Tuesday, July 13, 1999 Published at 17:42 GMT 18:42 UK
Drug prices slashed
The NHS will save money on some prescription medicines
The £7bn NHS drugs bill could fall sharply after the government struck a deal on prices with the pharmaceutical industry.
The Association of the British Pharmaceutical Industry (ABPI) has agreed to cut the price of branded prescription medicines by 4.5% - a move that could slash £200m a year from the health service bill.
Prescription charges will not be affected by the price cut, but the deal could help to reduce pressure on a health service which is struggling to cope with demand, and may lessen the need to ration some drugs.
In return, drug companies have won concessions and allowances aimed at rewarding and encouraging research and development of new products.
The revised Pharmaceutical Price Regulation Scheme (PPRS) replaces a 1993 agreement and will run from October 1 until 2004.
The agreement follows months of negotiations where it was rumoured that the government was preparing to scrap the PPRS, a voluntary code which allowed drug companies to set their own prices for drugs as long as they did not pass certain profit limits.
The justification for the scheme was that prices took into account the money each company invested in researching a particular drug.
But there were concerns that prices had been rising by 5% a year and that some drug companies were getting around the system by selling on licences and pushing up the cost of certain drugs.
Frank Dobson, the Health Secretary, said: "This new agreement rewards innovation and research, but keeps a tight rein on public expenditure.
"That is what we have got. It is good for the NHS, good for the tax-payer, good for the research-based pharmaceutical companies."
Mr Dobson said the savings generated by the 4.5% price cut and by a restriction on price increases for older medicines, would allow the government to reward companies which were successful in developing valuable new medicines. This will include new allowances for research and development costs.
Michael Bailey, president of the ABPI, said: "Industry and government have mutually beneficial interests in ensuring the flow of safe and effective medicines to the NHS at a reasonable price and in maintaining a profitable and innovative industry in the UK.
"The revised agreement is a very positive way to achieve both objectives."
A statement issued by the ABPI said: "Industry has had reluctantly to accept the one-off price cut but it has done so in recognition of the current pressures on NHS funding."
Stop overcharging consumers
But supermarket chain Asda, which has waged a three-year battle against pricing of over-the-counter medicines, called on the drug companies to go further than a simple reduction for NHS prescription medicines.
Asda claims that companies producing branded non-prescription medicines such as headache pills, indigestion tablets and vitamins are overcharging consumers.
An Asda spokesman said: "The issue is when are we going to see a reduction in prices for consumers as well.
"Over-the-counter medicines and self-medication are growing sectors and people are being charged what is in effect a health tax, particularly those with children and the elderly.
"Action on this, which will put money in people's pockets, is long overdue."