[co-author: Julia Fraser]

The new Health Service Medical Supplies (Costs) Act 2017 came into force on 27 April 2017, giving the Department of Health greater powers to control the cost of medicines supplied to the National Health Service (NHS).

The cost of branded medicines supplied to the NHS is regulated through two mechanisms – the Pharmaceutical Price Regulation Scheme (PPRS), which is a voluntary scheme agreed between government and industry, and a statutory scheme. Manufacturers and suppliers can choose whether to sign up to the PPRS or be subject to the statutory scheme, with the majority choosing to participate in the PPRS. The cost of unbranded generic medicines is not controlled other than through competition in the market.

The savings delivered by the statutory scheme have been significantly lower than the PPRS in recent years, resulting in a move by some companies to take their branded medicines out of the PPRS. To address this, the Act amends the NHS Act 2006 to allow the cost of medicines under the statutory scheme to be controlled in a similar way to under the PPRS.

Previously, unbranded generic medicines manufactured by companies that participate in the PPRS in relation to their branded medicines fell outside the statutory scheme. Over recent years, the prices of a number of unbranded generic medicines with no market competitors have been increased significantly. The Act extends the scope of the statutory scheme to all unbranded generic products, enabling such price increases to be controlled.

The amendments are intended to increase savings for the NHS and to provide a more level playing field for companies participating in either the PPRS or statutory scheme. Before such new controls are introduced, the Department of Health must consult on the economic consequences for patients, the UK life sciences industry and the UK economy generally, and must take into account the need to make medicines available to the NHS on reasonable terms and the costs of research and development.

The Act also includes new powers allowing the Department of Health to request various pricing related information from manufacturers, distributors and suppliers of medicines used by the NHS. Details of these new powers will be set out in a separate regulation and subject to consultation.

Further information on the Act is available in the Department of Health’s Health Service Medical Supplies (Costs) Bill factsheet.