Value-based pricing for pharmaceuticals : its role, specification and prospects in a newly devolved NHS

In December 2010, the Government launched its consultation on its plans to change the way medicines are priced in the UK. By 2014, a system of ‘value-based pricing’ (VBP) will replace the current Pharmaceutical Price Regulation Scheme (PPRS), which is a voluntary agreement between the Department of Health (DH) and the pharmaceutical industry whereby companies negotiate profit rates from drug sales to the National Health Service (NHS) every 5 years utilising price and profit controls. The concept of VBP emerged from the Office of Fair Trading (OFT) report in 2007, which recommended that prices of individual pharmaceutical products should reflect their 'clinical and therapeutic value to patients and the broader NHS'. The introduction of VBP provides an opportunity to found pharmaceutical pricing and access to new health technologies on sound principles; reflective of social values and the reality of a budget constrained NHS. This requires: clarity on key issues of principle and social value; as well as critical details of how it will be implemented and operate. This Research Report describes a potential framework for VBP in the type of devolved NHS envisioned in recent government reforms. It also considers some of the critical features of VBP arrangements which need to be appropriately specified if the potential benefits are to be realised.