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Monday 24th October 2016

Drug price reform may cost NHS

30th May 2007

A leading economist has warned that proposals to reform the way in which drugs are priced could cost the health service more money.

Drugs & Money

The Office of Fair Trading (OFT) has made proposals indicating that drug pricing within the NHS should be established on the basis of their effect on health, rather than how much it costs manufacturers to produce them.

The OFT said the change to value-based pricing - as reported by the Health Economics journal - could save the health service £500m of its £7bn bill.

Professor Karl Claxton, an economics expert at York University, said that although the scheme had solid foundations, it might end up costing the NHS more.

OFT officials conducted an 18-month study of the market before making proposals for the system. If the new proposals are implemented, it would allow companies to put higher prices on those treatments which provided the best health benefits.

Currently, prices are set by the Pharmaceutical Price Regulation Scheme, which enables companies to "set their own prices within broad profit constraints."

Professor Claxton said: "Under the new scheme, the NHS will only take on technologies if they are cost-effective - that means the health benefits of using the technology must be greater than health displaced elsewhere in the NHS.

"This will provide a powerful incentive for companies to concentrate on cost-effective delivery when they develop new therapies."

He warned the approach might cause an increase in drugs pricing as companies attempted to develop treatments which they could make more money from.

The government is due to respond to the OFT proposals in the next few weeks.

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