Controlling prescribing costs in the NHS refers to the policies and administrative measures used to manage the financial burden of medicines prescribed in the National Health Service (NHS) of the United Kingdom. Since its foundation in 1948, the NHS has faced rising pharmaceutical expenditure linked to increased prescribing volumes, the introduction of new branded medicines, and variations in prescribing practice. A range of mechanisms have been introduced over time to contain costs, including the distribution of the British National Formulary, monitoring of high-cost prescribers, and the development of pricing and reimbursement systems.
At its inception, the NHS experienced many of the cost control problems that had been encountered under the earlier National Insurance Act 1911, but to a greater degree because the entire population (not just insured workers) was now provided with Healthcare in England free at the point of delivery.[1]
As with general practice as a whole, the arrangements for prescribing and dispensing drugs in the early NHS were based on those operated by the Local insurance committee. Most drugs were prescribed by general practitioners, the majority of products were supplied by pharmacists, and rural practices could apply to self-dispense medicines for patients living more than one mile from a pharmacy. Pharmacists received a fee for each item dispensed and were reimbursed at nationally agreed rates. Dispensing doctors could choose either to be remunerated on the same basis as pharmacists or to receive a capitation fee intended to cover the majority of product costs.[1]
The new body responsible for pricing prescriptions and reimbursing pharmacists, the Joint Pricing Committee, initially struggled to cope with demand. A backlog of some 60 million prescriptions from the Second World War and a doubling of prescription volumes after the introduction of the NHS created delays in reimbursement.[2] Although effective in ensuring patients received medicines, the system incorporated few mechanisms to automatically control public expenditure on drugs. For example, there were no direct limits on the volume of medicines prescribed by GPs, and pharmacists had little incentive to advise doctors on cost-effective prescribing.
Regional variations
Significant regional variations in brand prescribing were observed. A survey of 17,301 prescriptions dispensed in September 1949 found differences between areas classified as "residential", "industrial" and "suburban".[3]
Regional variations in branded prescribing, September 1949
Area
Branded prescriptions
% of total
Residential
1,455
27%
Industrial
1,323
21%
Suburban
790
14%
The authors of the survey concluded that the observed differences were probably “due more to the prescribing habits of the doctors concerned than to the social groups catered for”.[3]
Early control measures
In consequence, additional measures were introduced to manage rising prescribing costs. The British National Formulary (BNF) was distributed free to all GPs, high-cost prescribers were visited by regional medical officers, and a system for investigating and penalising excessive prescribing was established.[4] However, memories of the unpopular "Floating Sixpence" scheme under the NIS meant that budgets or incentive systems were not initially introduced.
Brand prescribing
The NHS began during a period of rapid pharmaceutical innovation in which many new proprietary medicines became available. From July 1948 onwards, family doctors were able to prescribe a wider range of (often more expensive) branded products than under the NIS. This led to a rapid increase in branded prescribing rates and costs that administrators found difficult to control.[2] A post-war survey showed the rapid growth of branded prescribing under the National Insurance Scheme and early NHS years.[5]
Proportion of branded drugs prescribed, 1947–57
Year
Proportion of all items supplied (%)
Proportion of overall spend (%)
1947
7.0
24.0
1950
18.0
44.0
1956
40.5
66.0
1957
48.0
70.0
Joint Committee on Prescribing
In response to the growth in branded prescribing by general practitioners, the Central and Scottish Health Services Councils established the Joint Committee on Prescribing in 1949. Chaired by Sir Henry Cohen, the committee issued a circular letter to all GPs suggesting that significant savings could be achieved if proprietary brands were prescribed as their standard (generic) alternatives.
In its interim report of June 1950, the committee concluded that absolute restrictions on NHS prescribing were impracticable and that GPs should retain freedom to prescribe any drugs considered necessary for their patients. However, the committee’s final report in 1954 recommended a framework for evaluating the appropriateness of particular classes of drugs. Within this framework, pharmaceutical products were grouped into six categories:
New drugs of proved therapeutic value but not yet standard.
Proprietary brands of standard drugs.
Standard preparations in elegant forms or vehicles.
Modifications not therapeutically superior to existing preparations.
Preparations of unproven therapeutic value.
Preparations combining elements of categories 4 and 5.
The report recommended that drugs in category 1 should be freely prescribable, categories 2–4 should only be available subject to satisfactory price arrangements with manufacturers, and categories 5–6 should not be prescribed.
The approved list
Following the Joint Committee’s recommendations, the Chief Medical Officer produced an “approved list” of approximately 5,000 products recommended for NHS prescription. Distributed to all GPs with an accompanying letter, the list suggested that excluded preparations should only be prescribed once the practitioner had “ascertained the cost and compared it with that of identical or similar standard preparations.”
Compliance with the approved list was voluntary. The British Medical Journal observed that “for the already paper-bound general practitioner one wonders if the irritation of more printed reference matter will defeat its purpose.”[6]
Despite these efforts, governments found it difficult to influence prescribing behaviour directly. Reliance on voluntary cooperation from the medical profession, the pharmaceutical industry, and patients often limited the effectiveness of cost-control measures. Doctors resisted restrictions that might compromise clinical freedom, the pharmaceutical industry was reluctant to adopt policies that reduced profits, and patient expectations for medicines remained largely unchanged.
The Hinchcliffe Committee
Following the limited success of revised prescription charges, the Ministry of Health turned to representatives of the medical profession and the pharmaceutical industry for further measures to contain costs. After discussions with the British Medical Association (BMA), the Hinchcliffe Committee was appointed in June 1957 to investigate the factors contributing to the rise in NHS prescribing costs and to make policy recommendations.
The committee took almost two years to publish its final report, during which time major new pharmaceutical policy initiatives were suspended. Its inquiry considered a wide range of influences, including the training of medical students, the provision of information on new drugs, the impact of consultants and patients on GP prescribing, drug advertising, the right of doctors to prescribe, and the role of retail pharmacists. It also examined issues such as prescription charges, restrictions on quantities supplied, and the need for a permanent advisory body on prescribing and costs.
Improving prescribing
The committee reviewed whether prescribing behaviour could be improved. It concluded that while there was “no evidence of widespread and irresponsible extravagance” in general practice, there was scope for economy. It recommended against automatic substitution of generic drugs for proprietary brands at the point of dispensing, as this might discourage doctors from learning generic names. Instead, the committee advocated systematic postgraduate training in pharmacology and therapeutics for GPs, better access to information on drug prices, and encouragement to select the least expensive appropriate drugs.
The report reflected a belief that most GPs were rational prescribers, but that their decisions were limited by the information and training available to them. It also recommended tightening procedures for investigating excessive prescribing and the establishment of a voluntary limit on the amount of drugs supplied on a single prescription form.
Prescribing vs dispensing doctors
As part of its investigation, the committee studied the different arrangements for supplying drugs in urban and rural areas. The NHS was established with a Separation of prescribing and dispensing and pharmacists were reimbursed according to the rates listed in the Drug Tariff. Dispensing doctors in rural areas, however, could either be reimbursed on the same basis as pharmacists or opt for a capitation fee of ten shillings per patient per year, with additional payments for certain costly drugs and appliances. By 1959, around 2,220 of 2,700 dispensing doctors had chosen the capitation option.
Average prescribing costs, 1951–58
Average prescribing costs per patient, 1951–58
Year
Dispensing doctors
Prescribing doctors
1951/52
15s 0d
£1 1s 1d
1952/53
14s 10d
£1 2s 6d
1953/54
15s 0d
£1 2s 0d
1954/55
16s 7d
£1 3s 8d
1955/56
18s 0d
£1 5s 8d
1956/57
18s 7d
£1 7s 5d
1957/58
£1 1s 4d
£1 10s 1d
The committee reported that the capitation system had constrained expenditure, noting that dispensing doctors consistently had lower average prescribing costs than their non-dispensing colleagues during the 1950s. It acknowledged, however, “serious objections” to incentive schemes such as the earlier Floating Sixpence, as patients might feel that doctors were being encouraged to economise at their expense. The committee also observed that some pharmacists and dispensing doctors had purchased drugs below reimbursement rates, thereby benefiting financially. While it accepted this was not inherently problematic, it suggested that the taxpayer should share in such savings.
Savings not achieved
While the Hinchcliffe Committee deliberated, NHS pharmaceutical expenditure continued to rise. The prescription charge of one shilling per item (introduced in December 1956) had not produced the expected savings, and the Voluntary Price Regulation Scheme (VPRS), introduced in April 1957, failed to achieve its planned £750,000 annual savings. As many of the committee’s recommendations were long-term, short-term measures were also sought. The VPRS was renegotiated in December 1960, and the prescription charge was doubled to two shillings (10p) per item in March 1961. These changes, however, again failed to deliver the anticipated reductions in costs.
Further reading
Morton-Jones, Tony, and Mike Pringle. "Explaining variations in prescribing costs across England." British Medical Journal 306.6894 (1993): 1731-1734.
Taylor, R. J. "Prescribing costs and patterns of prescribing in general practice." The Journal of the Royal College of General Practitioners 28.194 (1978): 531.
References
1 2 Ryan M, et al. "Dispensing physicians and prescribing pharmacists: Economic considerations for the UK." Pharmacoeconomics 1994;5:8–17.
1 2 Ministry of Health. Final report of the committee on the cost of prescribing. London: HMSO, 1959.
1 2 Dunlop D. M., et al. "A survey of 17,301 prescriptions on form E.C.10." British Medical Journal 1952;1(4753):292–5.
↑ Martin, J. P. Social Aspects of Prescribing. London: William Heinemann, 1957.
↑ Ministry of Health. Final report of the committee on the cost of prescribing. London: HMSO, 1959.
1911 – National Insurance Act provided medical benefits for workers earning under £160 per year.
1913 – National Insurance Scheme formally introduced as the UK’s first health insurance scheme.
1913 – The Floating Sixpence scheme established to limit prescribing costs.
1948 – National Health Service introduced, with healthcare free at the point of delivery including pharmaceutical services.
1952 – First major scientific study of prescribing variations (Dunlop et al.) highlighted differences between demographic areas and prescribing practices.
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