NAO investigates generic price hikes

An unexpected increase in wholesaler margins and a fall in the value of sterling are some of the factors cited in a National Audit Office report as potentially contributing to the “unprecedented rise” in spending on generic medicines seen in 2017/18, which the Pharmaceutical Services Negotiating Committee says led to pharmacies being “caught in the middle”.

The NAO report looks into the possible causes of and response to the price hikes that led to a dramatic rise in the number of requests from pharmacies for concessionary prices – from less than 150 a month prior to May 2017 to a peak of 3,000 in November 2017.


The NAO estimates that clinical commissioning groups (CCGs) spent £315 million on concessionary priced medicines in 2017/18 (i.e. over what would have been spent had Drug Tariff prices applied) – seven times greater than the concessionary spend in 2016/17. According to NHS England, this issue contributed to the unaudited end-of-year deficit of around £250 million among CCGs.

The cost of obtaining some medicines increased more than tenfold, says the NAO. For example, atypical antipsychotic quetiapine 100mg tablets had a peak concessionary price of £113.10, compared to a previous Drug Tariff price of £1.59.

These pricing issues led to the Department of Health and Social Care receiving reports of pharmacies struggling to obtain certain medicines, though the NAO says it does not know how many patients experienced difficulties with having their prescriptions fulfilled.

The report notes the PSNC’s concerns that the pricing difficulties came about at a time when pharmacies were already struggling to cope with reduced funding, and that there was uncertainty as to whether pharmacies would be reimbursed at the higher prices at which they were dispensing medicines.

PSNC chief executive Simon Dukes has said that pharmacies were “caught in the middle of the many factors at play, working extremely hard to obtain medicines as quickly as possible for the patients who needed them.”


The DHSC has identified a number of factors that may have contributed to the price increase. These include some manufacturers having their licenses suspended and a fall in the value of sterling, as well as downward pressure on generic prices in other countries leading to higher prices within the UK market. However, the NAO report stresses that these factors cannot be fully verified or quantified.

The Department has also identified increases in manufacturers’ prices and an unexpected growth in wholesalers’ margins in 2017, which it says it cannot fully explain. The NHS will not be able to get this money back, the NAO report says.

An estimated £86.3 million worth of concessionary prices granted that were set higher than necessary above wholesaler prices is expected to be recouped through reimbursement mechanisms in the coming years.


Measures that were taken to combat the problem included permitting one manufacturer whose license was suspended to supply certain medicines considered critical, and releasing supplies of one cancer drug from a centrally held emergency stockpile.

From July 2018, the DHSC is expected to have new powers allowing it to control generic medicines prices and obtain information from manufacturers and wholesalers. The new legislation will see mandatory information-sharing arrangements introduced.

The NAO reports that in February 2018 NHS England advised CCGS to assume for planning purposes that high levels of concessionary pricing would not persist in 2018/19.

RPS: We must have greater stability in generic prices

RPS England board chair Sandra Gidley said: “This NAO investigation brings clarity to an issue which has hit community pharmacists hard over the past year. Many have found themselves out of pocket and experienced problems with their business operations. This has been a double whammy as it comes on top of the community pharmacy cuts and we are past the stage where community pharmacists can prop up the health service out of goodwill.

“Community pharmacy plays an important role in negotiating the prices of medicine reimbursed by the NHS. Pharmacists do such a good job in fact that the UK is in the lower half of the EU15 countries for spend on medicines.

“Every day, community pharmacists are ensuring that patients receive their medicines promptly. Medicines shortages and fluctuating prices mean that pharmacists have to devote more time to track down supplies for their patients in what is already a highly pressured environment.

“This frequently occurs ‘behind the scenes’ without patients being aware and so goes unrecognised. However, it prevents many patients from otherwise having to go back to their doctor, so saving the NHS time and money by preventing unnecessary GP appointments.

“The financial value of this work is enormous. A 2016 report commissioned by the Pharmaceutical Services Negotiating Committee found that ‘community pharmacies’ interventions on drug shortages result in an estimated annual cost saving to the NHS of £53.2 million and an overall contribution to wider society of £92.4 million.’

“We must have greater stability in generic prices – without it pharmacists struggle, CCGs are left in debt and patients suffer.”

NPA: The coming clawback will add insult to injury

Andrew Lane, chair of the NPA’s policy and practice committee, said: “Independent pharmacy contractors have had a torrid time because of increased generic medicines prices.

“We have displayed professionalism and great patient care by continuing to supply patients promptly – dispensing in good faith every time with the hope that we will be paid adequately for the items dispensed.

“Pharmacists have put patients first throughout all this, spending many extra hours hunting down supplies, to ensure continuity of therapy is maintained.

“Most independents cannot buy bulk stock in advance, so are particularly vulnerable to price instability.“At a time of deep cuts in pharmacy remuneration, the uncontrolled and unpredictable purchase costs hiked up working capital and many pharmacies have had to seek overdrafts at higher than normal costs.

“It adds insult to injury that independents will face a clawback of profits there were unlikely to have made in the first place, as clawback is applied evenly across the contractor network. Smaller pharmacy contractors will yet again get squeezed form both ends.

“Lessons must be learned from this difficult period and pharmacists must be better supported to maintain a quality medicines supply service.”

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