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U.K. Health Secretary Asked Drugmakers to Accept Lower Prices

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U.K. Health Secretary Andrew Lansley
U.K. Health Secretary Andrew Lansley. Photographer: Dan Kitwood/Getty Images

Jan. 21 (Bloomberg) -- U.K. Health Secretary Andrew Lansley told drug industry representatives that the prices of new medicines would be lower than companies wanted at a meeting weeks after the coalition government took power.

Lansley, a Conservative, “thought it inevitable that there would be some prices the industry therefore wouldn’t like,” according to the minutes of a June 7 meeting with the Association of the British Pharmaceutical Industry. Bloomberg News obtained the minutes through a U.K. Freedom of Information Act request. Drugmakers would have to acknowledge that some drugs “had not been made available at a ‘fair’ price.”

The meeting shows the government, which came to power after a May 6 election, is targeting health-care costs as it attempts to close the 156 billion-pound ($250 billion) gap in the overall U.K. budget. Spending on wages and medicines by the state-run medical system, the National Health Service, will be reduced to meet the government’s goal of saving 20 billion pounds over the next four years, said Alan Maynard, a health economist at the University of York in England.

“Politically the government can’t afford to have a crisis in the NHS, but it’s going into a very ambitious reform, and therefore a lot of people who are going to find it rather difficult,” Maynard said in a Jan. 17 interview. “There’s going to be pressure on all parts of the budget and we expect enormous downward pressure on drug prices and volumes.”

European Influence

The U.S., Germany, Greece and Spain are also trying to curb health-care spending. The overhaul in the U.K. may influence other European governments to follow suit, Maynard said.

“It is inevitable that there will be a squeeze across the European Union and they’re all in the same austerity game,” he said. “They look at the prices that are paid in different countries and they compare.”

Changes to the U.K. health service by 2014 will involve subjective judgments on drugs’ benefits for patients as well as calculations based on data, Lansley said at the meeting.

“This was a move towards a system which did not operate anywhere in the world, and therefore would present a challenge,” according to the minutes of the June meeting written by Lansley’s assistant private secretary.

The government last month published an outline of the plan, saying that it would set a basic price for new drugs that reflected how well it prevented hospitalizations and other costs in the NHS. Prices would be higher for medicines that offer improvements over existing treatments and those that address unmet medical needs or more severe illnesses, according to the proposal.

‘Significant Uncertainty’

“There clearly is quite a significant uncertainty for both the NHS and the drug industry of going down this route,” said James Gubb, director of the health unit of Civitas, an independent social policy research organization in London. “The drug industry will probably have to face up to this being a reality for new, non-generic drugs.”

Companies, doctors and patients have until March 17 to comment on the proposal before it is introduced to Parliament and debated. A proposal to give local doctors greater control of how the NHS spends money on supplies and care, a separate part of the government’s overhaul plan, was introduced Jan. 19.

The Department of Health’s Under Secretary of State Frederick Curzon, who sits in the House of Lords as Earl Howe, who attended the June 7 meeting and spoke with Eli Lilly & Co. in July, according to a list of meetings posted on the department’s website. Adam Joyce, a spokesman for the Department of Health, declined to comment on the discussions with the drug industry.

Drug Delays

Eli Lilly, based in Indianapolis, told Curzon that negotiations over a drug’s value-based price may lead to delays in the introduction of treatments, according to minutes of the meeting obtained by Bloomberg News under a separate Freedom of Information Act request.

Any new system of payment must “fairly recognize and reward innovation and investment in research and development” as well as improve patient access to treatment, said Richard Barker, director general of the ABPI, in an e-mailed response to questions on Jan. 14.

“Our industry must demonstrate the full value of its medicines,” said Barker, who attended the June meeting with Lansley. “It is for government to put in place processes which assess that full value, and then secure access to that value for NHS patients.”

Companies may choose not to sell newer medicines in the U.K. if the prices negotiated fail to meet their expectations, undermining the government’s goal of increasing access for patients, said Navid Malik, an analyst at Matrix Corporate Capital LLP in London.

“If you don’t get the right pricing these drug companies will start to talk about the fact that they probably won’t launch some of these drugs in the U.K.,” Malik said in a Jan. 14 phone interview. Companies “will prioritize other countries where they will get reimbursement quickly and launch quickly.”

To contact the reporters on this story: Chris Spillane in London at; Chris Kay in London at

To contact the editor responsible for this story: Phil Serafino at

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