Regulating pharmaceutical markets: improving efficiency and controlling costs in the UK

Abstract

UK government policy on pharmaceuticals is broadly integrated across the whole of health care policy. In the early 1990s, cost containment was emphasized, through budget holding by doctors to ensure clinical acceptability. From 2000 onwards, increased government funding for the NHS has allowed expansion of services and prescribing in areas of public health importance, but has been coupled with increased accountability and ambitious targets for the process of care and health outcomes. Standards for care are set in national guidelines including those from the National Institute for Clinical Excellence (NICE). NICE recommends or rejects new technologies to the NHS for their clinical value and cost effectiveness. Although following its advice is mandatory, evidence so far suggests that it has been only partly successful at improving services and eliminating variations. GP prescribing is monitored by Primary Care Organisations (PCO) which also hold the medicines budget. They may provide incentives to GPs for meeting targets in quality or expenditure. The UK government regulates the prices of generics but not of branded medicines; instead it regulates the profitability of the pharmaceutical industry. This arrangement seems to have been successful both at maintaining a major employer and export earner, and in limiting high drug expenditure.