Projecting Expenditure on Medicines in the NHS

O’Neill, P., Mestre-Ferrandiz, J., Puig-Peiro, R. and Sussex, J.

Research Paper
April 2013

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Medicines account for less than 10% of total NHS expenditure in the UK. Because spending on medicines is easy to separate out, however, this sector continues to come under particular scrutiny in efforts to manage costs. Forecasting spending on medicines can be useful in planning NHS resource allocation. Simple extrapolations of past trends in medicines expenditure, however, are insufficient because they cannot account for shifts in the mix of medicines available on the market or the appearance of generics.

Most projections of medicines spending are rooted in the past and are “top-down”, macro-type approaches. These models cannot anticipate changes in the mix of medicines available.

In this study, OHE projects medicines expenditure in the UK through 2015 using a product-level, or “bottom-up”, approach. This makes it possible to base forecasts on what is most likely to change in the medicines market, e.g. the appearance of new products and the debut of new generics and biosimilars.

The calculations in this study also differ from other estimates by using regression analyses of data drawn directly from experience to date in the UK--for example in estimating changes caused by the appearance of generic versions of prescription medicines and the rate of uptake of new medicines. The model developed in this study can be used to gauge the effects of any number of potential scenarios, thus providing another tool for forecasters.

A comparison of the results for forecasting medicine expenditures using a top-down analysis and OHE’s bottom-up approach shows that the bottom-up approach providers richer detail about causes and distribution of costs, i.e. which therapeutic areas may consume the greater resources. Such detail offers an opportunity, in theory at least, for policy makers to make better-informed decisions—both about allocating resources and about policies that can influence the factors that, in turn, determine medicines expenditures.

A revised version of this paper has been published in PharmacoEconomics and can be downloaded from: http://link.springer.com/article/10.1007%2Fs40273-013-0082-1

Please cite as: O’Neill, P., Mestre-Ferrandiz, J., Puig-Peiro, R. and Sussex, J., 2013. Projecting Expenditure on Medicines in the UK NHS. PharmacoEconomics, 31(10), pp.933-957.