Learn the lingo series: "Value Based Pricing"

Written by Jyothis George on 06 October 2012. Modified on 06 October 2012. Hits: 8340

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The current branded medicines pricing scheme, the PPRS, is a voluntary scheme agreed between the Department of Health and the ABPI (representing the branded pharmaceutical industry).From the end of 2014, new arrangements are being proposed. This will incorporate a broader assessment of the value of a medicine, known as value based pricing, for new medicines (new active substances).


The Govt aims to 

  • improve outcomes for patients through better access to effective medicines; 
  • stimulate innovation and the development of high value treatments; 
  • improve the process for assessing new medicines, ensuring transparent predictable and timely decision-making; 
  • include a wide assessment, alongside clinical effectiveness, of the range of factors through which medicines deliver benefits for patients and society; 
  • ensure value for money and best use of NHS resources.

Within previous pricing agreements, new products designated as new active substances by either the EMA or MHRA are priced at the discretion of the company on entering the market within a defined profit cap. Within VBP the proposal is that companies would be free to propose a price for a new medicine at launch.


Negotiations are ongoing between the government and the ABPI. The Government intention is that the value-based pricing assessment is carried out as fully as possible, as early as possible. The intention is that the new arrangements should be stable and not bureaucratic. The Government believes companies will therefore be able to predict well in advance how prospective products are likely to fare. The assumption is that prices at launch will be set at a level that is close to their expected assessed value. The management of any cases where the value assessment does not support the list price will be considered during the negotiations.


At the moment the Department of Health is commissioning a range of research to help inform the detail of how VBP will work. The ABPI is also doing a lot of background work to develop an industry position for a negotiation later this year. The latest insight into the Government’s position was contained in the Government’s response to the VBP consultation in July 2011. They confirmed the following features of the new system:


  •  The NICE pharmaco-economic assessment, which assesses the clinical and cost- effectiveness of each individual drug based on existing medicines, will be at the heart  of the system;
  •  The Government will set a range of thresholds which will reflect the value that medicines offer; from basic, where a product doesn’t offer any additional benefit than existing medicines to higher, for medicines which offer new benefits;
  •  Independent panels will be responsible for assessing therapeutic innovation and burden of illness; and
  •  Patient Access Schemes will continue to have a role.


The current regime for pricing drugs (Pharmaceutical Price Regulation Scheme 2009) runs out in 2013. Value Based Pricing will function in conjunction to the successor to this scheme.

This article has been produced with information provided by the ABPI here Additional info from Sanofi Diabetes. Please also note that the article is not regularly monitored and may become less accurate over time as things evolve. Please see this section for the latest news on NHS, reforms etc.

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