Price increases for generic medications Contents

Conclusions and recommendations

1.The NHS had to spend additional money, time and effort, for those generic medicines affected by the price rises in 2017, to make sure patients got the medicines they needed. Where pharmacies have trouble buying a generic medicine at the normal reimbursement price, the Department can agree to pay a higher price temporarily. In 2017–18, NHS England spent an additional £315 million to fund higher prices for generic medicines, seven times higher than the previous year. Some of these medicines were in short supply during the year and the Department took action to maintain the supply. For example, it released a cancer medicine from its stockpile of essential medicines during 2017–18 to ensure that the medicine remained available to patients. While no instances of patient harm have come to light, we were concerned to hear about the frustration and distress some patients experienced, and the extra efforts that pharmacies had to make to get medicines that were in short supply. The manufacture of medicines relies on importing ingredients from outside the UK. The UK’s exit from the European Union therefore poses further challenges to the supply of medicines, particularly for medicines with a short shelf-life.

Recommendation: The Department should, by December 2018, share with the Committee its plan for maintaining the supply of medicines pre- and post- the UK’s exit from the European Union, and confirm how it will ensure that patients will be able to obtain the medicines they need.

2.There were clear signs that prices of certain medicines were increasing from June 2017, but the Department failed to take any action to manage costs until November. Before June 2017, on average the Department agreed to pay higher reimbursement prices for 26 medicines a month. In June this increased to 38 medicines and continued to rise, peaking at 91 in November. The Department told us it became aware of the price rises in summer 2017 but did not have the information it needed to take action. For the financial impact of the price rises, the Department relied on NHS England to alert it, which in turn relied on clinical commissioning groups. The Department will depend on this same process to take action should future pricing issues arise. We heard from a pharmacy representative that rumours about stock shortages during 2017 may have exacerbated the supply issues due to panic-buying. Although better information is available to GPs, clinicians in hospitals generally do not know the price of the medicines they prescribe, meaning they cannot make fully informed decisions about what they prescribe or understand the influence of their prescriptions on the budgets of their pharmacies.

Recommendation: The Department and NHS England should, by December 2018, establish clear and timely information flows between each other and local bodies to identify and inform about generic medicine supply and/or pricing issues, and write to the Committee to explain what they have done to ensure this. These information flows should include how clinicians can obtain greater transparency of the price of the generic medicines they prescribe.

3.The price rises for certain generic medicines during 2017 contributed substantially to clinical commissioning groups’ end-of-year overspend. Clinical commissioning groups ended 2017–18 with an overspend of around £250 million. NHS England attributed the majority of this overspend to the unexpected price increases in generic medicines. The Department told us that, overall, spend on generic medicines did decrease slightly in 2017–18, which it put down to clinical commissioning groups making savings on other areas of spending on generic medicines. It told us that it expects clinical commissioning groups to manage cost pressures within their allocated spending levels for the year. However, NHS England has advised clinical commissioning groups that they should not budget for similar pricing pressures in 2018–19.

Recommendation: The Department and NHS England should, by December 2018, release updated guidance to clinical commissioning groups that sets out their contingency plans to mitigate the financial impact on clinical commissioning groups if there is a repeat of these unforeseen price increases.

4.The Department has not yet set out how it will use its new powers, should similar prices rises happen again. The price increases happened at a time when there were ongoing concerns about the generics market, with recent investigations by the Competition and Markets Authority into instances of suspected anti-competitive behaviour by generic medicines suppliers. The Department has acquired new powers, under 2017 legislation and new regulations published in 2018, to collect information about the market for generic medicines. The legislation also removed a loophole through which some suppliers of generic medicines were exempt from existing price control powers, which allow the Secretary of State to step in and limit prices. However, the Department did not tell us the full range of actions it could use, beyond the collection of information, to address similar price rises in the future. The Department recognises the challenge it faces in getting right the implementation, and making the best use, of its new powers to gather information, identify issues in the generics market, and control price where needed.

Recommendation: The Department should, by December 2018, write to the Committee to set out the full range of actions it can take to address rises in the price of generic medicines, and what skills and capacity it has put in place to use its new powers.

5.We are yet to be convinced that the Department’s new powers, and accompanying regulations, are sufficient to enable it to act effectively should similar price rises happen again. The regulations introduced in 2018 make it mandatory for companies to provide quarterly information on the medicines they sell. They also give the Department the right to request additional information within two days if it thinks there are issues with the supply or pricing of medicines sold by that company. However, the new regulations allow companies to give “reasonable estimates” of how much they buy and sell medicines for in some cases, rather than actual figures, limiting the accuracy of the information available to the Department. Companies are also required to notify the Department if they intend to stop supplying a medicine, or they expect a supply shortage. But this only applies if the company itself judges that its actions will affect patients, and does not give the Department any control over which medicines companies notify it about. We also raised concerns about the high prices the NHS has paid for ‘specials’, which are medicines prepared to meet the needs of individual patients. However, the regulations only enable the Department to collect routine quarterly data on a minority of these medicines.

Recommendation: The Department should, by September 2019, ensure that the first annual review of the regulations includes an assessment of how well the provisions for companies providing estimates and notifying the Department of an impending shortage are working, as well as the application of new information collection powers to ‘specials’ medicines.

Published: 12 October 2018