The Treasury may welcome the OFT report
Drug companies are being paid hundreds of millions of pounds too much by the NHS for branded medicines, an Office of Fair Trading report has said.
The competition watchdog said that the Department of Health - which buys £7bn of branded medicines a year - is not getting the best prices for drugs.

It is recommending the Pharmaceutical Price Regulation Scheme (PPRS) used to set prices is now overhauled.

But pharmaceutical firm representatives insisted that the NHS got a good deal.

The OFT's study, carried out since 2005, identified several drugs where it said prices were "significantly out of line with patient benefits".

Treatments for blood pressure and cholesterol were among those identified.

The watchdog added that some treatments which are prescribed in large volumes are up to ten times more costly than other drugs offering similar benefits.

Value-based pricing would give companies stronger incentives to invest in drugs for those medical conditions where there is greatest need, the report said.

"The big problem is that the prices paid to drug companies does not reflect the value of those drugs to patients," OFT chief executive John Fingleton told BBC Radio 4's Today programme.

"We would like to see incentives for investment directed much more towards complaints for which there are no current drug treatments."

Initial opposition to the proposals from drug companies should be expected, he added, "because they make quite a bit of money on one or two drugs which are close substitutes for existing drugs".

"But over time this is a very good scheme for investment," he said.

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Simon
Viewpoint Webteam