Generic prescription drugs: Are prices excessive?

At a time when the NHS is trying to save every penny without undermining patient care, news has emerged that it is being over-charged in one area of its drugs bill.

This has led the trade body for major pharmaceutical companies, the Association of the British Pharmaceutical Industry (ABPI), to condemn price rises by some small operators for prescription drugs as "cynical and exploitative".

So what's the problem and could more than £250m a year be saved?

An investigation by the Times newspaper has revealed that a small number of businesses have made big profits after hiking prices for generic prescription drugs, including some anti-depressants and skin medications.

There is a deal between the government and major pharmaceutical companies to cap the annual cost of branded drugs still protected by patent. But no such arrangement exists for generic medicines.

There seems to be a particular problem for some older generic drugs when distribution rights have been bought by smaller companies from the pharmaceutical giants.

These cases usually involve low sales volumes and rival companies deciding it's not worth entering the market. The theory is that when a drug "goes generic" there will be competition which drives down prices. But in these situations there is a monopoly.

Given that NHS tariffs (the prices which pharmacists pay for their supplies before getting reimbursed) are set by average market prices for each drug, the suppliers call the shots and the health service has to accept whatever is charged.

Market concerns

The Times investigation revealed an increase for one drug of 12,500% in five years and, for 32 others, a 1,000% rise.

The newspaper estimated this had added £262m to the annual NHS drugs bill. One industry source described it as market failure and told me it was clear there was a loophole which ought to be closed.

The ABPI condemned the pricing revelations, making clear the companies involved were not members and the examples quoted in the report were rare.

The association's Dr Richard Torbett said official intervention was required.

"The government can step in and question pricing decisions and, through the Competition and Markets Authority, has wide powers to regulate and deal with market abuses.

"The ABPI supports this and is in discussion with government about how best to ensure appropriate pricing throughout the system."

NHS England, while acknowledging that in general the system delivers value for money, is clearly anxious for action to be taken by the government.

A spokesman said: "We are concerned about these type of anomalies at a time when the NHS needs to make significant savings which suggests further regulatory action may be needed."

'Urgent' scrutiny

Ministers are aware of the problem and seem keen that the Competition and Markets Authority takes whatever action is needed.

A Department of Health spokesman said: "These are serious allegations and no pharmaceutical company should be exploiting the NHS.

"The secretary of state has asked the CMA to urgently look at the evidence uncovered by the Times as part of their continuing investigations into excessive drugs pricing."

The intent is there. The government and NHS leaders want any loophole allowing excessive charging to be closed.

But how quickly it can happen, allowing for due process involved with CMA investigations, is another matter.

Any delay will cost the health service millions of pounds more at a time when it needs as much cash as possible for frontline care.