To what extent are pharmaceuticals prices controlled?

UK

With respect to branded pharmaceuticals supplied to the National Health Service ("NHS"), prices are controlled in one of two ways:

  • a voluntary agreement, known as the Pharmaceutical Price Regulation Scheme ("PPRS"), between the Department of Health (the Government department responsible for the NHS) and the branded pharmaceutical industry, as represented by the Association of the British Pharmaceutical Industry. Any supplier to the NHS of branded pharmaceuticals can elect to sign-up to the scheme; and ("ABPI").
  • the Health Service Branded Medicines (Control of Prices and Supply of Information) (No.2) Regulations 2008 ("the Prices Regulations"), which governs all companies supplying branded medicines to the NHS, which have not joined the PPRS. The PPRS regulates prices of branded prescription medicines by regulating the profits that manufacturers are allowed to make on their sales to the NHS.

The Prices Regulations control the maximum price of prescription-only branded medicines supplied to the NHS. The initial price of a medicine under the Prices Regulations is set by the Secretary of State and is generally reduced each year by the amount set out in the Prices Regulations. Increases in price may only be made with the consent of the Secretary of State.

These pieces of legislation do not cover generics or branded products that are available without prescription, except when prescribed.

UKThe current PPRS, which expires at the end of 2013, includes flexible pricing, which allows a company to increase (or decrease) its original list price in light of new evidence or a different indication being developed.

With respect to the PPRS in force from 2014, the Department of Health and the ABPI have indicated that this scheme is anticipated to contain more emphasis on "value based pricing". The broader assessment of the value of a pharmaceutical will focus primarily on new medicines entering the market from 2014, however existing medicines may also be affected.

The current Prices Regulations do not specifically require the Secretary of State to carry out a cost benefit analysis when determining the initial price of a pharmaceutical or when considering an application for an increase in the price.

Germany

In general, the pharmaceutical entrepreneur is free to determine the price for a medicinal product when he introduces the product to the German market. In Germany, there is no pharmaceutical price regulation scheme or other price controlling instrument as in the UK or other countries.

The final prices of pharmaceuticals are determined by the Drug Price Ordinance (Arzneimittelpreisverordnung, "AMPreisV"). This lays down the allowed price surcharges for pharmaceutical wholesalers and pharmacies. It does not regulate price cuts for pharmaceutical manufacturers and it does not concern direct sales from pharmaceutical manufacturers to pharmacies.

Poland

Since 1 January 2012, products reimbursed by state funds have fixed prices and margins, while the prices for non-reimbursed drugs are determined by the manufacturer ("free pricing").

PolandThe Agency for Health Technology Assessment in Poland (AOTM) is the advisory body to the Minister of Health. The role of AOTM is to assess and appraise all medical technologies and services claiming reimbursement by state funds. Recommendations, statements and opinions issued by the AOTM are based on additional officially published data, experts' opinions, applicant's submissions and evaluation by the Polish National Health Fund. AOTM’s assessment also includes added context-specific judgments such as: impact of alternative options, social consequences, organisational implications, relative priorities and wider social and ethical aspects.

It is important to note, that the maximum amount of the official selling price may be limited if the product has a reimbursed equivalent, alternatively other circumstances provided in the Reimbursement Act will occur.

Austria

In Austria, the price of pharmaceuticals is determined by law under the competence of the Pricing Committee of the Federal Ministry of Health. For innovative medicinal products which shall be included onto the reimbursement list of Austrian social health funds, the EC average price is relevant. This average price represents the maximum possible selling price ex works. For pharmaceuticals which are not listed on the reimbursement list of the social securities, the selling price ex works may be fixed without legal restrictions but has to be communicated to the Federal Ministry of Health.

The price of generics which are to be included onto the reimbursement list is determined by a binding regulation concerning the publication of the reimbursement list.

One prerequisite of cost reimbursement of a medicinal product is a health-economic evaluation. An original product is considered cost effective if its price is reduced three months after the listing into the green box (which means, that reimbursement can be obtained without prior authorization of health funds) by about 30%, minimum. At least three months after the inclusion of the third generic, the price has to be reduced again.

If you have any questions on this article or would like to propose a subject to be addressed by Synapse please contact us.

Control of pharmaceutical prices

Talitha Shkopiak



Talitha is an associate in the Intellectual Property group based in our London office.

Manja Epping



Manja is a partner and Head of Life Sciences for Germany based in our Munich office.

Agnieszka Deeg



Agnieszka is special counsel in the Pharmaceutical Law group based in our Warsaw office.

Rainer Schultes



Rainer is a partner in the Patents group based in our Vienna office.