Select Committee on Health Written Evidence

Memorandum submitted by the Royal Pharmaceutical Society of Great Britain (CP 8)



    —  The RPSGB is the regulatory and professional body for Britain's pharmacists. As the only organisation that works with all pharmacists in Great Britain, the RPSGB safeguards the public and promotes the development of the pharmacy profession, whose unique knowledge and skills play a key role in the health of the nation.

    —  The RPSGB's longstanding policy is that there should be no financial barrier to the use of prescribed medicines. This implies either a move to abolition or a major reform of the existing charging system in a way that could be shown to have little or no deterrent effect on use.

    —  Since all British governments, including the present administration and the devolved governments across the UK, have espoused the general principle that the NHS should be free at the point of use, there is a prima facie case for abolishing prescription charges.

    —  The Society acknowledges that the implications of abolition or radical reform are considerable and considers that no such move should be considered without a careful analysis of the consequences for patients, professionals, the pharmaceutical industry and the public purse.

    —  In 2005, the RPSGB published a policy paper, Prescription charges: should they be abolished?, setting out a policy framework for prescription charges and exemptions; options for alternative systems and recommending further studies that should be commissioned as next steps. This policy paper is attached to this submission. [61]


  1.  The Royal Pharmaceutical Society of Great Britain (RPSGB) is pleased to respond to the Health Committee's call for evidence for its inquiry on co-payments and charges in the NHS. The RPSGB is the regulatory and professional body for Britain's pharmacists. As the only organisation that works with all pharmacists in Great Britain, the RPSGB safeguards the public and promotes the development of the pharmacy profession, whose unique knowledge and skills play a key role in the health of the nation.

  2.  Given the day to day contact the pharmacy profession has with the public and their prescriptions the RPSGB has developed a clear policy position on prescription charges, and we have taken the opportunity, within this submission, to focus on this area.

  3.  The RPSGB's longstanding policy is that there should be no financial barrier to the use of prescribed medicines. This implies either a move to abolition or a major reform of the existing charging system in a way that could be shown to have little or no deterrent effect on use.

  4.  Since all British governments, including the present administration and the devolved governments across the UK, have espoused the general principle that the NHS should be free at the point of use, there is a prima facie case for abolishing prescription charges.

  5.  The current system of prescription charges is widely perceived as illogical and unfair and there have been widespread calls for radical reform or abolition. The Welsh Assembly has already decided to pursue abolition and the Scottish Executive is due to publish a consultation paper shortly. The Scottish Parliament is currently considering a private members' bill proposing the abolition of prescription charges and has also commissioned a review into prescription charges.

  6.  In 2005, the RPSGB published a policy paper, Prescription charges: should they be abolished?,setting out a policy framework for prescription charges and exemptions; options for alternative systems and recommending further studies that should be commissioned as next steps.

  7.  Abolition or substantial reform should not be considered without a careful analysis of the consequences for patients, professionals, the pharmaceutical industry and the public purse. Any such analysis should:

    —  assess what the response of users would be to the removal of the charge or to new charging structures;

    —  assess the impact of this response on the use of other health services eg the potential reductions in hospital admissions arising from greater compliance with medication regimes;

    —  identify the full financial and workload implications for pharmacists, GPs and other health service professionals;

    —  Consider the implications for other policies particularly those such as direct supply minor ailments schemes which develop the community pharmacy role and for the recent policy initiatives aimed at reducing the costs of providing care for chronic diseases including the promotion of self-care and alternative to medicines such as dietary modification and exercise regimes;

    —  consider alternative charging structures which would mitigate the weaknesses of the existing system;

    —  assess the possible response of the pharmaceutical industry to any changes in demand for particular products;

    —  review all the relevant evidence on abolition and restructuring including overseas experience of changes in charges and of the impact of different charging structures;

    —  assess the implications of having different charging regimes in different parts of the UK.

  8.  Implications of abolition or radical reform are considerable. In particular:

    —  any income foregone has to be replaced from other services or other sources of income or made good by savings elsewhere in the NHS;

    —  removal or reduction of the price barrier will lead to greater take-up of prescriptions and hence greater claims on GPs' time as well as that of other professionals;

    —  the balance between prescription only medicines (POM), pharmacy only (P) and over the counter (OTC) medicines will change and hence the current system for financing community pharmacy may be undermined and require modification if the current system is to continue.

  9.  The RPSGB acknowledges that in the light of the financial, professional and industry considerations, the relevant administrations might wish to proceed in a measured way, taking due account of the impact of phased abolition in Wales.


  10.  As the Committee will be aware, prescription charges were introduced in 1952 and have been in place ever since with the exception of a brief period in the 1960s. The removal of charges in 1966 coincided with a sharp rise in the number of prescriptions dispensed, which continued until their reintroduction in 1968 at a time of economic crisis. When charges were reintroduced in 1968, exemption arrangements were added and have remained more or less the same to the present time.

  11.  From the 1960s onwards, the real cost of prescriptions—ie the charge adjusted for inflation—rose sharply: in 1996 it was nearly eight times its level in 1956. In recent years it has remained more or less constant. However, the number of prescriptions dispensed has continued to rise. The UK average is now [2002-03 figures] 12.4 per head. Wales (16.2) and Scotland (12.9) are above this average while England (12.3) is below. Prescribing levels in the UK are low by international standards but nevertheless exceed those in Australia, Greece, Denmark, Norway, Finland and Sweden.

  12.  Over 85% of prescriptions are obtained free of charge. The income from charges finances less than 1% of the cost of the NHS and about 6% of the total net ingredient cost of all prescriptions dispensed. The total revenue raised by prescription charges is around £500 million per annum, which represents about 40% of all income raised from NHS charges. Nearly all OECD countries impose prescription charges but the form of charge imposed in the UK—a single nationally determined amount—is not typical. Where standard national tariffs are in place, typically these vary with the type of drug. In some countries the charge, a co-payment, is calculated as a share—which may vary between drug categories—of the cost of the medicine concerned.

  13.  Most countries limit the impact of charges through exemptions or maximum limit to payments in a year. The scale of such exemptions is generally lower than in the UK. The existing system of charges has been criticised by user groups, think tanks and professional bodies, other pharmacy bodies and the pharmaceutical industry.

  14.  The notion of extending exemptions for chronic conditions was explicitly rejected by Alan Milburn when he was Secretary of State for Health. In 2004, however, minor modifications were introduced to the low-income exemption threshold. However, using its devolved powers, the Welsh National Assembly has decided to abolish prescription charges and is currently in the process of implementing that policy in stages, with completion - and free prescriptions—scheduled for 2007. In Scotland, the possibility of abolishing charges is also under discussion. Following consultation an MSP (Colin Fox) has now introduced the Abolition of NHS Prescription Charges (Scotland) Bill.

  15.  The reluctance of the UK government to reform the existing charging regime appears inconsistent with its health policy goals. In The NHS Improvement Plan it signalled its intention to switch the emphasis of health care policy over the next four years away from waiting times for elective treatment to care for those with long-term conditions. The majority of these are highly dependent on prescription medicines and most are required to make a contribution to their cost. As we set out below, it is this group which is most likely to be deterred from taking the medicines they need by the existing charging regime.

  16.  At the same time, the government is making a number of other changes to make it easier for patients to access medicines: at the UK level there is the transfer of medicines from prescription to P (available in a pharmacy without prescription) or GSL/OTC (general sales list/over the counter) status, and in England measures such as the liberalisation of entry to community pharmacy, which have implications for the financial stability of existing providers. (The Welsh and Scottish governments are also pursuing measures to improve access to medicines.)

  17.  The question arises therefore as to whether the continuation of prescription charges in their present form is compatible with other health policies.

  18.  Therefore in this submission we have set out a framework for assessing the appropriate role for the use of prescription charges within a national health service in England, which seeks to ensure that access to care is based on need not willingness to pay, and hence which does not generally impose charges at the point of use. We also consider in broad terms alternatives to the present system of charges, before setting out the RPSGB's view as to what should happen next.


  19.  The Committee will be aware that legislation in the form of the Abolition of NHS Prescription Charges (Scotland) Bill is currently passing through the Scottish Parliament. This process has ensured that, in turn, the Welsh Assembly's decision to abandon prescription charging has been scrutinized.

  20.  At a Scottish Health Committee Meeting on 29 November, it became clear that more evidence was required in order to properly plot the success of the policy of abolition. However the Committee did acknowledge that the current system is no longer fit for purpose in its current form—the Partnership Agreement looked to address this through consideration of charges for people with chronic health conditions and young people in full time education or training. The Deputy Health Minister also acknowledged that the consultation would have to be wider than just these two strands and would consider the fundamentals.

  21.  Given the Scottish Executive is so far down the line with this legislation we hope that the UK Parliament will be given an opportunity to examine and debate the results, so that a similar policy approach can be taken forward for the rest of the UK.


  22.  The framework incorporates the following elements:

    —  Users or self-carers.

    —  Government in its role of financier, and as health policymaker.

    —  Professionals, primarily those prescribing and/or dispensing medicines.


  23.  The critical question, both from the financial and the health viewpoint, is how do users react to the existence of charges for prescription medicines?

Impact on use of medicines

  24.  Studies carried out in a number of countries over a substantial number of years come to the same broad conclusion, that users, particularly those on lower incomes, are deterred from seeking or taking up prescriptions by the existence of charges. This was the finding of the only research based on an experimental design, the RAND studies, carried out in the US in the 1970s [Newhouse 1993] but there is now a substantial body of evidence from a number of countries accumulated since then which confirms this result.

  25.  A key research project carried out in 2004 surveyed the relevant literature from a wide range of countries, including England, and come to the following broad conclusion:

  "Virtually every article we reviewed supports the view that cost sharing through the use of co-payments (charges) or deductibles decreases the use of prescription medicines by the poor and the chronically ill".

  26.  Studies appearing since this survey including a number from Australia and the US support this general conclusion.

  27.  Obviously the impact on demand depends on the level of the charge. For example, a Canadian study of the imposition of a $2 charge, a fraction of the UK charge, found that it had little impact on access by all income groups. The UK evidence is provided by statistical analysis of the impact of changes in the level of charge introduced in the years since their original introduction, and by survey and focus group methods.

  28.  A review of these studies in 2000 suggests that on average, for every 1% increase in the cost of a prescription, demand falls by 1/3% (the estimates vary considerably). This means that overall demand is relatively inelastic (ie not very responsive) which explains why the increases in UK charges in the recent past have increased revenue. There is some evidence that elasticity has been rising over time. Given the significant increase in the real-terms level of charges, this is only to be expected since a small proportional change in the charge now represents a much larger absolute change in what users have to pay.

  29.  The fact that demand overall is inelastic does not mean that all users are unaffected by charges. Within the UK, the available evidence suggests that the current charge deters some of those with incomes just above the exempt income threshold and some of those with non-exempt chronic conditions, because of the large up-front cost of the pre-payment certificate, as well as ignorance of its availability. For example:

    —  A survey carried out by NACAB [2001] found that around 50% of those who had received a prescription in the past year (and about two-thirds of those with long-term health problems) reported they found difficulty in meeting the charges. NACAB estimates that about 100,000 of their clients fail to make full use of prescriptions because of their cost. This study also cites a MORI survey which puts the national figure at ¾ million.

    —  Studies of non-take-up have found that the rate is higher for the non-exempt than for the exempt.

  30.  Not all studies into the impact of charges find they reduce the take-up of medicines. But where they do not, the groups concerned have generally been higher-income or the relatively healthy or, as noted above, the charge has been much lower than the UK level. But they make the important point that the impact of charges may be on the decision to consult as much as on the decision to make use of a prescription. If this is correct, then the apparent lack of response to charges among some users groups may be understated by any analysis focusing solely on the take-up of prescriptions.

  31.  A number of studies have established that users may respond to an increase in prescription charges by making more use of alternatives, particularly over the counter medicines (OTCs). A 1989 study found that a 1% rise in prescription charges led to 0.2% increase in the use of OTCs. A more recent study carried out in 1998 found that such substitution took place primarily for minor health problems but there was also substitution for more serious problems. Another issue, debated in the Scottish Parliament, details the unfairness of current arrangements in that patients with one of the listed chronic diseases are exempt from all prescription charges. Therefore a patient with diabetes and asthma receives asthma inhalers without charge, whereas a patient with asthma alone has to pay.

  32.  In some health care systems, a distinction is drawn between branded and generic medicines. Research into the impact of such charging arrangements suggests that users are price sensitive ie they are very responsive to such differentials. Research on this issue carried out in 1999 found that an increase in prescription cost from $10 to $15 for branded medicines resulted in little reduction in the use of medicines but did produce a switch from brands to generics.

  33.  Another common form of charge derives from what is termed reference pricing. In this system, the insurer covers the cost up to the reference price and patients pay the extra if they choose a more expensive medicine within a given therapeutic category.

  34.  Evaluation of the impact of the introduction of such a scheme for ACE inhibitors in British Columbia [Schneeweiss et al 2004] found little impact on drug utilisation and no increase in other health care costs. But other studies have found that overall drug costs met by insurers/government were reduced by this form of charge, at least in the short run.

  35.  All the studies reported here have examined increases to charges or limits on reimbursement. The impact of reductions in charges does not appear to have been researched presumably because reductions are rare. The statistical studies referred to above cannot be relied upon to provide estimates of major changes to the level or structure of charges. However, in Italy charges were abolished in January 2001, and in the year that followed, spending on medicines increased by just over one third, leading to a reintroduction of charges in some regions. No detailed studies of this episode appear to be available, however.

Impact on health

  36.  If the use of medicines is curtailed by charges, does it matter? Only a small number of studies have addressed this question. A study in the US of mentally ill patients living in the community faced with a cap on the drug expenditures for which they would be reimbursed, found that the increase in hospital admissions led to cost increases of 17 times the drug cost saved. Another study by the same authors found that charges led to more people being institutionalised for care and also found reductions in the use of particular medicines including essential ones such as insulin, thiazides and frusemide.

  37.  A study in Canada on the impact of charges introduced in1996 found that use of essential medicines decreased and hospital admissions rose. A further study of the US Medicare system found a clear link between greater availability of medicines and improved mortality rates among the elderly by studying the impact of the introduction of insurance coverage for medicines during the 1990s.

  38.  A study carried out in the US concluded—albeit tentatively—that while low levels of co-payment had little effect on use of medicines, the health status of elderly users (measured by a combination of two scoring systems) did appear to decline, the higher the level of payments.

Are charges fair?

  39.  Any system of prescription charges applied to all or most of the population may be judged to be unfair against the criterion which the NHS applies to most health services that they should be free at the point of use. More specifically, whether charges are fair as between users depends critically on their precise structure and the nature and extent of exemptions. The current UK system is inequitable in three main respects:

    —  The sharp "cut-off" at the lower income exemption limit means that people just above the limit may be worse off than those below it.

    —  It requires people with low incomes to pay while some with much higher incomes such as well-off pensioners or pregnant women do not.

    —  The existing list of exemptions for chronic conditions dates back to 1968 when few medicines were available; some conditions which are now treated extensively with medicines were rarely diagnosed then, and new conditions such as AIDS have emerged. Hence the exemptions create an arbitrary division between those who pay and those who do not, which is not based on any defensible medical criterion.


  40.  From the viewpoint of HM Treasury, charges have two positive attributes: they raise revenue and reduce expenditure. Simply viewed as a tax, charges on prescription medicines are relatively inefficient ie the administration and transaction costs are higher than for most other taxes.

  41.  Charges reduce public expenditure if they are set, like the current prescription charges in the UK, on average, below costs—and hence are subsidised out of taxes—and if users are deterred from accessing the services on which charges are imposed and thereby the total amount of subsidy is reduced.

  42.  From the viewpoint of a government as a health and health-service policymaker, taxes represent a barrier to access, again provided that [some] users are deterred from taking up the services affected. Accordingly there is a direct conflict between the two viewpoints, unless there is no deterrence effect. However, the evidence set out above suggests that there is.

  43.  The potential scale of the conflict between the two viewpoints can be reduced by a variety of means of which the most significant are partial or total exemption of certain groups, particularly those with low incomes, from charges. The extent of exemptions means in practice that charges can never be a major source of revenue, particularly as the main users of prescription medicines, the chronically sick and the elderly are, in general, on low incomes. But the current range of exemptions is not based on any defensible principle: those over retiring age enjoy exemptions whatever the level of their income, while many of those suffering from long-term conditions requiring medications have to pay the full charge.

  44.  An alternative would be to reduce the charge to the level below that which would maximise tax revenues to a more or less nominal level. But to take the latter option makes charges viewed as a tax even more inefficient. Their only purpose would be to serve as a reminder to users that there is no such thing, from the viewpoint of society as a whole, as free medicine. Finance and health policy share an interest in the efficient use of public funds.

  45.  Charges have been justified on the grounds that they deter frivolous use and encourage more responsible use of medicines. There is no evidence to support either of these arguments. Charges may indeed reduce the seeking or cashing of prescriptions in circumstances where there is little need for medical intervention. But there is no practical way of imposing charges which distinguishes these circumstances from those in which medicines are important to health. The only way in which some degree of judgement can be exercised over what is medically important or otherwise, is through the prescribing decision itself. This is where the main emphasis of policy should be if there is concern about inappropriate use.

  46.  In summary: if charges are imposed they can never make a substantial contribution to financing the bulk of the costs of supplying necessary medicines. In the words of a recent OECD cross-national report on health care reform:

    Increases in co-payments substantial enough to have significant effects on demand are likely to have undesirable effects on access and may have additional social costs.

  47.  Moreover, according to a number of studies where charges have been increased, the effect on overall spending has been temporary. The main reason is that charges are only one of several factors bearing on the use of medicines. Nevertheless the amount currently raised through charges is not negligible. Any assessment of alternative charging systems or outright abolition should either consider alternative sources of revenue or the benefits forgone by diverting funds from other beneficial uses, or estimate the further potential for reducing spending on medicines such as measures directed at prescribers.


  48.  The prime motive for those prescribing and dispensing medicines is to improve the health of their patients. Nevertheless professional behaviour may be influenced in a number of ways by the way in which charges are levied and the financial context in which prescribing and dispensing takes place. Research has been carried out into professional behaviour in a number of countries. The specific findings reflect the specific circumstances of each but some general points emerge:

    —  Prescribing behaviour may be influenced by a desire to reduce the burden of charges.

    —  Prescribing behaviour may also be influenced by the financial incentives bearing on the prescriber.

    —  The existence of charges may also pose issues at the boundary between hospital and community eg in the case of day surgery where non-exempt patients are liable for charges, but where practical considerations make it hard to impose them.

  49.  There are many other influences on professionals. A large number of measures have been introduced to improve prescribing in both clinical and cost-efficiency terms, including in particular medication reviews and prescribing guidelines and pressure of various sorts to increase the use of generics. Measures to improve prescribing—if successful—should reduce the force of the argument for charges based on "frivolous" use.


  50.  The design of a policy framework on charging within the national health service requires a balancing of different objectives.

  51.  The decision taken by the Welsh National Assembly reflects the view that overwhelming weight should be given to ensuring the availability of medicines to users. In contrast, policy in England reflects a more even balancing of objectives in which the Treasury interest is given greater weight relative to the access and health objective. Other countries go even further in this direction by imposing higher charges, at least for some medicines.

  52.  In Great Britain, the revenue/cost-containment objective is pursued by policies such as those promoting the use of generics, the provision of cost information to prescribers, and the transfer of medicines from prescription to OTC status, all of which are intended to reduce the costs falling on the NHS/Treasury. In addition, the Pharmaceutical Price Regulation Scheme provides a measure of control over the prices the industry can charge, while at the same time recognising the industry's need to invest in R & D.

  53.  In considering alternatives to the present system, we can define a number of broad options:

    —  Abolition of charges without any compensating changes in related policy areas: this is the approach in Wales.

    —  Retain a revenue objective similar to the present one but redesign the charging system so as to achieve a similar level of revenue but raised in a different way. Such options include a lower charge with fewer exemptions, as proposed by the Health Select Committee in 1994, proportionate charges which may be banded according to therapeutic value, reference pricing for conditions treatable by a range of therapeutically similar medicines, a national formulary of medicines which the NHS will pay for or subsidise (which would exclude some safe but not very effective medicines), as well as modifications to the existing system of exemptions so as to include a wider range of long-term conditions and to the current season-ticket system to make pre-payment more affordable.

    —  Reduce the revenue "target" from charges but use other measures to compensate for the loss of revenue eg by using stronger incentives for prescribers to reduce costs through generic or other forms of substitution.

  54.  Possible implications from the user viewpoint could include:

    —  changes in take-up of prescription medicines and hence the potential for greater compliance with prescribed medicines regimes or the reverse;

    —  the same for medicines transferred from prescription to OTC status.

  55.  Possible implications from the governmental viewpoint could include:

    —  the overall costs to the public purse including both the immediate loss of revenue and the costs of meeting any subsequent demand effect resulting from changes in user and prescriber behaviour;

    —  policy options that might modify the demand effect and hence reduce the impact on NHS expenditure eg other forms of control or limit on prescribing;

    —  the potential for cost saving in other parts of the NHS from improved compliance with prescribing regimes;

    —  if a substantial change were envisaged, the Westminster government would wish to take into account the impact on the pharmaceutical industry, within the context of the PPRS and its likely response in terms of its pricing and marketing strategies;

    —  the relationship between prescription charges and health policy in general, and other policy objectives such as those in England to reduce emergency admissions through improvements to chronic care, and the attempts to promote changes in diet and an increase in exercise—both of which may impose costs on users which are not usually met by the NHS. Abolition of charges tilts the balance in favour of patients seeking care paid for by the NHS rather than selfcare through health-promoting activities or dietary modifications.

  56.  Possible implications from the professional viewpoint could include:

    —  the workload implications for all health professionals generated by the expected rise in take-up if charges were abolished or lowered;

    —  the impact on the current system for financing community pharmacy eg if users switched back to prescribed medicines from OTCs if all prescription charges were abolished;

    —  the impact of other policies—within pharmacy and general practice in particular—which bear on access to prescription medicines and the alternatives to them which might modify the above.

Beverley Parkin

Royal Pharmaceutical Society of Great Britain

December 2005

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