The statutory scheme covers those companies who don’t sign on to the voluntary Pharmaceutical Price Regulation Scheme (PPRS). To coincide with the new PPRS scheme, expected to come into force after the current scheme expires on 31 December 2018, the government is proposing changes to the statutory scheme from the beginning of 2019.

One change would be to include all biological medicinal products (including biosimilars) within the scope of health service medicines captured by the payment mechanism, price controls and information requirements.

"As biosimilars, while interchangeable by the prescribing clinician, are not substitutable at the point of dispensing medicines, competitive forces generally act more slowly," the consultation document says.

"Further, decreases in actual selling prices are likely to be lower than if competition were arising from identical generics. Analysis undertaken by the Department has shown that the average price decline upon loss of exclusivity is significantly lower for biological medicines than for non-biological medicines, with a c.70% average drop in expenditure for non-biological medicines compared to a c.45% drop for biological medicines.

"We remain of the view, therefore, pending any additional evidence and analysis received as part of this consultation, that it is appropriate for these health service medicines to be captured by the payment system, price control mechanisms and information requirements in the statutory scheme as market forces do not operate in the same way as they do for identical unbranded generics."

But the proposed changes provoked a strong reaction from the Generic Manufacturers Association (BGMA) and the British Biosimilars Association (BBA), with director Warwick Smith saying: "It makes no sense for the government to intervene in pricing when competition or tenders already very effectively control prices of branded generics and biosimilars.

"In particular, the consultation appears significantly to underestimate the savings already delivered by biosimilars where we have seen price reductions of more than 80% for some products. It is therefore wrong to include products which are subject to competition via tendering in the statutory scheme or the PPRS and also apply an additional rebate of up to 25%.

"These proposed changes will significantly impact biosimilars and manufacturers may be unable to launch products as a consequence. This could also impact the potential patient benefits of these medicines and threaten Simon Stevens’ objective of £300 million of savings in the next three years."

Other changes include changing the payment percentage mandated by the statutory scheme. In April the government changed the statutory scheme from a system of price cuts to one of payments made of a percentage of the value of branded health service medicines sales.

The government has said this is a more effective and reliable mechanism for controlling the cost of branded health service medicines and re-establishes an appropriate level of commercial equivalence with the PPRS that had been lost when the 2014 PPRS agreement adopted a payment percentage mechanism.

The payment percentage applied in the statutory scheme was set at 7.8%. This was aligned with the payment percentage operational in the PPRS for 2018.

In the proposed changes, the Department of Health has constructed a forecast against which the payment percentage for 2019 can be set. The percentage is then set to recover the difference between forecast sales value and allowed sales value in each year.

Currently, the proposed payment percentages are 9.95 for 2019, 15.8% for 2020 and 21.7% for 2021.

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