Price increases for generic medications Contents

1Impact on the NHS and the supply of medicines

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Health & Social Care (the Department), NHS England, and the Medicines and Healthcare products Regulatory Agency on spending on generic medicines by the NHS.1 We also took evidence from the Pharmaceutical Services Negotiating Committee (which represents community pharmacies), the British Generic Manufacturers Association, and a Deputy Director of Medical Education from Imperial College.

2.Medicines can be ‘branded’ or ‘generic’. New medicines, generally marketed under their brand name, have patents protected for around 20 years. After this time, other companies can manufacture and market the same medicine under its generic name, usually at a lower price. Generic medicines are medicines which are no longer on patent.2

3.Generic medicines are commonly prescribed by GPs. GP prescriptions for generic medicines accounted for 81% of the total £4.3 billion that the NHS spent on generic medicines in 2016–17. Community pharmacies buy medicines on behalf of the NHS, for which they are then reimbursed. For these generic medicines, the Department’s policy is to rely on competition in the market between suppliers of generic medicines to control their price. The Department does not set the price of generic medicines, but does set the amount that community pharmacies will be reimbursed by the NHS (the ‘reimbursement price’). Clinical commissioning groups pay for these medicines out of the funding they receive from NHS England.3

4.The Department, the British Generic Manufacturers Association, and the Pharmaceutical Services Negotiating Committee agreed that, for most generic medicines, relying on competition in the market to set the prices generally serves the NHS well.4 Research suggests that the UK enjoys comparatively low prices. However, as a purchaser the NHS has relatively limited influence over prices in what is a global market, with the UK making up around 2.6% of the world market value.5

5.During 2017–18, the reimbursement prices of some generic medicines increased substantially. These medicines are used to treat a range of conditions, from high blood pressure to mental health conditions. One example of the extent of the price increases was for a mental health medicine called Quetiapine. The reimbursement price for Quetiapine 100mg tablets reached £113.10 at its peak, compared with a previous price of £1.59.6

Maintaining supply of medicines

6.The Department asserted that it has to balance maintaining the supply of medicines to patients with obtaining a good price for the tax payer. Where pharmacies have trouble buying a generic medicine at the normal reimbursement price, the Department has an established mechanism where it will temporarily pay pharmacies a higher reimbursement price. The Department used this during 2017–18 to allow reimbursement prices to rise at a time when it considered supply was under threat. Its view is that the mechanism to grant a temporary higher price worked, as it avoided patient harm, but came at a financial cost. The NAO estimated the additional cost to the NHS was £315 million in 2017–18, seven times higher than the equivalent spend in the previous year.7 The Department also took other action to maintain supply, including releasing a medicine to treat cancer from its emergency stockpile.8

7.Although we did not receive evidence to suggest that any patients were harmed during 2017–18, we were nonetheless concerned to hear about the frustration and distress some patients experienced in obtaining their medicines. The representative from the Pharmaceutical Services Negotiating Committee (PSNC) told us about one case where a patient could only obtain one week’s supply of their breast cancer drug at a time as the pharmacy could only get limited amounts and had to ration its supplies.9 We also heard about the impact of the price rises on community pharmacies. The PSNC told us of the burden on pharmacies: the extra effort required to get medicines and the actions they took to minimise the impact on patients. This included contacting GPs to suggest an alternative medicine or ways of filling a prescription (e.g. if 20mg tablets had been prescribed and were unavailable, whether they could supply 2 x 10mg tablets), and rationing supplies to patients. It also reported that pharmacies had to dispense medicines not knowing how much money they would get back from the NHS, creating financial uncertainty against a backdrop of reduced government funding to the sector.10

8.The Department told us that the UK’s exit from the European Union is not expected to affect where the NHS obtains its medicines as the vast majority are made outside of the European Union. As the British Generics Manufacturer Association explained, the UK is heavily dependent on active ingredients coming from India and China. However, the Department told us that it is currently looking at how it can mitigate against any supply issues which could arise in response to the UK’s exit from the European Union, for example getting medicines into the country.11 The Department explained that this contingency planning includes looking at more general threats to supply, such as events in other countries. For example, the British Generics Manufacturers Association told us about a previous strike at a port in India affecting supplies of active ingredients used to manufacture medicines which created a shortage. The Department told us that different medicines, for example those with a short shelf-life, require different solutions, so there is no ‘one size fits all’ plan.12 The Department was unable, however, to provide us with any detail of its plans, or to assure us and the public about the supply of medicines in the event of a ‘no deal’ exit.13

Access and availability of information about the market

9.Before June 2017, on average the Department agreed to pay higher reimbursement prices for 26 medicines a month. In June 2017 this increased to 38 and peaked at 91 in November 2017. Clinical commissioning groups alerted NHS England to the increasing price of some generic medicines in July 2017, and NHS England subsequently informed the Department of the financial pressure in September 201714.. The Department told us that this process, where local areas first raise the issue, is the most important trigger for it to take action should future issues arise. Regarding the price increases in 2017, the Department admitted that it began to see prices increasing in the summer, but asserted that it did not know how best to take action because it did not have the information to understand what was happening until the end of October. In November 2017, the Department undertook an investigation and data analysis into the causes of the price increases.15 It attributed the price increases to turbulence in the market arising for a series of events which included two large medicine manufacturers having their production suspended because of quality issues. The Department also identified changes in other countries’ markets causing downward pressure on UK prices and the fall in the value of sterling as contributing factors to the price increases.16

10.We received written evidence from a community pharmacy owner which suggested that many of the shortages in 2017–18 may have been caused by rumours about short supplies. They told us that this created a “self-fulfilling prophecy”, leading pharmacies to buy more stock than normal to get through the period of supposed shortage.17 The representative from the PSNC acknowledged that this does happen but told us that it is not within its remit to ask pharmacies to avoid panic buying.18

11.We asked how doctors are alerted to increases in the prices of generic medicines and how, or whether, they factor in the cost of a medicine into their decisions when prescribing medicines. Imperial College told us that generally hospital doctors do not know the costs of the medicines they prescribe. He told us that he was unaware that the cost of a medicine called hydrocortisone had increased from about £1 a month to £100 a month until he prescribed it for a private patient, who said they could not afford it.19 He told us that for these types of ‘outlier’ medicines, generic medicines which go against the general picture of a low cost and good value market, it would be helpful if clinicians knew the price of the medicine in advance of prescribing it. The PSNC told us that the situation is different among GPs as they have a large amount of data and information available to them, and clinical commissioning groups monitor local prescribing. It also said that community pharmacists, who dispense the medicines GPs prescribe, want better access to information and timelier price data.20

Clinical commissioning groups’ spend on generic medicines

12.Clinical commissioning groups are allocated money by NHS England to pay for medicines for their local population.21 From October 2017, NHS England started including the impact of the price increases on clinical commissioning groups’ budgets in its financial reports, directly linking a forecast overspend by clinical commissioning groups to the price increases. At the time, NHS England described the price increases as a “significant unbudgeted pressure”.22 Following its analysis in November 2017, the Department also realised that it was setting reimbursement prices paid to pharmacies higher than necessary and changed the way it calculated the reimbursement price, reducing the amount the NHS paid. In May 2018, NHS England reported that clinical commissioning groups ended 2017–18 with an unaudited overspend of around £250 million.23

13.The Department told us that overall spending on generic medicines prescribed in the community had decreased slightly in 2017–18. However, clinical commissioning groups still had to spend more money on medicines than they had planned to. NHS England told us that clinical commissioning groups absorbed some of the costs themselves, including using unexpected savings from other parts of their generic medicine budget.24 NHS Clinical Commissioners, a national membership organisation for clinical commissioning groups, submitted written evidence that its members, in responding to the pressures, had to make difficult decisions to try to stay within budget, including reductions in the availability of treatments and services.25

14.In February 2018, NHS England advised clinical commissioning groups not to plan for a continuation of the pricing pressures in 2018–19.26 More generally, the Department told us that it expects clinical commissioning groups to manage these pressures across the year and that there is not extra money in the health system for this. We highlighted, however, that clinical commissioning groups do not have control over the price of medicines.27

1 Report by the Comptroller and Auditor General, Investigation into NHS spending on generic medicines in primary care, Session 2017-19, HC 1122, 8 June 2018