§ The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath)
The prices of branded medicines are controlled indirectly by the Pharmaceutical Price Regulation Scheme (PPRS), which limits the profits which companies can make from the sale of these products to the National Health Service. Within this ceiling on overall profits, companies have freedom of pricing with a high price on one product being balanced by a lower price on others. A new scheme was introduced in October 1999 under which the prices of medicines covered by the PPRS were reduced by 4.5 per cent. overall, representing savings to the NHS of around £200 million per year. The new scheme incorporates an inquiry into the extent of competition in the supply of branded medicines to the NHS, which will inform the mid-term review of the PPRS, which will be undertaken after April 2002.
Pharmaceutical companies often concentrate their research in particular therapeutic areas in which there may well be few suppliers. New products benefit from intellectual property protection which rewards and encourages research. In this particular area there has been a tendency for products to be launched at a common European price. Although their relative prices in different countries may be affected by currency fluctuations and controls of the kind exercised by the PPRS, they are at a similar level in other European countries.