The DH and the ABPI aim to achieve a new pricing system for branded medicines that reduces bureaucracy whilst being affordable, sustaining and responsive to the future needs of the NHS.

A joint statement from the two said that negotiations to replace the existing Pharmaceutical Price Regulation Scheme (PPRS) will begin next month and will include value-based pricing (VBP).

The two insist they are “committed” to reaching a new agreement that gives “patients better access to the most effective medicines”.

The new pricing scheme will cover the majority of branded drugs which will enter the market before 2014. It will operate under a similar but “evolved framework” to the existing PPRS.

However, the Government and the ABPI believe it is “important” for the new arrangement to provide “stability and predictability in the new framework” to ensure the NHS and the pharmaceutical industry manage financial and investment plans.

The statement said it is “vitally important” to continue the supply of innovative treatments to NHS patients and the ABPI “welcomes” value-based pricing alongside a renewed PPRS to “support this goal”.

Therefore, the statement said, VBP will be introduced in a “planned and progressive way” to focus on new medicines entering the market from 1 January 2014.

The Government aims to ensure the assessment of new medication is conducted as fully and early as possible for pharmaceutical companies to “predict well in advance” how products will “fare”.

The updated PPRS will also include a “statutory scheme” for companies that choose not to participate in the voluntary agreement.

Prescribing costs fell last year as measures to reduce the amount spent on medication began to have an impact, new data shows.

Figures from the Information Centre show there was a reduction in spending by a third of a per cent compared to 2010.

The Department of Health praised the efforts of doctors in reducing medicines spend but said further progress could still be made in this area.

Research found that a total of 962 million prescriptions were dispensed in community pharmacies in England last year at a cost of £8.831bn.

However, this total was down on the £8.834bn spent 12 months before.

The reduction in overall spend followed a reduction in the mean net ingredient cost of the average prescription falling from £9.53 to £9.16. Reduced drug tariff prices and smaller payments to pharmacists also contributed.