NHS Finance

08.06.18

DH ‘can’t fully explain’ why NHS spent 7 times more money on generic meds last year

Prices of generic medicines purchased by CCGs for primary care have soared sevenfold in the past year alone, yet the Department of Health and Social Care (DHSC) “could not fully explain” the cause of the surge, a new report has found.

Findings from the National Audit Office (NAO) revealed that an increase in selling prices of generic medicine from wholesalers and manufacturers to CCGs has amounted to an additional £315m in costs to the NHS in the last year alone.

Unlike new, patent-protected medicines, pharmacies buy generic medicines from wholesalers who can set their own prices (the DHSC do not set prices on generic medicines). If pharmacies cannot get a medicine at a set price from a wholesaler, they can ask the government to use a mechanism called concessionary prices, which means the government can set a temporary higher reimbursement price for pharmacies.

But in the last year, the wholesale price of generic medicines skyrocketed: total costs for the NHS were seven times greater than the equivalent spend in 2016-17. The costs of some medicines increased by more than 10 times their price the year before. For example, the wholesaler price for quetiapine 100mg tablets was £113.10 last year, 70 times higher than its previous price of £1.59.

The surge in prices set by wholesalers meant there was an “unprecedented” rise in the number of requests from pharmacies for concessionary prices: an increase from fewer than 150 a month before May 2017 to a peak of 3,000 in November that year. In 2016-17, the NHS spent an estimated £4.3bn on generic medicines, which was mostly (£3.5bn) spent on primary care.

The DHSC believe the price increases are related to the suspension of some manufacturers’ licenses and the fall in the value of the sterling, but the NAO claims that the department “cannot fully verify or quantify” these suspicions.

Wholesalers’ margins were also identified as an unexpected increase in the market, the report said: “The department identified increases in manufacturers’ prices, but also unexpected increases in wholesalers’ margins in 2017, which it could not fully explain. The NHS will not be able to get back the expenditure due to the increase in manufacturer and wholesaler prices.”

Meg Hillier, chair of the Public Accounts Committee, said: “The exponential increase in generic drug costs, in some cases tenfold, means money that could have been spent on local healthcare has instead been eaten up in an inflated drugs budget. NHS England needs to make sure this does not happen again.”

Medicines can be ‘branded’ or ‘generic.’ New medicines have patents that are protected for a minimum of 20 years under their brand name, intended to allow pharmaceutical companies to fully conduct and test their research.

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