NHS 'paying £500 million too much for medicines'

13 April 2012

The health service is paying £500 million too much for drugs, according to the Office of Fair Trading.

The watchdog said some medicines were up to 10 times overpriced and that cost should be based on the amount of benefit to patients.

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It found that treatments for cholesterol, blood pressure and stomach acid cost far more than they should.

Some drugs like statins, prescribed to millions of people, are up to 10 times more expensive than substitute treatments that deliver very similar benefits to patients, the competition watchdog said in a report.

It recommends that the current "profit cap and price cut" system called the Pharmaceutical Price Regulation Scheme, where companies set their own prices within broad constraints, be replaced.

The OFT estimates that the NHS could save around £500 million meaning more patients could have access to the best drugs. The new system would encourage drug companies to invest in medicines which would provide the most benefit to patients rather than those where the most profit can be made. Other countries, including Sweden, Australia and Canada have already introduced similar schemes.

OFT chief executive John Fingleton said: "Focussing prices on the needs of patients rather than on the costs of drug companies would be good for both patients and for business.

"It would allow more patients better access to more effective treatments, and it would focus drug company innovation and investment on the areas where patients need it the most, creating more valuable drugs in the future."

Drugs companies say prices have fallen since the Pharmaceutical Price Regulation Scheme came into force in 2005. It runs until 2010. The NHS spends £8 billion on branded drugs each year and efforts are being made to reduce this bill.

Doctors have been encouraged to switch patients onto generic drugs where possible in order to avoid using costly branded medication.

But drugs companies argue that medicines cost around £500 million each to bring to the market and the research and development costs must be reflected in the end price.

The British pharmaceutical industry is also a large contributor to the economy. A Department of Health spokeswoman said: "It is important that we have fair prices which give value for money to the taxpayer.

"However, we recognise the importance of the pharmaceutical industry to healthcare and the development of medical advances and it is in all of our interests to encourage research and reward innovation." The pharmaceutical industry claimed the NHS medicines bill was growing due to increasing consumption not price.

Dr Richard Barker, director general of the Association of the British Pharmaceutical Industry, said the PPRS had done a "good job" of delivering value for money in healthcare, something which the pharmaceutical industry supported.

The Department of Trade and Industry and the Department of Health now have 120 days to consider and respond to the OFT's findings and recommendations.

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