a pound imageJune 8 2018

Unexpected price increases for generic medicines in 2017 added an additional £315 million to the drugs budget, the National Audit Office has found. This was 9% of the generics drugs budget of £3.5 billion for 2016-17.

The number of concession price requests from pharmacies also increased sharply, from a level of 150 in May 2017 to 3,000 in November 2017. These requests are made when pharmacies are unable to source generic medicines at or under the price set by the Department of Health and Social Care and listed in the monthly Drug Tariff. 

In total, the DHSC granted 709 price concessions in 2017-18, up from 282 in 2016-17, a 151% increase.

The NAO has investigated NHS spending on generics medicines in primary care Following concerns raised by NHS England of “significant unbudgeted pressure” on clinical commissioning groups (CCGs). Its new report says that the increase between the net spend on price concessions for generic medicines in primary care in 2017-18, was seven times greater than that in 2016-17

“The cost of obtaining certain medicines increased more than tenfold, including those used to treat conditions such as high blood pressure and mental health conditions,” said the NAO. “For example, at its peak, the concessionary price that the Department set for Quetiapine 100mg tablets (which is used to treat mental health conditions) was £113.10, 70 times higher than its previous set price of £1.59.”

Included in the report is reference to concerns raised by eth DHSC around supply issues, and the fact that the Department had identified increases in manufacturers’ prices and unexpected growth in wholesalers’ margins in 2017, which it could not fully explain. 

“The Department’s analysis also demonstrated that the concessionary prices it had granted were set higher than necessary above wholesalers’ selling prices. It estimated that this amounted to £86.3 million of additional costs for CCGs in 2017-18 which it expects to be recouped in subsequent years through the established reimbursement mechanisms,” said the NAO.

Warwick Smith, Director General of the British Generic Manufacturers Association (BGMA), has welcomed the report “and the clarity it has brought to the circumstances around the recent increase in the number of concessionary reimbursement prices for generic medicines.” 

He pointed out that the report found that generic medicines prices in the UK may be lower than in other comparator countries, and that the increases in concessionary prices were not wholly as a result of increases in manufacturers’ prices.

“All in the supply chain should be proud of the fact that despite two major, volume manufacturers not being able to supply medicines due to regulatory issues, patients were usually still able to access their medicines and other generic medicines manufacturers have now been able to step in and fill the gap. However, disruption to supply and production changes to meet the shortfall do inevitably lead to increased costs,” said Mr Smith.

“Our own data based on all generic medicines in the market show that, while there was a higher value of concessionary priced products in 2017, the actual average reimbursement price per product reduced by more than 30p compared to 2016 even taking into account the impact of concessionary prices. This demonstrates the overall value that generic medicines deliver in terms of reducing cost and increasing access for patients.”

PSNC fed into the investigation, including highlighting concerns about the impact of price increases on the community pharmacy sector.

PSNC Chief Executive Simon Dukes said: “Community pharmacy teams were caught in the middle of the many factors at play, working extremely hard to obtain medicines as quickly as possible for the patients who needed them. PSNC welcomes the moves towards developing a more refined price setting system; this must enable pharmacies to continue to purchase generic medicines effectively on behalf of the NHS for the benefit of patients.”

The Royal Pharmaceutical Society has also commented. Sandra Gidley, Chair of the RPS England Board, said the NAO investigation “brings clarity to an issue which has hit community pharmacists hard over the past year. Many have found themselves out of pocket and experienced problems with their business operations. 

“This has been a double whammy as it comes on top of the community pharmacy cuts and we are past the stage where community pharmacists can prop up the health service out of goodwill.”

“Community pharmacy plays an important role in negotiating the prices of medicines reimbursed by the NHS. Pharmacists do such a good job in fact that the UK is in the lower half of the EU15 countries for spend on medicines.”

Ms Gidley pointed to research that PSNC had commissioned in 2016 which found that community pharmacies’ interventions on drug shortages had resulted in an estimated annual cost saving of £53.2 million to the NHS and an overall contribution to wider society of £92.4 million.

“We must have greater stability in generic prices – without it pharmacists struggle, CCGs are left in debt and patients suffer,” she said.

National Audit Office announcement    
NAO ‘Investigation into NHS spending on generic medicines in primary care’. June 8 2018.          
BGMA statement