Pharmaceutical Price Regulation

Despite the existence of direct and indirect mechanisms for pharmaceutical price regulation in most countries, some authors put forward reasons for a growing opposition to the need to regulate prices.2,3 The discussion on the possible lack of justification for drug price regulation policies to improve welfare can be built on three types of argument, which it is important to understand. 

And third, given that regulatory intervention generates both benefits and costs, the benefits of price control might be more than cancelled out (welfare loss) by its costs in the form of administrative costs, transaction costs and distortions in incentives derived from the regulation itself.5 The costs of an imperfect market cannot be compared with those of a perfect one, and pharmaceutical price regulation failures must be taken into account. 

Danzon, P.M. (1997), Pharmaceutical Price Regulation National Policies versus Global Interests, Washington AEI Press. 

Sargent, J.A. (1987), The politics of the pharmaceutical price regulation scheme , in W. Streek and PC. Schmitter (eds), Private Interest Government Beyond Market and State, London Sage. 

Systems with freedom of prices These are the countries in which pharmaceutical companies are free to fix the price they see fit for their medicines. This is the case in the USA and the UK. However, freedom of prices does not mean the absence of any type of regulation. Thus, in the UK the Pharmaceutical Price Regulation Scheme6 establishes limits to the return that can be obtained by the companies. Indirectly, this limits the price of the drags. 

Borrell, J.R. (1999), Pharmaceutical price regulation a study on the impact of the rate-of-retum regulation in the UK , PharmacoEconomics, 15, 291-303. 

The regulations do not deal with this point. Companies may charge doctors for products supplied to them on a particular patient basis. There are no general Department of Health restrictions on the levels of price or price increase, as the Pharmaceutical Price Regulation Scheme only governs products with a marketing authorisation. 

Each Member State of the European Union operates its own policy regarding the pricing of pharmaceutical products. In the United Kingdom, the primary tool is the Pharmaceutical Price Regulation Scheme (PPRS), which is better described as a profit-regulating scheme. This is dealt with in detail in Chapter 26. 

Department of Health. The Pharmaceutical Price Regulation Scheme. London HMSO, 1993. Reference number Det DH 004643,9/93. 

ABPI. A Guide to the Pharmaceutical Price Regulation Scheme (PPRS). London Association of the British Pharmaceutical Industry, 1993. 

Department of Health (DoH). 2003. Pharmaceutical Price Regulation Scheme - Seventh Report to Parliament. London DoH. 

PPRS pharmaceutical price regulation scheme (UK). Prausnitz-Kastmer reaction A specihe allergy produced in a non-allergic individual following injection of serum from an allergic individual. 

The prices of medicines sold to the National Health Service are controlled in the UK by the Pharmaceutical Price Regulation Scheme (PPRS) , negotiated periodically every five to six years by the Department of Health (DoH) with the Association of the British Pharmaceutical Industry (ABPI), for example in 1979, 1986, 1993 and 1999. The PPRS controls the maximum - but not guaranteed — profits that pharmaceutical companies make on the capital they have invested in plant for research, development and manufacturing for sales made to the NHS. (Capital employed by the individual companies is allocated between that devoted to NHS sales and that for non-NHS sales and exports.)... 

The Pharmaceutical Price Regulation Scheme. ABPI and Department of Health. WWW. doh. gov.uk/pprs. htm... 

In the United Kingdom, the government controls the cost of pharmaceuticals not by limiting individual product prices, but by setting a cap on the profit that individual pharmaceutical companies can enjoy from their business with the National Health Service. Each company negotiates with the Secretariat of Pharmaceutical Price Regulation Scheme (PPRS) a total rate of return on the capital employed in generating its sales to the British National Health Service (NHS). 

Pharmaceutical Price Regulation Scheme (United Kingdom)... 

Collier, J., The Pharmaceutical Price Regulation Scheme A Time for Change, The Lancet l(8437) 862-863, 1985. 

---