Memorandum submitted by the Royal Pharmaceutical
Society of Great Britain (CP 8)
EXECUTIVE SUMMARY
INTRODUCTION
— 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]
INTRODUCTION
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.
BACKGROUND
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.
THE SCOTTISH
PARLIAMENT
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.
A POLICY FRAMEWORK
FOR PRESCRIPTION
CHARGES AND
EXEMPTIONS
22. The framework incorporates the following
elements:
— Government in its role of financier,
and as health policymaker.
— Professionals, primarily those prescribing
and/or dispensing medicines.
USERS
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.
GOVERNMENT
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.
PROFESSIONALS
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.
ALTERNATIVES TO
THE CURRENT
SYSTEM OF
CHARGES AND
EXEMPTIONS
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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