UK coalition govt could end free drug pricing

* Move to “value-based pricing” may bring in price controls

* UK currently one of few markets with free drug pricing

By Ben Hirschler

LONDON, May 25 (BestGrowthStock) – Britain’s position as one of the
few markets in the world where drug companies are free to set
prices for their medicines could be under fire from the
country’s new coalition government.

Industry analysts said a Conservative-Liberal Democrat
coalition proposal to move to “value-based pricing” for
medicines suggested price controls were now on the horizon.

Drug prices have been under growing pressure across Europe
this year as governments tackle ballooning budget deficits.
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The British proposals do not represent an immediate threat
to drug company profits like recent price cuts in Spain, Greece
and Germany, but may ratchet up the pressure in the long term.

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For drug sales graphic see http://link.reuters.com/ryt84k

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The current UK Pharmaceutical Price Regulation Scheme (PPRS)
regulates profits, not prices, on sales to the state health
service. At the same time, the National Institute for Health and
Clinical Excellence (NICE) assesses if drugs are cost effective.

Now that is set to change. In its “Programme for Government”
document released last week, the coalition said it would “reform
NICE and move to a system of value-based pricing”.

“A price-control policy has not been fleshed out … but the
fact that it has been mentioned in the context of NICE reform
should be considered as the main — and perhaps inevitable —
threat to the pharmaceutical industry in the UK going forward,”
said IHS Global Insight healthcare analyst Milena Izmirlieva.

Analysts at Morgan Stanley described the proposal in a note
on Tuesday as a “wolf in sheep’s clothing” with long-term
negative implications for the industry.

Loss of free pricing could also have a knock-on impact,
since companies can currently use Britain to set a high price
point for reference pricing in the rest of the European Union
and other countries, such as Japan, they added.

The Association of the British Pharmaceutical Industry said
it was keeping an open mind ahead of talks with government.

“Valued-based pricing is one way of doing it,” said
spokesman Richard Ley. “We not opposed to the principle. It is a
question of how it is achieved to get it right.”

On the positive side, the government restated a Conservative
manifesto promise to help patients get access to pricey cancer
drugs not approved by NICE, like Roche’s (ROG.VX: ) Avastin —
although an earlier Conservative funding pledge of 200 million
pounds ($288 million) was not spelt out in the document.

Investment Analysis

(Editing by Louise Heavens)

UK coalition govt could end free drug pricing