In swap for faster UK launches, pharma caps sales growth at 2%

How much are pharma companies willing to pay in exchange for a faster trip to market in the U.K.? As it turns out, a cap of 2% on total branded-drug sales growth should do. And that’s a deal the industry is billing as a big savings for the government next year—$1.2 billion, to be exact.

But there’s a catch: The 2% cap is actually higher than annual spending growth at the National Health Service over the past five years.

Under the new five-year agreement between the NHS and the Association of the British Pharmaceutical Industry (ABPI), which replaces an expiring five-year arrangement, pharma members will sign on to limit sales growth of branded drugs to the NHS to 2% or less each year. The industry will pay back any excessive sales, ABPI says, projecting the deal could save NHS about £930 million in 2019.

Although higher than the 1.1% rate of growth at the NHS since 2014, the 2% cap is still much lower than the 5% many pharma companies have in the past pledged for the U.S. market.

The NHS, mainly through its cost-effectiveness watchdogs at the National Institute for Health and Care Excellence (NICE), has taken several measures aimed at clamping down on drug prices.

In a separate win for the agency, NHS England said it has cut deals with five drugmakers for its most costly drug, AbbVie’s megablockbuster Humira. Through the deals with AbbVie and four biosimilar makers who market Humira knockoffs in the EU—Amgen, Biogen, Sandoz and a partnership between Mylan and Fujifilm Kyowa Kirin—the NHS is set to save about £300 million, the biggest drug discount deal in the agency’s history.

But the pricing agreements are also seen as a way to keep the U.K.’s position in biopharma after Brexit. By giving drugmakers a faster path to collecting sales from new drugs, the growth-cap deal will "ensure the U.K. remains an attractive hub for research and investment so the next generation of ground-breaking treatments can be developed here with patients benefiting earlier," said Health Secretary Matt Hancock in a statement.

In exchange for the 2% pledge, the U.K. government promises to make novel drugs available on the NHS faster by way of earlier talks about reimbursement and, perhaps more importantly, faster evaluation by NICE. It means new drugs could reach patients up to six months earlier than they do today, said ABPI.

Expected to take effect in January 2019 after the two sides finalize the details, the new deal, dubbed "Voluntary Scheme for Branded Medicines Pricing and Access," will replace the decades-old "Pharmaceutical Price Regulation Scheme," though the core contents remain largely unchanged.

Companies on the scheme make payments to the U.K. government based on a joint forecast of expected growth in the branded-medicines bill above the agreed level. Under the new deal, the payment rate for 2019 is now set at 9.6%.

Novel drugs that break new ground are exempt from the rebate payments for 36 months after licensing and are granted "freedom of list pricing." There will also be "significantly improved exemption" of payments for smaller companies. In the old arrangement, smaller companies with sales to the NHS of less than £5 million are excluded from the make-up payments.

As in the past, companies that opt out of the ABPI agreement will be subject to the so-called "statutory scheme," a price control tool imposed by the U.K. government that doesn’t come with stability because its price cut rate can be revised by the government at any time.

The U.K. deal comes at a time when an unyielding pharma industry has continued to increase drug prices in the U.S. despite threats and public shaming from the Trump administration. Pfizer, which had put a temporary hold on price hikes after being singled out by President Donald Trump earlier this year, recently said it would go back to raising prices for 41 drugs for 2019.

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