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Law to cut the cost of generic drugs

Can legislation to close a purchasing loophole reduce the NHS medicines bill?

A law that gives the government better control over the cost of drugs is expected to save NHS England £88m a year.

Before the Health Service Medical Supplies Costs Act came into force, the Health Secretary controlled the price of branded medicines through the voluntary pharmaceutical price regulation scheme (PPRS), under which companies pay the Department of Health based on sales to the NHS. However, companies that do not join the PPRS use a statutory scheme, which allows them to sell to the NHS at a mark-down down from their list price.

Companies have been switching patent-expired drugs over from PPRS to the statutory scheme and then increasing their listed price in an effort to preserve profits. The government relies on market forces to keep the prices of generics down, but where there is no competition companies are free to increase prices.

The new act will allow the Health Secretary to apply the same price controls to both schemes and to act on price increases. It will also force those who manufacture, distribute or supply drugs and medical items to disclose prices to the government.

The British Generics Manufacturers Association has called for more transparency and warns that interfering with the system may increase prices and have a negative impact on supply.

Further information

British Generic Manufacturers Association: Bill provides department with powers to implement pricing agreement with BGMA

Department of Health: Health Service Medical Supplies (costs) Bill factsheet

King’s Fund: How much has generic prescribing and dispensing saved the NHS?