Cost of prescription drugs to the NHS reached a new high in the financial year 2021 -2022, says LSE report

New figures show that the total cost of prescription medicines to the NHS in England reached a new high of £17.2 billion in the financial year 2021 -2022, according to a new independent report by the London School of Economics and Political Science (LSE), the London School of Hygiene & Tropical Medicine (LSHTM) and the University of York.

Since 2018 NHS spending on branded medicines has been increasing by over five per cent annually. This excludes expenditure on COVID-19 vaccines and treatments, says the report.

A significant portion of this growth is due to increased spending on hospital-prescribed medicines which rose by 35 per cent from £6.7 billion to £9.1 billion between 2018 – 2022.

Drugs classified as medicines for malignant disease and immunosuppression, including cancer drugs, accounted for £904 million of the total medicines bill growth since 2018, representing a 43 per cent increase in spending on these types of drugs. Drugs for the respiratory system accounted for a £587 million growth in the medicines bill, representing a 279 per cent rise in spending for this category of drugs.

A small number of products were responsible for increased spending across drug categories. For respiratory system disorders, the top three products contributed to a growth of £561 million in spending between 2018 and 2022. For malignant disease and immunosuppression, the top three products accounted for £333 million of the increased expenditure.

NHS spending is exceeding predictions with relatively few medicines driving the growth in the medicines bill between 2018 – 2022.”

Dr Huseyin Naci, Associate Professor of Health Policy at LSE and senior author of the report

The report finds evidence that many new medicines are too expensive for the benefits they offer to patients, even after accounting for any potential cost savings.

Dr James Lomas, Lecturer at the University of York and one of the authors of the report, said: “We have to face the reality that the NHS does not have unlimited resources and the more money we spend on medicines, the less money we have for other medicines, treatments and services that already offer significant health benefits in the NHS.”

Against the background of these new figures, the voluntary agreement that the pharmaceutical industry has with the UK government on medicine pricing is being currently renegotiated.

The Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) sets a cap on the total allowed sales value of branded medicines to the NHS each year. Under the current scheme, which finishes this year, the cap grows at an agreed rate of two per cent per year and any medicine sales above the cap are paid back to the government through a rebate.

The pharmaceutical industry argues that VPAS in its current form may limit or delay the availability of new medicines in the UK, have negative impacts on the UK pharmaceutical industry, and reduce the UK’s contribution to global pharmaceutical innovation.

The report argues that it would be unlikely and costly for pharmaceutical companies to forego a UK launch of their products since the NHS has long been a reliable market for them. For example, the Medicines and Healthcare products Regulatory Agency (MHRA) is one of the fastest regulators globally. In addition, NICE recommends most new medicines it appraises for use in the NHS. The report also highlights that new drugs are already exempt from VPAS for three years after their launch.

There is no evidence that the price the NHS pays for medicines is a key factor in driving pharmaceutical industry investment in the UK, according to the report.

It also points out that recent research assessing the benefits of different pricing levels for drugs, taking account of their impact on current and future health through innovation and drug development, suggests that current pricing levels in the UK are likely to be too high.

Dr Beth Woods, Senior Research Fellow at the University of York and one of the authors of the report, said: “Incentivising the development of new medicines is important, but the right balance needs to be struck given other NHS priorities – especially at a time when budgets are tight. Doing this requires sharing the value of medicines between providing rewards to the pharmaceutical industry and generating health benefits for patients in the NHS. The pharmaceutical industry is currently getting too big of a slice of the pie.”

Dr Aris Angelis, Assistant Professor of Health Economics at LSHTM and one of the authors of the report said: “As the government is currently negotiating for the next iteration of the voluntary agreement with the industry, it should ensure that spending on medicines is proportionate, to prevent resources from being diverted away from other vital services in the NHS.”

Dr Huseyin Naci said: “The government should not rely on pricing as the primary means to achieve industrial policy objectives, as other mechanisms are likely to be more appropriate.”