2The Department’s new and additional powers
15.The Department acquired new powers, under the Health Service Medical Supplies (Costs) Act 2017, to collect information about the market for generic medicines. In 2018, it published regulations (the Health Service Products (Provision and Disclosure of Information) Regulations), which set out what its new powers mean in practice, including what information the Department can collect and under what circumstances. The legislation also removed a loophole through which some suppliers of generic medicines were exempt from existing price control powers, which now allow the Secretary of State to step in and limit prices.28
Implementing the new powers
16.The price increases and supply issues happened at a time when there were ongoing concerns about the generics market. The NAO report summarises some of the Competition and Markets Authority’s recent investigations into instances of suspected excessive and unfair pricing. These included cases where companies had allegedly de-branded a medicine to make it generic and, at the time, no longer subject to price control and then used their market dominance to increase prices unfairly.29
17.We heard from the British Generic Manufacturers Association that there will always be outliers in how much suppliers charge for generic medicines, where competition does not appear to drive down the price, but that a better system was needed to address them.30 The Department told us that the reason it asked Parliament to grant its new powers was because of weaknesses in its information gathering powers and a lack of transparency in the market. As we heard, these weaknesses included a time-lag in the Department receiving information from suppliers, which the Department told us delayed its ability to take action in response to price rises during 2017.31
18.The British Generic Manufacturers Association told us that it expects the Department’s new powers will allow the types of cases which have previously been referred to the Competition and Markets Authority to be resolved much more easily and efficiently. For example, the Department will be able to collect additional information within two days if it has any concerns rather than having to wait three months. The British Generic Manufacturers Association also told us that the Department can use this information to first try to resolve issues, with the option to still refer cases to the Competition and Markets Authority.32 The Department similarly told us that us it expects to use its new powers to spot trends in the prices for generic drugs and investigate what is causing them much more quickly. The Department recognised that its main challenge is now implementing its new powers properly to get the best out of them. It told us that it was committed to ensuring that its powers are used effectively, so that data is swiftly and properly analysed so the Department can take the right action against those who are not complying. However, aside from the collection of information and using this to investigate what is happening, the Department did not tell us the full range of actions it was planning to use.33
Effectiveness of the new powers
19.The new regulations make it mandatory for companies to provide the Department with information on the medicines they sell, replacing the previously voluntary arrangements.34 The Department explained that where it has specific concerns it will be able to request additional information within two days. However, we were concerned to hear that companies are able in some cases to give the Department “reasonable estimates” of how much they buy and sell medicines for, rather than actual figures, potentially limiting the accuracy of the information. The regulations also make it mandatory for companies to notify the Department if they intend to stop supplying medicines, or expect a supply shortage. However, this requirement only applies if a company itself judges that its actions will affect patients, and does not give the Department any control over which medicines companies notify it about. The Department wrote to us after the session to say it was planning to issue further guidance to companies. The Department acknowledged that while the legislation increases its powers it is not the whole answer.35
20.We also raised concerns about ‘specials’: medicines prepared to meet the needs of individual patients, for example in liquid form for patients unable to swallow tablets. Since only a minority of specials have set reimbursement prices we asked the Department what it can do to ensure that pharmacies buy the more cost-effective product. For the majority of specials, pharmacies are instead reimbursed either the price they paid or the cost of the ingredients. The Department told us that it is currently looking at its options to ensure that the NHS pays the best available price for specials and plans to consult on these at the end of the year.36 However, while the Department confirmed that under the new regulations it can ask for additional information about any ‘specials’, we remain concerned that the provision of routine quarterly information collection for ‘specials’ is limited to the minority with set reimbursement prices.
28 C&AG Report, paras 3.13, 3.15
29 C&AG Report, para 3.12
30 Q 47
31 Qq 65, 66
32 Qq 50, 158
33 Qq 65, 66, 118, 119, 124, 158–161
34 Qq 65; C&AG’s Report, paras 3.8, 3.9, 3.15
35 Q 118, 131, 152; Ev XXX Letter from the Permanent Secretary at the Department of Health & Social Care
36 Qq 49, 118, 140–143, 147; C&AG’s Report para 3.14
Published: 12 October 2018