Projecting Expenditure on Medicines in the NHS (Second Edition)

Office of Health Economics Research Paper 14/01

47 Pages Posted: 15 Aug 2015

See all articles by Phill Peter O'Neill

Phill Peter O'Neill

Office of Health Economics

Jorge Mestre-Ferrandiz

Office of Health Economics

Ruth Puig-Peiro

Office of Health Economics

Jon Sussex

RAND Europe

Date Written: January 1, 2014

Abstract

Expenditure on medicines is a readily identifiable element of health service costs. As such, it is the focus of much attention by payers, not least in the UK despite the fact that the ex-manufacturer cost of medicines represents less than 10% of total UK National Health Service (NHS) expenditure. Projecting future spending on medicines enables the likely cost pressure to be allowed for in planning the scale and allocation of NHS resources. Simple extrapolations of past trends in medicines expenditure fail to account for changes in the rate and mix of new medicines becoming available and in the scope for windfall savings when some medicines lose their patent protection. The original research paper (as well as the subsequent article published in Pharmaco-economics (O’Neill et al., 2013)) describes the methodology we have used to project medicines expenditure in the UK to 2015 at list prices. This second edition adds an Appendix extending the results to 2018, as well as distinguishing between gross sales (at list prices) and net sales (following discounts). Note that our original projections to 2015 have not changed. Unlike any of the other forecasting approaches mentioned in the literature, we have adopted a product-by-product, pack-by-pack, expert-driven, bottom-up approach. Also, unlike other studies, our projections of the impact of loss of market exclusivity by existing medicines and the rate of uptake of newly launched medicines have been obtained from regression analysis of UK data, i.e. they are drawn directly from experience to date in the relevant market. For any projections, it is also important to address uncertainty by modelling a number of scenarios. In addition to a baseline scenario, we have created two other illustrative scenarios; many others also would be conceivable. We believe that our methodology provides a robust and comprehensive framework for projecting UK NHS medicines expenditure over the medium term.

Suggested Citation

O'Neill, Phill Peter and Mestre-Ferrandiz, Jorge and Puig-Peiro, Ruth and Sussex, Jonathan Mark, Projecting Expenditure on Medicines in the NHS (Second Edition) (January 1, 2014). Office of Health Economics Research Paper 14/01, Available at SSRN: https://ssrn.com/abstract=2630966 or http://dx.doi.org/10.2139/ssrn.2630966

Phill Peter O'Neill (Contact Author)

Office of Health Economics ( email )

7th Floor Southside
105 Victoria Street
London, SW1E6QT
United Kingdom

Jorge Mestre-Ferrandiz

Office of Health Economics ( email )

12 Whitehall
London, SW1A 2DY
United Kingdom

Ruth Puig-Peiro

Office of Health Economics ( email )

12 Whitehall
London, SW1A 2DY
United Kingdom

Jonathan Mark Sussex

RAND Europe ( email )

Cambridge
United Kingdom

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