UK drug prices drop by 7 per cent
to cut the prices of medicines by 7 per cent next year but said the
measures did nothing in recognising the burden of mounting research
and development costs.
The Association of the British Pharmaceutical Industry, which represents bigger manufacturers such as AstraZeneca and GlaxoSmithKline, recommended its member companies should accept the new voluntary scheme as the best available to industry.
In a statement Vincent Lawton, president of the ABPI, said the five-year agreement offered a degree of stability that was important to an industry that worked very much in the long-term.
The prices of branded medicines covered by the Pharmaceutical Price Regulation Scheme (PPRS) will be reduced from 1 January, 2005. The price cut will apply to the NHS list price of all products marketed by companies with NHS sales above £1 million.
A spokesman for the ABPI told DrugResearcher.com: "Although we have recommended this scheme within the best interests of the industry, we feel this is essentially imposed on us and is quite unnecessary."
In return for the price reduction, pharmaceutical companies will get a sweetener in the form of increased research and development allowances.
Firms will be able to offset up to 28 per cent of the cost of research and development against sales to the NHS, before the price cuts are triggered. This is a rise of 5 per cent from the previous 23 per cent.
"It takes some 10-12 years and costs £550 million to develop a single new medicine," commented Lawton.
The ABPI spokesman said: "The price cut is certainly not good news in terms of future R&D funding for drug discovery [but] it is going to affect individual companies in different ways, and overall is going to be difficult to assess its impact on the industry."
"Prices in the UK are already competitive and under constant scrutiny. If anything, the price rises are seen mostly on the cheaper generic drugs," he asserted.
Help for smaller companies has been given by increasing the turnover level at which companies routinely have to report financial data from £1 million to £5 million, thus eliminating some smaller companies from the whole process.
The new scheme also expressly states that smaller companies will be dealt with more flexibly in terms of the application of limits and allowances and also specifies that for companies with NHS home sales of less than £10 million, the first £1 million will be exempt from the price cut.
The UK market represents some 4 per cent of global drug sales, making it a relatively small outlet for UK-based groups such as GlaxoSmithKline and AstraZeneca, which make most of their money in the US.
But the UK's price cut follows a wave of similar cost-cutting measures by governments across Europe in the face of escalating spending on medicines, most notably in Germany where a 16 per cent price reduction for many drugs was instituted earlier this year.
