Projecting expenditure on medicines in the UK NHS

Expenditure on medicines is a readily identifiable element of health service costs. It is the focus of much attention by payers, not least in the UK even though the cost of medicines represents less than 10 % of total UK National Health Service (NHS) expenditure. Projecting future medicines spending enables the likely cost pressure to be allowed for in planning the scale and allocation of NHS resources. Simple extrapolations of past trends in 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 objective of this study is to develop and test an improved method to project NHS pharmaceutical expenditure in the UK for the period 2012-2015.

We have adopted a product-by-product, bottom-up approach, which means that our projections are built up from individual products to the total market. Our projections of the impact of generic and biosimilars entry on prices and quantities of medicines sold, and of the rate of uptake of newly launched medicines, have been obtained from regression analysis of UK data. To address uncertainty, we have created a baseline and two other illustrative scenarios. We have compared our projections with actual expenditure for 2012.

Our projections estimate that, between 2011 and 2015, with no change in policy or price regulation, the UK total medicines bill would increase at an average compound annual growth rate (CAGR) of between 3.1 and 4.1 %. Total NHS spending on branded medicines and total NHS spending on generics are projected to increase at average CAGRs of 0.5-1.8 and 10.0-11.0 %, respectively, over the same time period. For the total market, the actual growth rate for 2012 lay within our projected range.

Our methodology provides a useful framework for projecting UK NHS medicines expenditure over the medium term and captures the impacts of existing medicines losing exclusivity and of new medicines being launched onto the market.