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Government sets out move towards ‘value-based’ drugs pricing

By Lilian Anekwe

The Government has launched a consultation on its proposal to alter the cost-effectiveness thresholds that NICE uses to evaluate medicines, by giving new products special weighting according to their additional benefits.

The Department of Health say the new system of ‘value-based' pricing of drugs will ‘give patients better access to effective and innovative medicines'.

The current system for pricing NHS drugs, the pharmaceutical pricing regulation scheme (PPRS), will be discontinued at the end of 2013, and the DH is seeking views on how the new system will work.

Under the PPRS, which has existed since 1957, pharmaceutical companies have freedom of pricing for new active substances. However, the PPRS controls the prices of branded medicines through regulating the profits that pharmaceutical companies are allowed to make on their sales to the NHS.

The consultation document sets out the DH's plan to ‘re-evaluate' the ‘basic' £30,000 per quality-adjusted life year (QALY) threshold used by NICE to rule on the cost-effectiveness of drugs and to a new system with a range of thresholds to ‘reflect a broader range of relevant factors'.

‘The key principle of value-based pricing is to ensure NHS funds are used to gain the greatest possible value for patients. So the Government would set a range of thresholds or maximum prices reflecting the different values that medicines offer.

‘Under the new system of value-based pricing, the Government would apply weightings to the benefits provided by new medicines, which would imply a range of price thresholds reflecting the maximum we are prepared to pay for medicines.

‘As part of value-based pricing there would be a basic cost effectiveness threshold, directly reflecting the health gains displaced when new treatments are funded. This would set the maximum that the Government was prepared to pay for medicines that offered no additional value in terms of innovation, tackling diseases with a high burden of illness or wider societal benefits.'

Secretary of State for health Andrew Lansley said: ‘The current system of pricing medicines has tried to achieve a balance between reasonable prices for the NHS and a fair return for the industry to develop new medicines.

'However, it does not promote innovation or access in the way this Government is looking for. Also, too often, the NHS has been in the position of either having to pay high prices that are not always justified by the benefits of a new medicine, or having to restrict access.'

The consultation will run until 17 March 2011 and responses should be emailed to

The exisiting deal for drug pricing will expire in 2013