The latest Pharmaceutical Price Regulation Scheme (PPRS) came into force on 1 January 2014 and will cap growth in the NHS branded drugs bill for five years, with the pharmaceutical industry picking up the cost of any excess spending.
Stephen Whitehead, chief executive of the Association of the British Pharmaceutical Industry, told GP the deal struck between government and industry should reduce pressure on GPs to cut drug spending.
GP leaders said the deal would not address more pressing problems with supply and demand of generics.
A recent GP survey revealed how more than two thirds of GPs have been hit by rising pressure on prescribing budgets. GPs said expensive treatments prescribed by hospitals were having a 'big impact' on primary care costs.
The PPRS deal freezes growth in the NHS drugs bill for two years, then allows for a slow annual rise of 1.8% for two years and 1.9% the year after. The pharmaceutical industry will rebate any branded drug spend that exceeds this growth rate. The first year's payments are fixed at 3.74% of net sales, the difference between the 0% growth cap and the forecast increase in the medicines bill.
Mr Whitehead said this arrangement had 'taken affordability off the table' in prescribing decisions. 'There will be billions flowing back from the industry over the course of the next five years to meet the agreed cap.'
He said rationing of drugs in the community had driven up costs in other parts of the NHS, such as A&E admissions.
Mr Whitehead added: 'I would like to see all these conversations that tell GPs they can't prescribe drugs to be turned on their head, so people say: you can prescribe and the money will flow back.
'The NHS spends a fortune trying to control GP behaviour, trying to control expenditure on drugs. Why don't we just say to the system, let's make those disincentives incentives. This could be an end to rationing if the system responds.'
Former GPC dispensing lead Dr David Bailey said the deal was no 'panacea'. 'We would welcome the continued PPRS agreement, but it's not going to solve the problems with generics,' he added.