Response to the Public Accounts Committee (PAC) report into price increases in generic medicines

In response to the Public Accounts Committee (PAC) report into price increases in generic medicines, Warwick Smith, Director General of the British Generic Manufacturers Association (BGMA), who gave evidence at the hearing, said: “We have welcomed the Public Accounts Committee’s interest in this area following on from the National Audit Office (NAO) report. Importantly, the PAC report states that patients did not suffer as a result of the shortages and all in the supply chain should be recognised for their efforts in ensuring medicines were delivered. 

“In the wider context, it is important to note the price paid by the NHS for generic medicines is not that charged by manufacturers, but includes distribution costs from wholesalers and the retained margin for community pharmacy which is targeted to be £800m per annum. This means that typically, the reimbursement price of a generic medicine listed in Category M of the Drug Tariff may amount to approximately twice the manufacturer’s actual selling price (ASP).

Indeed, for many of the medicines highlighted in the NAO report and subsequently looked at by the PAC, the manufacturer actual selling price made up a far smaller proportion of the overall reimbursement price charged to the NHS.  In cases where supplies of generic medicines are inadequate, the reimbursement price may well be based on the list price of the branded originator product. 

“Indeed, our own data shows that whilst there was a higher value of concessions in 2017 (£341m in 2017 v £75m in 2016) the actual average reimbursement price (including the effect of concessions) of a pack of generic medicines fell from £2.80 in 2016 to £2.46 overall in 2017. So, even during the period where high levels of concessionary prices were being set by the Department of Health and Social Care, the average cost to the NHS of generic medicines as a whole continued to fall. More widely, generic competition provides clear value for money for the NHS. Looking at all branded products to come off patent since the start of 2014, the introduction of generics saw prices reduce by an average of 89% in this time.

“Like the PAC, we welcome clarification of the Government’s price-setting powers for where competition isn’t working to protect the interests of the NHS. Importantly, the Government will now have full visibility across the full medicines supply chain, including manufacturers, distributors and pharmacies, allowing it better to understand and scrutinise what is happening in the supply chain. 

“We echo the PAC’s call for clarity on the Government’s plans to ensure supply of medicines following the UK’s exit from the European Union next year. We have been discussing with the Government for some time how to ensure that the medicines supply chain continues to operate effectively particularly in the event of a no-deal Brexit. Clearly, the complex nature of the manufacture and supply of medicines in Europe means that they and their constituent parts may cross many borders before reaching patients. A deal between the UK and the EU27 to maintain these free flows is obviously the only way to ensure that the supply of medicines is not disrupted.

“A survey of our own members shows that the vast majority have been actively planning and implementing measures to ensure that the impact of a disorderly Brexit is minimised wherever possible. No-one wants to see delays at the UK’s borders risking the supply of medicines to patients and we still need further clarity from Government on its intentions. As we have consistently said, what is needed to ensure the supply of medicines to British patients is an agreement between the UK and the EU27 to allow the free flow of medicines and their components. Ideally, we want the UK to remain part of the European medicines regulatory environment, or more pragmatically a mutual recognition agreement to be agreed quickly.”