What NHS England isn’t telling you, and more indispensable insight for commissioners. This week by HSJ commissioning correspondent Sharon Brennan

The government has announced plans to dramatically increase the clawback from the sale of branded medications, to “safeguard the financial position of the NHS.”

Yesterday the Department of Health and Social Care published a consultation on changes it would like to make to a statutory scheme with pharma companies – which the government introduced in 2017 to keep down the cost of branded medicines to the NHS.

It said that by 2021, it wants pharma companies to pay back 21.7 per cent of the money it receives from the NHS at the time of sale – an increase from 7.8 per cent this year. From 1 January 2019, the pay back percentage would rise by 9.9 per cent in 2019 and 15.8 per cent in 2020. The consultation said 30 per cent of pharmaceutical revenue is “ordinarily taken as profit”. Companies with annual sales of £5m or less are exempt.

The body that represents pharma companies, the Association of the British Pharmaceutical Industry, called the figures “concerning…[and] unjustified”.

The statutory scheme covers the majority of drug manufacturers and wholesalers that sell into the NHS, unless they have signed up to the voluntary pharmaceutical price regulation scheme, which is also currently being renegotiated and must be in place by 31 December 2019.

An industry insider told me that the statutory scheme is now acting as a “loaded gun” in these PPRS negotiations to force through a considerable pharmaceutical rebate from NHS sales to the government. This is because, as the consultation starkly laid out, “If no agreement on a successor [PPRS] scheme can be reached, all companies would become subject to the statutory scheme”.

The source said, seen alongside Brexit, the devaluation of the pound over recent years plus low uptake of new meds, this proposal will “deter people from even thinking about launching [new products] in the NHS… which would see patients have a lower standard of care here than on the continent”.

Generic medicines are excluded from the agreement but the DHSC has propsed the clawback scheme will now apply to biosimilars, some of which have authorisation from the European Medicines Agency to market themselves as generics. It said this is because biologic medicine prices only drop by 45 per cent when biosimilars are introduced to the market, compared to 70 per cent drop when generics are introduced.

The government has said the new measures, if implemented, will save the NHS £162m by 2021. It said these savings will “enabl[e] the provision of additional treatments” which it said had a quality adjusted life year value, a measure of the benefit to patients, of £947.5m. It also said the resulting improvement in patient health would lead to ”wider economic benefits…valued at £220m”.

In comparison, its impact assessment said the measures would see a £2.4m reduction in tax revenue from pharmaceutical companies due to a reduction in R&D, plus a loss of profits to UK shareholders of £6.8m.

The industry and government have understandably long been at odds on how pricing policy will affect pharmaceutical investment in the UK.

This consultation, which closes on 18 September, is no different. It said: “We believe any impacts on R&D investment in the UK life sciences sector would be limited. It is possible that lower than expected revenues from branded health service medicine sales as a result of these proposals may have an impact on boardroom sentiment towards the UK”.  

Yet the number of price capping policies are adding up. These include the controversial affordability cap introduced by the National Institute of Health and Care Excellence and NHS England in 2017, plus the aggressive stance taken by NHS England on new drug deals as epitomised by its recent dealings with Vertex.

HSJ also revealed yesterday that the government is likely to ask pharma to absorb the costs of stockpiling up to six weeks worth of additional medicines in the case of a no-deal Brexit.

Dr Richard Torbett, executive director of commercial policy at the ABPI which is negotiating the PPRS scheme with DHSC, said: “The figures proposed in the statutory scheme consultation are concerning and will undoubtedly send an alarming signal to an industry that is working hard to secure a future in the UK post Brexit. Such punitive measures are unjustified due to the systems already in place which help the NHS to buy medicines at some of the lowest prices in the developed world.”

But the DHSC has to be careful that its “loaded gun” strategy doesn’t ricochet back on itself.

It could well find it is subject to an unexpected volume of emergency drug price increases if, as the consultation outlines, it becomes “economically unviable” for companies to supply medicine at NHS prices.

If pharma companies follow through with their warnings to not launch products in the UK, the government may also see patients increasingly demanding why they can no longer receive gold standard treatment on the NHS.