IDEAS home Printed from
   My bibliography  Save this article

If it ain't broke, don't price fix it: the OFT and the PPRS


  • Adrian Towse

    (Office of Health Economics, London, UK)


The Office of Fair Trading (OFT) Report on the UK Pharmaceutical Price Regulation Scheme (PPRS) recommends that when the current five-year PPRS expires in 2010 it be replaced with 'value-based pricing' which involves pre-launch centralised government price setting based on a cost-per-QALY threshold plus periodic ex post reviews. I examine the validity of the OFTs criticisms of the existing PPRS, review its proposals and propose an alternative way forward. I conclude that PPRS has performed well as a procurement bargain between industry and the UK government. It does not, however, incentivise efficient relative prices. That is not its job. I identify a number of problems with the OFT proposals. I recommend that key elements of a reformed UK pharmaceutical environment for 2010 should include an expanded role for HTA but with companies retaining freedom to set prices at launch; HTA use targeted via a contingent value of information approach; a retained backstop PPRS, perhaps moving to an RPI-X type control; the use of risk sharing and non-linear pricing arrangements; measures to ensure more effective therapeutic switching at local level; and measures to improve the take up of cost-effective treatments. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Adrian Towse, 2007. "If it ain't broke, don't price fix it: the OFT and the PPRS," Health Economics, John Wiley & Sons, Ltd., vol. 16(7), pages 653-665.
  • Handle: RePEc:wly:hlthec:v:16:y:2007:i:7:p:653-665
    DOI: 10.1002/hec.1263

    Download full text from publisher

    File URL:
    File Function: Link to full text; subscription required
    Download Restriction: no

    References listed on IDEAS

    1. Philipson Tomas J & Jena Anupam B, 2006. "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," Forum for Health Economics & Policy, De Gruyter, vol. 9(2), pages 1-33, January.
    2. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1049-1090.
    3. Frank R. Lichtenberg & Joel Waldfogel, 2003. "Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act," NBER Working Papers 9750, National Bureau of Economic Research, Inc.
    4. Karl Claxton, 2007. "Oft, Vbp: Qed?," Health Economics, John Wiley & Sons, Ltd., vol. 16(6), pages 545-558.
    5. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Joshua Graff Zivin & Matthew Neidell, 2010. "Medical technology adoption, uncertainty, and irreversibilities: is a bird in the hand really worth more than in the bush?," Health Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 142-153.
    2. Rutger Daems & Edith Maes, 2014. "Global Pharmaceutical Management: Building a Fair Pricing Policy," Working Papers 2014/05, Maastricht School of Management.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:16:y:2007:i:7:p:653-665. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.