of Medicines in the United Kingdom - Understanding the pharmaceutical market in the healthcare system is a straightforward guide to the pricing and reimbursement mechanisms in the UK market, in particular the Pharmaceutical Price Regulation Scheme (PPRS) that came into force in January 2005.

The 70 page report clearly explains the structure of the healthcare system and the regulations and arrangements in place that provide the framework for setting medicine prices and gaining reimbursement through the state financed national health service (NHS). Attention is paid to the mechanisms that restrict spend on pharmaceuticals, including the role of the National Institute for Clinical Evidence (NICE) in England and its equivalent in Scotland. Finally, key current or forthcoming events that may affect the environment are identified and explained. Latest market figures are provided where possible.

Reasons to read this report:

• Save time by concisely explaining the key elements of pricing and reimbursement regulation in the UK
• Understand the principles of the Pharmaceutical Price Regulation Scheme (PPRS)
• Gain insight into latest policies and the political environment affecting the reimbursement of medicines
• Learn common jargon and terminology used in the UK healthcare system

Summary
As the National Health Service (NHS) reimburses the majority of drugs sold in the UK, the UK has developed an unusual system of controlling pharmaceutical companies' profits through a 'voluntary' agreement, known as the PPRS, between the Government and the Association of the British Pharmaceutical Industry (ABPI). Although some patients pay a small co-payment, the health service is free at the point of contact and most patients are protected from the true cost of medicines. However, a series of cost-control measures on the demand side, including the use of government bodies (The National Institute of Clinical Excellence, NICE; and the Health Technology Board for Scotland, HTBS), to assess clinical-effectiveness and cost-effectiveness, makes the UK one of the most controlled environments in Europe.

Summary

Healthcare System Structure

The NHS
The NHS in England
Primary Care in England
PCT Prescribing Budgets: ?The Drugs Bill?
Local Pharmaceutical Services (LPS) in England
Secondary Care (Hospitals) in the UK
The NHS in Scotland
The NHS in Wales
LHBs
The NHS in Northern Ireland
Classification and Supply of Medicines in the UK
Nurse Prescribers in the UK
Pharmacist Prescribers (Supplementary Prescribing) in the UK

The Pharmaceutical Market?

Data for England
Data for England and Wales
Data for Wales
Data for Scotland
Data for Northern Ireland
Pharmaceuticals and Tax

The Pharmaceutical Price Regulation Scheme (PPRS)

Annual Financial Returns (AFRs)
Allocation of Costs and Capital
Limitation of Costs and Assets
Company Profit Cap
R&D Allowance
Marketing Allowance
Information Allowance
New Product Pricing
Products Sold On
Transfer Prices
Other Provisions
Arbitration

Prices Changes for Pharmaceuticals

Pharmaceutical Reimbursement

Dispensing Doctors
Personal Administration GP Claims
Local Supply or National FP10 Routes
Prescribing Information
The PSNC
Contractors in Scotland

Hospital Sales

OTC Price Regulation

Abolition of Resale Price Maintenance (RPM) in May 2001
Size of the UK OTC Medicines Market
Restrictions Removed on Advertising OTC Products
Reclassification (Switching)
Online Directory of OTC Products

Control of Pharmaceutical Expenditure

The PCA System
The Indicative Prescribing Scheme (IPS)
Economic Evaluation
The NICE
The HTBS
The SMC
Recent NICE Guidance and Decisions
Recent NICE Citizens Council Report
The Limited List (?Blacklisted? Products), and ?The Grey List?
Patient Co-Payment
What is the Effect of Generic Drugs?
The Drug Tariff
Maximum Price Scheme and Generics
Future Transfer of ?Standard? Branded Generics to the New Payment Arrangements for Generic Medicines
NHS Legal Action Against Anti-Competitive Price-Fixing

Pharmaceutical Wholesaling

Wholesale Margins

Pharmacy Finance and Margins

Control of Entry Restrictions Revised
New Community Pharmacy Contract
Payments for PCTs
Formula for Future Years
Funding for the New Essential Services
Global Sum Payments
Practice Payments
Protected Payments
Practice Payments
Exit Payments
LPS
ESPS Pharmacies

Impact of Parallel Imports

Future Developments

- A UK General Election in 2005: Re-Election of the Labour Government, and a Subsequent Decrease in the Share of the NHS Budget for Medicines
- The UK Government Cabinet Office May Review The NHS Drug Tariff, NHS Medicine Procurement, Generic Medicine Substitution, and the Control of Entry Regulations, in 2005
- Primary Care Trusts (PCTs) in England Will Receive ?135bn in 2006/07 and 2007/08
- Increased Involvement of the European Commission and the European Parliament in the Pharmaceutical Industry and Healthcare Policy; and the Introduction of a Possible Single European Price
- The Possibility of the EU Allowing Pharmaceutical Companies to Set Prices for Medicines Ineligible for Government-Controlled Pricing and Reimbursement
- The Impact of the Accession of 10 New EU Member States in May 2004; Further Cost Containment: Cheaper Branded and Generic Drugs, and More Parallel Imports
- GlaxoSmithKline (GSK) Will Increase the Cost to Pharmacies of its Best-Selling Medicines from 1 April 2005, by Removing the 12% Discount it Gives on Drugs Where it Still Holds a Patent
- Pricing Reforms for Reimbursed Generic Medicines: Simplification of Drug Tariff Rules
- More POM to OTC P Medicine, and OTC P to OTC GSL Reclassifications ('Switches')
- More Prescribing by Nurse Prescribers and Supplementary Pharmacist Prescribers
- The New Community Pharmacy Contract Effective From April 2005
- Electronic Transmission of Prescriptions (ETP) will Begin in Early 2005
- Merger of the PPA into a new NHS Business Services Authority in October 2005
- The Application of VAT to Personally Administered Drugs and Appliances (in the Course of Treatment) is currently Under Appeal

Useful Contacts

Abbreviations used

About Urch Publishing

LIST OF FIGURES

Figure 1 PPA System for Calculation of Reimbursements and Remuneration to Dispensers of Drugs in England
Figure 2 Reimbursement of Items on an FP10 Prescription Form

LIST OF TABLES

Table 1 NHS Expenditure on Medicines per Person in the UK
Table 2 Definitions of Prescribing Costs
Table 3 PPA Payments to Contractors
Table 4 Example of Timing of Reimbursement by PPA to Pharmacists
Table 5 The UK Drug Tariff for Generic Medicines
Table 6 Funding for the New Community Pharmacy Contract in England for 2005/6
Table 7 Funding for the New Community Pharmacy Contract in England 2005/6
Table 8 Annual Establishment Payments to Contractors in the Community Pharmacy Contract for 2005/06
Table 9 Practice Payments to Pharmacies Dispensing at Least 1,100 Items per Month in the Community Pharmacy Contract for 2005/06
Table 10 Summary of Pharmaceutical Cost-Containment Measures in the UK

Simon Hester is a Pharmaceutical Business Intelligence Consultant who has compiled several reports on Pricing and Reimbursement and Medicine Switching Strategies. He has also compiled competitive intelligence reports on the marketing of Antihistamines and Oral Anti-Diabetic medicines, and carried out business intelligence research on OTC company strategy. He was formerly Content Manager for Business-To-Business Conferences, and an internet portal for the pharmaceutical and biotechnology industries.
Earlier responsibilities were market research on European healthcare purchasing strategies, and information and project management in healthcare purchasers within the National Health Service.
Simon has published four papers and two abstracts in peer-reviewed, healthcare, physiology, pharmacology, and cardiology journals. He graduated from The University of Liverpool with an MPhil Research Degree in Cardiac Muscle Physiology, and has a BSc Degree in Physiology from King's College London.