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Primary care rebate schemes: win-win partnerships for industry and the NHS

There is a culture of secrecy and shame concerning primary care rebate schemes but there are really no good reasons why they should not be adopted in the NHS

By Stephen Goundrey-Smith

Over the past few years, primary care rebate schemes have become more commonplace. They offer a primary care organisation, such as former primary care trusts and new clinical commissioning groups, entry into a retrospective discount agreement with a pharmaceutical manufacturer in order to reduce costs.

Under these schemes, a pharmaceutical company provides a local rebate (retrospective discount) for a product, based on previous sales, increase in sales above previous levels, volume or market share of the product. Unlike national patient access schemes, which are approved nationally by the Department of Health to manage the entry of new products to the market at a reduced cost, primary care rebate schemes are local initiatives for medicines which are already on the market.

A recent survey commissioned by the Health Service Journal suggests that just under a third of primary care trusts had rebate schemes in place, but this may be a conservative estimate. Many wanted to retain confidentiality regarding their participation. However, various organisations, including the Department of Health, have questioned the legality of these schemes, suggesting that they fall foul of the Bribery Act 2010, or monopolies legislation.

In addition, the Association of the British Pharmaceutical Industry has expressed concerns about these schemes because they have the potential to undermine the national pricing agreement, the Pharmaceutical Price Regulation Scheme (PPRS).

It has also been suggested that primary care rebate schemes might not be appropriate for medicines in category M in the Drug Tariff, and some medicines in category C, due to the potential wider impact on pharmacy remuneration in the locality.

Acceptability of rebate schemes

The NHS changes, with the disbanding of PCTs and the establishment of CCGs, have brought the issue of rebate schemes to the fore, because in future there is the potential for GP partners, who are board members of CCGs, to benefit directly from buying decisions made by CCGs.

For this reason, the London Procurement Partnership (LPP) took legal advice about rebate schemes, and established that these were legally acceptable, as long as a number of key principles were adhered to. These include, for example:

•    The clinical need for the medicine should always be established and evaluated before the cost is considered

•    Rebate schemes procedures should be robust and transparent

•    Rebate schemes should apply to licensed medicines only

•    NHS organisations should not solicit rebate schemes

•    Rebate schemes should be agreed with statutory NHS bodies, not individuals or GP practices

•    Rebate schemes should not be based on volume targets or thresholds

•    Rebate schemes should not be based on exclusive supply or bundled deals based on sales of several products (in order to avoid breach of competition law)

Full details of the principles of rebate implementation are available to download from the LPP website at In essence, the bribery legislation defines bribery as a financial, material or pecuniary inducement that causes an individual or business to act in an improper way.

However, if the pharmaceutical industry provides the NHS with favourable terms of trade that enable the NHS to provide more efficient and cost-effective patient care, this can hardly be described as an improper action on the part of the NHS. Rather, the NHS is more readily able to fulfil its role and function in society.

Benefits of rebate schemes

So within this legal framework, and with careful consideration of the impact on pharmacy remuneration, it may be argued that rebate schemes provide benefits for both the industry and the NHS. For the industry, providing discounts can be beneficial to cash flow, and rebate schemes provide a low-risk means of encouraging market growth.

With rebate schemes the national list price is unaffected, which is important for many companies because the list price is the reference price for other countries, and if it varies there would be an impact on global pricing and revenue.

The benefits to the NHS are obvious. As well as the cost savings achieved, rebates also contribute to the established NHS efficiency agendas, such as QIPP (quality, innovation productivity and prevention). Once the evidence for a new medicine has been assessed and approved by national bodies such as the National Institute for Health and Care Excellence o­r the Scottish Medicines Consortium, a rebate scheme can be used to leverage local implementation of NICE or SMC advice for that medicine.

A robustly administered rebate scheme will not have any impact on clinical decision making in the local NHS and can only support the legal requirement for PCTs to make arrangements which are “necessary and expedient” to supply medicines to patients, according to the NHS Act 2006 and the NHS (Pharmaceutical Services) Regulations 2012. As Paul Jerram, head of medicines management at the former Isle of Wight PCT, put it: “As I help GPs manage a budget which is public money I believe that I am ethically obliged to source at the best price. Therefore … I have to support rebates.”

Why schemes are not implemented

However, in practical terms, NHS bodies are not always willing to consider pharmaceutical industry rebate schemes. Some are concerned that participation in a rebate scheme may undermine their credibility as a healthcare body. Others will not enter rebate schemes because of the generic prescribing agenda in the NHS in general.

For example, some rebate schemes will not be recommended by prescribing optimisation service PrescQIPP because they might advocate branded prescribing, even in cases where branded prescribing is clinically appropriate. Some will claim that rebates are at odds with local formulary and guidance recommendations.

Nevertheless, given the financial and cost-effectiveness advantages that rebate schemes offer, NHS organisations would be wise to evaluate them on a case by case basis, rather than simply rejecting them in principle, because in many cases these schemes may have a positive impact on the quality and individuality of patient care.

An often-quoted disadvantage of rebate schemes for both the industry and the NHS is that there is an administrative burden, because of the need for a robust governance framework and a clear transaction procedure.

It is to be hoped that the adoption of the rebate scheme principles developed by the LPP might lead to national guidance (templates and tools etc) which will provide consistent administrative support for the implementation of local primary care rebate schemes. This would hopefully facilitate the establishment of rebates in a robust and transparent way, and allay the fears of those who are concerned about undue and unaccountable influence of the industry on the local NHS.

With the appropriate safeguards, rebate schemes provide an opportunity for a partnership between the NHS and the pharmaceutical industry, which benefits both parties and is readily understood by all stakeholders. Discounting is a standard trade practice in all industry sectors and there is no reason why it should not be adopted in the healthcare market, within an appropriate procedural framework.

Currently, there is a culture of secrecy and shame concerning primary care rebate schemes, as is evidenced by the HSJ survey results and report, no doubt fuelled by concerns about claims of bribery and inappropriate industry influence in the NHS. Given the pressures faced by both the NHS and industry, it is time to end this culture and move towards trade practices for purchasing medicines that are both realistic and ethically accountable.

It is to be hoped that the national adoption of the primary care rebate scheme principles will enable the NHS and pharmaceutical industry to move forward together and to change the culture, for the benefit of the health service and ultimately for patient care.

Citation: The Pharmaceutical Journal DOI: 10.1211/PJ.2013.11121787

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