Select Committee on Health Minutes of Evidence

Memorandum by the British Generic Manufacturers Association (PI 148)


  1.  The role of the generic pharmaceutical industry within the NHS is:

    —  To provide low-cost high-quality versions of older medicines once the patent protection on those products lapses, thus reducing the medicines bill and allowing the NHS to pay higher prices for branded medicines, ensuring that originator pharmaceutical companies have the funds to research and develop truly new innovative products (the "headroom" principle).

    —  To provide competition for older medicines produced by originator pharmaceutical companies, thus offering a commercial impetus for them to research truly innovative new chemical entities against which generic medicines cannot compete during the period of patent protection.

  2.  These principles have been adopted and endorsed both by the European Commission, and the UK Government. However, the launch of generic equivalents to branded products does not always take place immediately following expiry of the patent protection enjoyed by the brand. In some cases, this may be due to technical or scientific issues.

  3.  In others, however, it can be due to a failure of the policy and legislative framework within which the generic pharmaceutical industry must rightly operate, and this failure may be subject to influence exerted by the originator branded pharmaceutical industry. Clearly, if originators are able to delay the launch of generic versions of their products, they extend the commercial life of them.

  4.  We believe that the Government should be more alert to activity undertaken to produce this "evergreening", and act in a more concerted and joined up way to prevent it happening. Only in that way will the Government ensure that the NHS fully benefits from the reduction in the prices of medicines brought about by generic competition.


  5.  The BGMA is the representative trade body of the manufacturers and suppliers of generic medicines in the United Kingdom. Our members are: APS/Berk (Teva), Alpharma, Crescent Pharma, Dr Reddy's Laboratories, Generics UK (Merck), Genus Pharmaceuticals (Stada), IVAX, Kent Pharmaceuticals, Ranbaxy, ratiopharm, Rosemont, Sandoz and Sterwin (Sanofi).

  6.  We believe that our membership accounts for more than 80% of the supply of generic medicines in the UK.


  7.  A generic medicine is one that contains the same active ingredient as an original branded product. It is subject to the same regulatory standards of safety, quality and efficacy as the original brand; and, before being marketed in the UK, must similarly receive a marketing authorisation from the Medicines and Healthcare products Regulatory Agency (MHRA).

  8.  However, rather than having unnecessarily to reproduce data relating to preclinical and clinical trials as with an originator product, a generic manufacturer instead needs to demonstrate that the generic product is essentially similar to the original brand in terms of its effect on the patient. This not only avoids the need for unnecessary trials on animals and humans, but reduces the research and development costs involved in bringing a generic medicine to the marketplace.

  9.  Under current UK legislation,[65] a generic manufacturer may make a so-called abridged application for a marketing authorisation to the MHRA, based on demonstrating "essential similarity", 10 years after the commercial launch of the original product.[66] Once the MHRA has issued a marketing authorisation, the generic medicine may be launched, so long as any relevant patents on the original brand have expired. It may take two years or more to develop a generic version of an original brand.

  10.  Thus, after the expiry of the patent or patents covering an original branded medicine, there are a number of versions of that medicine in the marketplace: the original brand, and any number of generics, depending upon the number of generic manufacturers that chose to launch the product. Under a community pharmacist's terms of service, the pharmacist must dispense the brand if the GP writes a prescription for the brand; but a prescription written generically may be met by the generic or the brand (since the two are equivalent and thus interchangeable). In the latter case, however, the community pharmacist is reimbursed at the lower generic price, even if the brand is dispensed.

  11.  The reimbursement price of a branded medicine under the NHS is directly related, and can be close to its market price. Market prices are only indirectly regulated by the Department of Health under the Pharmaceutical Pricing Regulation Scheme (PPRS), which sets a limit on the overall profit that members of the Scheme are able to make. The PPRS takes account of the very significant research costs borne by the branded sector and also provides allowances for promotional and advertising activities.

  12.  Because there are typically a number of suppliers of most generic medicines, the market price paid by community pharmacists and wholesalers is set by competition between generic manufacturers. Different generic manufacturers compete largely, but not wholly, on the basis of the price of their products.[67] The reimbursement price paid to community pharmacists by the NHS (the Drug Tariff price) is determined on a monthly basis by the Department of Health and is based upon a weighted average of the list prices of five suppliers (three generic manufacturers and two wholesalers, the latter contribution being weighted double: ie, manufacturers provide three sevenths of the prices taken into account, and wholesalers four sevenths).

  13.  Competition naturally drives down prices and, according to the latest published Department of Health statistics, generic medicines account for 55% of prescriptions dispensed, at a cost of only 24% of the drugs budget. On this basis, if there were no generics available, and all medicines paid for by the NHS were priced at the average cost of brands today, the drugs bill would increase by over £5 billion.

  14.  [In fact, we believe that the savings due to generics could be significantly greater than this because the current reimbursement price does not fully reflect discounts from list prices that are offered by generic manufacturers. With others, we have been working with the Department of Health to agree a more realistic reimbursement scheme which will ensure that the NHS fully benefits from the savings due to generic medicines.]


  15.  It is clear, therefore, that any delay in the launch of a new generic after expiry of the patent or patents on an original brand is potentially very expensive for the NHS. We set out below some recent examples of where delay has been caused, at least in part due to the influence or actions of the originator branded pharmaceutical industry.

  16.  In many cases, the delay is due to the brand originator changing the active ingredient, formulation or pharmaceutical form shortly before patent expiry. Generic manufacturers will already be well down the road of developing generic versions of the original product. Launch of the changed version of the brand often leads to GPs prescribing the new version—particularly if the originator has withdrawn the first version from the market—and thus there is no market for the generic under development.

  17.  Developing the revised version may take another two years or more, delaying generic launch by that period. Alternatively, the brand originator may claim data exclusivity on the revised form, delaying generic launch by 10 years (though the recently adopted revised EU pharmaceutical legislation limits the scope for this in future).[68]

  18.  In making these points, we must make clear that we do not seek to undermine the legitimate rights of the originator sector, nor criticise them for making the most of available opportunities to extend the commercial life of their products, especially where real benefits are given to patients and are cost-effective. However, it is crucial for everyone concerned in the NHS, not least patients, that the creative energies of the originator pharmaceutical companies are directed to researching and developing new medicines, which will become generic medicines in due time, rather than working to extend the commercial life of their older products and reducing the headroom created to pay for true innovation.

(i)  Chiral switching (Example: Omeprazole/Esomeprazole)

  19.  Most commonly used drugs are administered as 50:50 mixtures (also know as racemic) of enantiomers, a type of optical or stereoisomers. These are left-handed and right-handed 3-D forms of the same molecule. The originator company usually first markets its product as a racemic mixture.

  20.  With a view to evergreening or extending the return on the originator product and delaying generic competition, it has become a common strategy for originator companies to develop and market different mixtures of, or single isomer forms of the original product, and gain extra patent and other intellectual property protection on the new product. These invariably have no or only marginal therapeutic benefit to patients over the first originator product. Where these new products are introduced, changes to prescribing habits are promoted further restricting the market for the previously available form.

  21.  In this case, the originator sought to establish a distinct identity for the single isomer version by obtaining a marketing authorisation for it to be used at twice the strength of the original product (40mg for indications where 20mg was traditionally used and 20 mg where 10mg was used).

  22.  Marketing to GPs to prescribe the single isomer version undermined the market for generic versions of the original form which had been developed ready for launch.

  23.  Issues surrounding the introduction of esomeprazole are currently the subject of a competition inquiry by the European Commission.

(ii)  Switching to active metabolite (Example: Loratadine)

  24.  Originators can also switch the active metabolite, potentially to the more active isomer.

  25.  The withdrawal of loratadine and its replacement with desloratadine prior to patent expiry similarly meant that there was no market for generic loratadine once it became available since GPs had changed to prescribing the new form, desloratadine.

(iii)  Different formulations (Examples: Doxazosin and Mirtazapine)

  26.  In this case, different formulations are marketed, usually based on sustained release technologies. Historically, they were marketed alongside the original brand but increasingly they are replacing the original product.

  27.  Just before patent expiry the originator marketed a sustained release version of doxazosin and discontinued the corresponding strength of the conventional product.

  28.  Just before patent expiry the originator marketed a soluble version of Mitazapine (Soltab) and discontinued their tablet form.

  29.  In each case, prescribing patterns changed so that there was a reduced market for the generic.

(iv)  Different presentations (Example: Ramipril)

  30.  Ramipril was licensed and sold in the UK as a capsule. Elsewhere in Europe, it was presented as a tablet. The patent expired on 9 January 2004, at which point generic manufacturers were ready to launch Ramipril capsules.

  31.  The originator attempted to withdraw the capsule form in the UK, intending to replace it with the tablet form, to be sold at the same price as the capsule. The originator contacted all major wholesalers and retail suppliers informing them that capsules would be replaced by tablets with effect from 3 November 2004. A large number of GP prescribing computer systems were also changed to list and print prescriptions for the tablet form and not for capsules. Pharmacists would be required to dispense tablets if that form was specified on the prescription.

  32.  If action had not been taken there would have been very little or no market for Ramipril in the capsule form, when patent expiry took place in January 2004, if the majority of prescriptions had required the tablet to be dispensed. It would have taken generic manufacturers two or three years to undertake from scratch the development work for the tablet form, and gain authorisation from the MHRA.

(v)  Different salts (Example: Amlodipine)

  33.  Medicinally active chemical entities are commonly insoluble in water and are therefore manufactured in salt form to increase solubility. One of the decisions of the recent European Pharmaceutical Review was that a generic may be based upon a different salt than that of the brand if the products can be shown to have the same safety and efficacy profile. This is logical given that it is the medicinally active chemical entity that provides therapeutic benefit to patients.

  34.  The Amlodipine base is not water soluble, and must therefore be manufactured in salt form. The brand is manufactured as amlodipine besilate. Other salt forms include amlodipine maleate and amlodipine mesilate. Generic versions are based upon these latter two salts since, although the patent on the amlodipine base expired on 7 March 2004, there is a further patent on amlodipine besilate which does not expire until 25 March 2007.

  35.  The originator company wrote to GPs, in March 2004, advising that alternative salt forms were not identical to the brand (amlodipine besilate), despite the European Medicines Evaluation Agency having confirmed that the two salts were equivalent in adjudicating upon two arbitrations. In parallel, many of the GP prescribing software packages automatically produced apparently "generic" prescriptions for amlodipine besilate (ie, the brand) due to the generic description entered in the product's Summary of Product Characteristics by the originator.

  36.  We are still working to ensure that GPs' software produces a generic descriptor when desired by the GP that is salt neutral and allows all forms of amlodipine to be supplied by a pharmacist.

(vi)  Costs of delays

  37.  We have calculated below the potential cost over one year to the NHS should these circumstances lead to a delay in the onset of generic competition. In doing so, we have used two hypotheses: first, that the generic would take 50% of the market, and reduce market prices by 50%; and, secondly, that the generic would take 75% of the market and reduce market prices by 75% (the latter being more normal).


Product name
Market value
before patent
50% becomes
generic and
50% price drop
NHS annual
75% becomes
generic and
75% price drop
NHS annual




  38.  The generic industry is facing growing difficulties in launching new products due to the increasing number of patents on very minor or marginal changes to pharmaceutical products. There is evidence that this could become the principal obstacle facing the industry. As an example, in the year 2000, the US Patent Office granted 6,730 pharmaceutical patents whilst the US Food and Drug Administration only registered 27 new chemical entities.

  39.  This growing global trend has the effect of delaying the entry of new generic products, and allows the originator industry to reap continuing benefit from its older products. This not only keeps the cost of medicines unnecessary high, but reduces the incentive on the originator sector to develop truly innovative new chemical entities.

  40.  We believe that more should be done to simplify current patent structures, and to ensure that the growing trend of establishing numerous patents on superfluous aspects of medicines for the sake of prolonging market exclusivity should not be allowed to become common practice in the UK and the EU. This is particularly important in the light of the newly adopted EU legislation on the enforcement of intellectual property protection.


  41.  We are also concerned about the way in which branded and generic medicines are treated under the Government's approach to reimbursement. This allows the branded sector to use the flexibility it enjoys under the PPRS to compete with generics in the post-patent market in a way that is unfair and which lessens the cost savings that the NHS would otherwise enjoy as a result of generic competition.

  42.  Under so-called "brand equalisation", the brand originator sells a proportion of his product at the generic market price, thus allowing pharmacists to dispense a branded product against a prescription written and reimbursed generically without suffering any commercial disadvantage. Branded companies may similarly be able to "balance" prices across their patented and non-patented portfolio to gain a greater market share in segments of the market where they face the greatest competition, such as primary care. Notwithstanding the restrictions placed on modulation in the current PPRS, branded companies are able to manage the pricing of the portfolios in this way.

  43.  We believe that this form of competition acts against the interests of the taxpayer and patients, as well as those of the generic pharmaceutical industry. At a time when the Government intends to change the way in which generic medicines are reimbursed, we believe that it is crucial to ensure that the current competitive balance between true generics and off-patent brands is not tilted in favour of brands.

  44.  Indeed, we believe that it is essential that the Government ensures that the impact on this competition is properly assessed in the light of its proposals to amend the generic reimbursement scheme, and as part of its consideration of changes to the PPRS. This is apparently not being done.

  45.  We believe that the current scope of PPRS does not reflect the operation of the marketplace, and is thus wrong. As we have commented above, off-patent brands and generics compete in the marketplace to meet prescriptions written generically. Broadly, the PPRS applies to brands and the generic reimbursement system to generics. These are not, however, two distinct markets. Rather, there is an on-patent market and an off-patent market. The Government's schemes for managing the price of medicines to the NHS should reflect this market reality.

  46.  For on-patent markets, competition takes place in the doctor's surgery. Brand originator companies market their products to encourage doctors to prescribe their brand. (Even if doctors prescribe an on-patent medicine generically, only the brand will be available.) For products still under patent, therefore, there is no competition outside of the doctor's surgery: once the prescribing decision has been taken, they enjoy a monopoly in the marketplace.

  47.  Once a product's patent has expired, however, the scope of competition normally increases dramatically. If the product is prescribed generically, the prescription can be met by a generic medicine, typically manufactured and marketed by a number of competing companies, or by a brand. There is, therefore, usually very considerable competition at pharmacy (and wholesale) level. However, if the brand originator succeeds in persuading doctors to continue to prescribe the brand after patent expiry, no price competition exists at pharmacy or wholesale level.

  48.  We believe that these features of the marketplace under the current twin systems of price regulation (the PPRS and the generic pricing in the Drug Tariff) act against the interests of the NHS and the taxpayer. We believe that the market would be more competitive and more dynamic, and more closely meet the public policy principle of "headroom", if one form of price regulation—the PPRS or its successor—were to apply to the on-patent market, and another—the proposed revised generic reimbursement scheme—to the off-patent market.

  49.  We have urged the Department of Health to seek to renegotiate the PPRS along these lines.


  50.  The Department of Health has from time to time intervened to ensure that the launch of generics, and the benefit that that brings for the NHS, is not delayed and is fully realised. That intervention has, however, been sporadic and ad hoc. There has, further, been little co-ordination between the different government agencies involved, and external suppliers to the NHS.

  51.  We believe that, if the NHS is to achieve the maximum benefit from generic competition, the Department needs to take a more holistic approach. We have raised these issues with them and are confident that they will respond positively. We should, however, very much welcome the Committee's endorsement of this view.

16 August 2004

65   Changes to the detail but not the principle are due to be implemented next year. Back

66   It is open to a generic manufacturer to make a different form of application before the expiry of this ten-year period of "data exclusivity" by undertaking its own preclinical and clinical trials; but an abridged application under which the MHRA compares the similarity of the generic with the data submitted by the brand originator in support of its application is the normal way of bringing a generic to the market. Back

67   Other competitive factors include quality of service, range of products available, customer loyalty schemes, etc. Back

68   See footnote 2 for an explanation of "data exclusivity". Back

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