The UK government is scrapping its existing national scheme for controlling drug prices. The system, called the Pharmaceutical price regulation scheme (PPRS), will be replaced by a newly negotiated agreement on 1 September 2008.

Under the PPRS, companies are allowed to set their own prices when launching new medicines, but in return must keep their UK-earned profit margins within an agreed limit. Any excess profits have to be refunded to the state-run National Health Service (NHS).

The profit caps are re-negotiated at regular intervals, and the current deal was originally intended to run until 2010. Details of the replacement scheme have not yet been settled. The government says it would be based on four principles: value for money, reward for innovation, accelerated uptake of new medicines, and sustainability.

Health ministers have forbidden firms to discuss the negotiations publicly. But the industry is known to regret the PPRS's demise, regarding the scheme as better than the direct price controls common elsewhere in Europe.