NHS drug costs to be renegotiated

The OFT spent 18 months looking at drugs pricing

Health Secretary Alan Johnson is to renegotiate a five-year agreement with pharmaceutical companies on the price of drugs to the NHS.

The Office of Fair Trading recently condemned the Pharmaceutical Price Regulation Scheme which allows drug companies to set their own prices.

It said the NHS was paying drug firms hundreds of millions of pounds too much for branded drugs.

The Department of Health said the system needed updating for efficiency.

Value for money

The OFT suggested a move to pricing drugs based on health impact rather than the cost to manufacturers could save £500m from the NHS' current drugs bill which stands at more than £8 billion a year.

The announcement comes as the government publishes its interim response to the OFT report.

It is in all our interests to encourage research and reward innovation, but above all we want to ensure that the taxpayer gets value for money A Department of Health spokesman

A Department of Health spokesman said: "The OFT concluded that the pricing system should have a more value-based approach in order to deliver greater benefit to patients.

"It said reform could deliver better value for money for the NHS. The Secretary of State has therefore decided that it is timely to enter into a dialogue with the industry to renegotiate the PPRS."

He said any new agreement would recognise the contribution of the pharmaceutical industry to the UK economy.

"It is in all our interests to encourage research and reward innovation, but above all we want to ensure that the taxpayer gets value for money and patients continue to benefit from innovative products at a reasonable price."

The Association of the British Pharmaceutical Industry said that the PPRS had done a "good job" of delivering value for money in healthcare, but welcomed a review.

Nigel Brooksby, president of the ABPI, said: "The PPRS has brought many benefits to the NHS and to the UK as a whole. It is essential that these remain integral to the PPRS as it evolves."

He said the pharmaceutical industry recognised the government's need to gain best value for money from all aspects of NHS services, including medicines.

Liberal Democrat health spokesman John Pugh said: "The relationship between the pharmaceutical industry and the British government has been far too cosy for too long. This renegotiation is a very welcome development."