Progress towards personalised medicines is being held back by the way drug prices are set, it is claimed.

The current system fails to provide good incentives for developing effective new drugs that work for specific groups of patients, an Academy of Medical Sciences report has warned.

Under the current pricing system in the UK, the cost of a drug remains the same or decreases once it enters the market.

But this means manufacturers risk getting a poor return from personalised or “stratified” medicines that necessarily target small numbers of patients.

Changing the system to allow prices to rise and fall to reflect the changing value of a product would help generate more interest in the new drugs, according to the report.

Professor Sir John Bell, chairman of the academy working group that produced the report, said: “Current pricing and reimbursment systems do not provide adequate incentives for the development of personalised medicines.

“A new system of pricing needs to be developed that enables prices to be adjusted over time to reflect the increases in value.”

Likewise there was an “urgent need” to incentivise the creation of diagnostic tests to identify patients likely to benefit from personalised medicines by rewarding their development.

The effective patent system that applies to drug design does not extend to diagnostics, said the academy.

The report also highlights the need to share molecular and genetic data that aid the development of personalised medicines.

It recommends the provision of international “good genomic practice” guidelines to ensure high standards of genetic data.

A number of personalised drugs are already in use including Herceptin, aimed at breast cancer patients with a particular variant of the Her2 gene.

Another example is Xalkori, which targets an uncommon strain of lung cancer affecting just 5 per cent of patients.

Sir John said: “Stratified medicine offers promising advances to patients across the UK and worldwide. Embracing this technology and empowering researchers in the field will help the UK remain at the forefront of this pioneering approach.”