Probe into cap on drugs profits

Prescription drugs cost the NHS around £7 billion per year

The Office of Fair Trading (OFT) is to examine restrictions on the profits that pharmaceutical firms make from sales of drugs to the NHS.

The OFT inquiry is meant to check whether safe and effective branded prescription medicines are being provided at reasonable prices.

The NHS spends about £7 billion a year on such medicines.

The current Pharmaceutical Price Regulation Scheme (PPRS) is a voluntary agreement due to run until 2010.

The PPRS sets a cap on the profits that each drug company can earn on its annual sales of branded medicines to the NHS.

We shall of course co-operate fully with the OFT Dr Richard Barker, director general of the ABPI

It is a voluntary scheme negotiated every five years between the Departments of Health and the Association of the British Pharmaceutical Industry (ABPI). The current scheme runs from 2005 to 2010.

As part of its inquiry, which could take until the end of next year, the OFT will want to ensure that the PPRS meets its core aims, including the promotion of a strong pharmaceutical industry capable of research and development that can lead to new and improved medicines.

John Vickers, OFT Chairman, said: "We want to examine whether the PPRS works well to ensure that pharmaceuticals markets meet the needs of patients by offering adequate rewards to pharmaceutical companies for developing new and useful drugs, while providing the taxpayer with value for money."

Dr Richard Barker, director general of the ABPI, said: "The PPRS is conducted in a very open and transparent way, with annual reports to Parliament about its progress and full details of how it operates made public.

"We shall of course co-operate fully with the OFT."