Officials are under pressure to overhaul the UK’s new prescription medicines pricing system only days after its launch, with concern growing that it will destabilise smaller drugs companies.

Measures in the latest Pharmaceutical Price Regulation Scheme (PPRS), unveiled by the Department of Health this month, will impose a 4 per cent rebate next year to be levied on all pharmaceutical companies with annual sales above £5m.

The move erodes concessions in previous versions of the PPRS, which permitted a “taper” so that smaller companies paid a rebate only on any sales between £5m and £25m and on the full amount higher than that threshold.

Industry organisations have been stepping up talks with government officials in recent days before final ratification of the new PPRS scheduled at the end of this week. Some senior politicians have called for the introduction of a more generous taper.

Leslie Galloway, head of the Ethical Medicines Industry Group, representing smaller drugs companies, said 18 of his members had warned that the measures might threaten investment plans or trigger job cuts. “This is unfair and ineffective. The bureaucracy will make life very difficult because of the added workload and cash-flow issues.”

Much of the discussion in the weeks leading up to the new agreement focused on efforts to increase the taper to £40m, which industry estimated would have cost the Treasury £11m-£15m. But it was forced to cede given the threat of a compulsory price cut of 15 per cent for those companies that disagreed.

Stephen Whitehead, head of the Association of the British Pharmaceutical Industry, the main trade body that negotiates the PPRS, said he had been “disappointed” with the measures adopted. “We think this inflicts this pain for very little gain and we are continuing a dialogue.” The BioIndustry Association has also complained.

Some officials have argued that the concessions did not benefit small businesses but rather the local subsidiaries of multinational pharmaceutical companies with modest domestic sales.

But Simon Collins, UK general manager for the US-based ViroPharma, which produces breakthrough medicines for “rare” diseases, said: “I was cross as a wasp when I saw the terms. I feel small business is being asked to take a bullet for the team. We invested heavily in infrastructure and manufacturing in the UK when we could have gone to the Dutch or Irish.”

He warned that rebates under the new PPRS were likely to rise to nearly 10 per cent in the coming years, which would not only reduce sales revenues but probably wipe out all profits in the UK. “Just as Germany has promised to give back drug rebates, the UK is adding them. It’s a bit of a no-brainer. If you are sat in Boston, you will jump on the German horse.”

Derek Williams, general manager for Vifor Pharma UK, said: “The proposed removal of the tapering mechanism for small companies will bring minimal benefits to the [National Health Service] but can have a devastating impact on the growth plans of exactly the smaller companies the government is relying on to stimulate growth and create jobs in the UK.”

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