Bloom, Nick and Van Reenen, John 
ORCID: 0000-0001-9153-2907
(1998)
Regulating drug prices: where do we go from here?
Fiscal Studies, 19 (3).
pp. 321-342.
ISSN 0143-5671
Abstract
This paper examines the arguments for changing the ways that UK drug prices are regulated. In the UK, NHS pharmaceutical expenditures on branded drugs, currently worth about £3 billion a year, have been regulated by the Pharmaceutical Price Regulation Scheme (PPRS) since 1978. We argue that, in publicly funded healthcare systems, pharmaceutical price regulation is necessitated by a tendency towards excessive government expenditure because of over-prescription and the monopoly power of firms with on-patent drugs. We briefly explain the operation of the PPRS. which is based on rate-of-return regulation, and discuss its merits and drawbacks. We then consider five alternative pricing systems: free pricing, therapeutic benefit pricing, international reference pricing, therapeutic reference pricing and RPI - X price regulation. However, we reject all these alternatives in favour of a reformed PPRS. We suggest three potential reforms of the PPRS: an RPI - X cost allowance if feasible or a widening of the rate-of-return bands otherwise; the introduction of a marketing innovation allowance; and greater regulatory transparency.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.wiley.com/bw/journal.asp?ref=0143-5671 |
| Additional Information: | © 1998 Institute for Fiscal Studies |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HB Economic Theory R Medicine > RA Public aspects of medicine |
| Date Deposited: | 27 Apr 2007 |
| Last Modified: | 01 Nov 2024 05:13 |
| URI: | http://eprints.lse.ac.uk/id/eprint/1461 |
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