A new independent report by economics consultancy Oxera has underlined the critical importance of the UK generic medicines sector and how, via free competition, it provides sustained and significant savings to the NHS creating greater patient access.
The UK pharmaceutical industry, and in particular the generic medicines segment within it, has grown significantly in recent years. NHS prescription data shows that the number of generic prescriptions fulfilled by community pharmacy in England has doubled between 2005 and 2017 from 415m to 824m.
This represents an increase in the share of generically dispensed prescriptions from 59% to 75% and compares very favourably to the OECD average of 52%. Despite accounting for the vast majority of medicines being prescribed, generics accounted for only 28% of NHS spending on drugs at reimbursement prices which are approximately double those charged by manufacturers.
The British Generic Manufacturers Association (BGMA) - the trade association representing 85% of generic medicines supply in the UK - commissioned Oxera to undertake an independent study to assess the effectiveness of the generic medicines market in the UK in terms of delivering benefits for patients and the NHS.
The in-depth study used a mixture of qualitative interviews and quantitative data analysis. For the first time, the report compared actual sales prices charged manufacturers - the price before margins for pharmacy, wholesale and distribution costs have been added. The analysis showed that average actual manufacturer selling prices for readily available generics are typically around half the Drug Tariff or reimbursement price - the cost that the NHS pays for a medicine.
The Oxera analysis, which focused on primary care and sales of medicines through community pharmacies, concluded that the market for the supply of generic medicines in the UK is functioning well and delivering significant price reductions following loss of patent exclusivity from originators.
Other conclusions included:
Report author Dr Avantika Chowdhury, a partner with Oxera said: “Overall, our assessment of the available evidence indicates that the regulatory and market mechanisms that are currently in place for the supply of generic medicines in the UK are fit for purpose and operate well in general, with prices comparing favourably to those in other countries of a similar nature.
“The UK regulatory systems provide strong incentives to all key players to encourage generic medicines use, in particular doctors and pharmacies who are incentivised to dispense the lowest price product. This in turn creates strong incentives for generic manufacturers to offer low prices for securing volume. This pressure on generic prices is supported by the regular revisions (typically, reductions) of the Drug Tariff price which is used to reimburse pharmacists.
“The above assessment is supported by the cross-country comparison which indicates that the higher prices of some other European countries relative to the UK is likely to be driven, to a large extent, by the relevant national regulations.
“Notwithstanding, specific products may need a higher level of intervention to ensure that prices are fair and reasonable and patients are getting the value of generic medicines. In such cases, it is necessary to consider the nature of intervention in the context of the specific product features to avoid potential unintended consequences.”
The report also analysed some of the strategic and commercial decisions made by manufacturers ahead of generic launch which includes commercial expectations; factors specific to an individual molecule as well as the cost of research and development.
The report also concluded that other factors such as portfolio fit can also be important depending on the business model of the company in question. For example, large companies producing a wide portfolio of products will attach importance to the fit of new product with existing portfolio even if stand-alone profitability is low.
Other issues included:
Warwick Smith, Director General of the British Generic Manufacturers Association, said: “This study validates the effectiveness of the UK generics market which has for many years delivered significant price reductions to the NHS and widened patient access following loss of patent exclusivity.
“Manufacturers selling prices are among the lowest in Europe and this report demonstrates the robustness of having a competitive market model with multiple suppliers and the ability to respond quickly to supply and demand conditions.
“It also shows the long-term effectiveness of the market and that even in circumstances where prices do rise, they are largely dissipated by increased supply within a relatively short time frame.”
The report examines where intervention in the competitive market may be appropriate and the factors which need to be considered.
Principal areas for focus included:
For further information contact Jeremy Durrant on 02078667883 / 07792918648 or email Jeremy.firstname.lastname@example.org