The Pharmaceutical Price Regulation Scheme - Office of Fair Trading

February 20076.59 Second, while some companies have seen merit in the creation of an independent body inprinciple, it would take time for the policies and processes of a new PPRS, and the workingpractices of the CVM, to establish a track-record of credibility and fairness with companies.Once pricing decisions had been shown to be robust and fair and, ideally, to improve uptakeof cost effective medicines in the NHS, moving to an independent structure would be moretenable.6.60 Third, the current expertise of the main constituent bodies of the Commission is in the fieldof technical analysis and assessment rather than commercial decision making. It wouldtherefore take the body time to build up the capacity for commercial negotiations.6.61 Ultimately, we think that either model set out here – either the medium term or long termapproach – could work. There are examples of effective systems in other countries based oneither of these approaches (see Annexe K).Policy input and the role of PPRS6.62 In both the medium term and long term structures, we think there could be an important rolefor a PPRS-style agreement between industry and Government, to provide high-level inputinto pharmaceutical pricing and reimbursement arrangements.6.63 A value-based PPRS would clearly be a different sort of document to the present agreement,containing high level principles for the conduct of reviews and setting out certain keyparameters. Perhaps the most important among these would be the cost/QALY thresholdthat should apply to assessments. Annexe L of this report gives some considerations as tothe factors that should be taken into account in setting this threshold.6.64 We think it is appropriate that this threshold be determined in discussion between industryand Government, given the significant impact it has on NHS expenditure and companiesrevenues. 85 This would become increasingly important under any system in which pricing andreimbursement decisions are delegated entirely to an independent authority. 866.65 Other matters that might be set out in a PPRS agreement might be which costs and benefitsto consider in the assessment of the cost effectiveness of a medicine (for example, whetherto include benefits to carers and whether to include non-NHS costs) and priorities of socialequity such as the appropriate treatment of orphan medicines.6.66 The document would therefore be a higher level policy document than at present. It wouldnot be prescriptive as to the details of the methodologies and procedures to be followed bythe Commission – these would be set out in guidance that the Commission itself wouldissue. Moreover, it would not provide the main mechanism for enforcing decisions – in mostcases the bargaining position of the payer would be underwritten by the ability to refusereimbursement or, in the case of the risk sharing approach – through separate contractualmechanisms.85 Under current arrangements it seems to us to be exposing NICE, SMC and AWMSG to excessive pressure to expectthem to develop an appropriate cost effectiveness threshold without guidance or input from central Government.86 An alternative approach is that the body be allocated a fixed drug budget (the size of which would be determined throughperiodic negotiations), from which a cost / QALY would be derived. The arguments for and against this approach werediscussed in Chapter 5. As noted there, we think it is an option that should be seriously considered for the long run.113