Pharmaceutical Price Regulation Scheme PPRS profitability

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. 

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.)... 

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). 

The price of drugs sold to the NHS is controlled indirectly by the DHSS through the Pharmaceutical Price Regulation Scheme (PPRS) which began in 1957. The scheme has been revised several times and requires that companies present details of costs, sales, exports, capital investment and estimates of future sales and profits. Rather than regulate the price of each individual product, the scheme aims to limit overall the return on capital which a company makes on its business with the NHS. The scheme works mainly by negotiation between the companies and the DHSS but the Secretary of State for Health can if necessary fix prices by order. For example, in 1983 the minister enforced a 2 % cut across the board. Moreover, limitations have been placed on the amount of money to be spent on promotion. It has been reduced to 10% of the sales for 1984 and 9% for 1985. Companies can in effect be fined under the PPRS for exceeding the limits on promotion. 

The second method of price controls, using profit caps, is employed in, for example, the United Kingdom through the Pharmaceutical Price Regulation Scheme (PPRS), whereby the government negotiates a reasonable profit with companies for products sold to the National Health... 

---