The rising cost of medicines to the NHS: what’s the story?

Medicines are a vital part of modern health care. The question of how to give patients access to them in a way that the NHS can afford has exercised policy-makers and politicians for many years.

In this briefing, we look at how much the health service spends in total on medicines, both generics and branded medicines, based on publicly available data. In recent years, spending on branded medicines has been constrained by the Pharmaceutical Price Regulation Scheme a new instalment of which is currently under negotiation. We also explore policies used to try to control growth in costs and the choices policy-makers are likely to face in the future.

Key messages

• Estimated total NHS spending on medicines in England has grown from £13 billion in 2010/11 to £17.4 billion in 2016/17 – an average growth of around 5 per cent a year. These figures are uncertain due to gaps in data, but the rate of increase is substantially faster than for the total NHS budget over the same period.
• Much of the recent growth in medicines spending has been in the hospital sector, where estimated costs have grown at around 12 per cent a year on average since 2010/11. Today hospitals account for nearly half of total NHS spending on medicines. 
• In primary care, spending growth has been much lower. Although the volume of prescription items provided to patients increased by almost half in the decade to 2016 (to 1.1 billion items), this was offset by a reduction of nearly a quarter in the average cost per prescription item (to £8.34).
• Policy on medicines in England aims to balance the competing goals of giving patients prompt access to effective treatments, incentivising the pharmaceutical sector to develop new products, and ensuring that expenditure on medicines is affordable for the NHS. Today it is becoming harder to balance these objectives.
• Over time the NHS has used a number of policies to promote value for money in spending on medicines, such as encouraging the widespread use of cheaper generic drugs. Opportunities to generate additional value remain, such as increasing the uptake of biosimilars (which resemble generics for biological products). But with growth in spending on medicines outstripping growth in funding, policy-makers have recently sought to exert greater control over medicines expenditure – for instance with the introduction of a controversial budget impact test for new products that will cost more than £20 million a year to provide.
• Given the founding principles of the NHS, policy options that are available in some other advanced health care systems, such as significantly increasing user charges for medicines, would be politically challenging to implement in England.
• Without a new funding settlement for the NHS, policy-makers are likely to face increasingly difficult choices. There is a risk of returning to the position of the 1990s, when funding pressures led to widespread concern about patients’ access to medicines.