ANNEX C
NOTE ON POSSIBLE COST IMPLICATIONS OF ABOLISHING PRESCRIPTION CHARGES
1. The Executive's policy intention is to retain prescription charges but to augment these by a range of appropriate exemption arrangements. This consultation is about identifying system changes that will make the arrangements fairer, more transparent and more affordable to those who find it difficult to pay the charges. It follows that abolition of prescription charges is not an option under this consultation. However, consultees may find it helpful to understand the possible consequences of abolition.
2. In the preparation of this consultation document, extensive use was made of the Scottish Parliament Information Centre ( SPICe) 6 briefing paper for the Scottish Parliament's Health Committee's consideration of the Abolition of NHS Prescription Charges (Scotland) Bill. What follows draws on evidence provided in this briefing paper.
3. The SPICe briefing paper suggests that introducing or raising prescription charges generally leads to a reduction in the take-up of prescriptions and vice versa. However, whether patients take medication as prescribed (sometimes referred to as "patient compliance") is a complex area of behaviour. Prescription charges are only one of many factors influencing patients' decisions.
4. If patients fail to take their essential medication for whatever reason, there may be detrimental effects on the health of these individuals. This might lead to additional demand for health services, including hospital admission, which is likely to cost more than the medication not taken. Overall, it is difficult to generalise the findings of the available research to Scotland and as such, it is not possible to assess the degree to which prescription charging would adversely affect health status due to reduced take-up of prescriptions, or, for that matter, the degree to which non-compliance with taking medication for any reason would have this effect.
5. The consequence of abolishing charges is not simply a cost increase equivalent to the current income from paid-for drugs. The evidence suggests that complete abolition of charges leads to a significant increase in scripts dispensed, with a consequential rise in drugs bill costs and increased consultations with GPs to obtain prescriptions.
6. There is therefore evidence that on the one hand, if prescription charges are introduced or increased, uptake is likely to fall (with possible adverse consequences); and on the other, if charges are abolished, there is likely to be a significant increase in prescribing and dispensing charges.
7. The one clearly identifiable cost of abolition is the revenue loss of £44.4 7 million that health boards would incur through lost charges. With regard to the possible cost consequence of an increased demand for prescriptions, the SPICe briefing reported research 8 that pointed to a possible increase in demand in the range of 22% to 64% of currently chargeable prescriptions 9 - this equates to a range of £17.5 million to £51 million in 2003-04 cost terms in Scotland.
8. The SPICe briefing paper did not identify any research that quantified the impact of increased demand on GP services from the abolition of prescription charges. However, to quantify a possible scenario, if there were to be a 20% increase in the current demand for prescriptions then, based on the assumptions that each person obtained an average of 2 prescriptions when they saw their GP, and an average cost to the NHS of £25.00 10 per consultation, the additional cost of consultations would be in the region of £15 million per annum.
9. The SPICe briefing paper suggested that administrative savings would accrue as a consequence of abolition of prescription charges. This would be in the region of £1.5 million - mostly in respect of charge exemption or abatement certificate work undertaken by the Prescription Pricing Authority on behalf of the Department.
10. In summary, even with a conservative estimate, the net cost of charge abolition could be at least £75 million (£44.4m lost revenue + £17.5m for a 22% increase against currently chargeable prescriptions + £15m for increased GP consultations, less £1.5m administrative savings), which equates to 7.5% of the cost of providing pharmaceutical services in Scotland and just under 1% of its total health budget. This excludes any reduced cost to the NHS through the prevention of ill-health; the SPICe briefing paper identified a lack of research in this area and concluded that it was impossible to generalise from available research and impossible to quantify the potential benefit from this effect.