DoH publishes generics reimbursement proposals

The Department of Health has published its long awaited proposals for a new system of reimbursing cost and supply of generic medicines for the NHS (See below).

Following widespread consultation with the industry, the DoH claims the proposals should provide a long-term basis for the reimbursement of generic medicines that will deliver reasonable prices for the NHS and a fair return for the generic supply chain. They would replace the maximum price scheme introduced in 2000.

The NHS spends more than £1 billion on generic medicines in primary care each year. Seventy six per cent of prescriptions were written generically in 2002, with over 53 per cent of scripts dispensed generically that year

Generics proposals outlined

Key points include the proposal that prices at which pharmacy contractors are reimbursed would be linked to prices charged by manufacturers and information from manufacturers would be used to calculate the volume weighted average price.

For example, if the average ex-factory price of one medicine is 25 per cent more than another, the reimbursement price would also be 25 per cent higher.

It is also proposing there should be incentives for pharmacies to benefit from procurement decisions where these also benefit the NHS.

The document is also proposing that if there are a limited number of manufacturers of a generic medicine (for example less than two or three) or the supply is concentrated (with one manufacturer supplying 40 per cent of the product to market), manufacturers would be required to seek the Department’s agreement to any price increase.
However, in certain cases manufacturers would be able to alter the price at which the generic medicine is sold to wholesalers or dispensing contractors without any prior requirement to discuss such changes with the Department of Health. The DoH is as yet undecided on what these cases may be.

Manufacturers and wholesalers would be required to submit quarterly information for generic medicines on their income revenues, cost of purchases and volumes of transactions, although how this would be policed is also unknown.

In addition, manufacturers could decide prices of new generic products at their discretion following the granting of a marketing authorisation, provided the Drug Tariff price was less than the equivalent branded medicine.
However, at the same time the DoH is considering provisions that would prevent companies exploiting this freedom, although these criteria too have not been clarified yet.

For more information:
www.doh.gov.uk/generics
www.britishgenerics.co.uk

New proposals for the supply of generic medicines

Final proposals for a new system of reimbursing the cost and supply of generic medicines for the NHS were published today by the Department of Health.

The NHS spends over £1 billion on generic medicines - those without a brand name - in primary care each year.

Following wide spread consultation with the industry, these new proposals should provide a long term basis for the reimbursement of generic medicines that will deliver reasonable prices for the NHS and a fair return for the generic supply chain. They would replace the maximum price scheme, introduced in 2000 following concerns raised over costs and availability of generic medicines.

Health Minister, Lord Warner said: "Generic medicines play a crucial part in NHS treatment. The new system is aimed at securing better value for money for the health service and ensuring a reliable supply of medicines for patients. The aim of the scheme is to prevent the NHS paying too high a price for generic medicines.

"Since the conclusion of the last consultation we have considered all the representations put to us and had lengthy discussions with the
representative bodies of the manufacturers of generic medicines, pharmaceutical wholesalers and community pharmacies.

"We are now ready to set out the reimbursement arrangements which we think should be introduced in England for generic medicines. However, we are are still concerned that those most closely involved - manufacturers and suppliers, community pharmacists, others in the NHS and patients - continue to contribute to the discussion. Once agreed, the scheme would be introduced in April 2004."

Key proposals include:

· If there are a limited number of manufacturers of a generic medicine or the supply is concentrated, manufacturers would be required to seek the Department's agreement to any price increase.

· Manufacturers and wholesalers would be required under the arrangements to submit quarterly information for generic medicines income revenues, cost of purchases and volumes of transactions.

· New generic products, introduced following the granting of a marketing authorisation, could decide prices at the discretion of the
manufacturer(s) upon entering the market provided that the drug tariff was less than the equivalent branded medicine. At the same time, the Department may consider provisions that would prevent companies exploiting this freedom to their advantage.

· The prices at which pharmacy contractors are reimbursed would be linked to prices charged by manufacturers.

· There should be incentives for pharmacies to benefit from procurement decisions where these also benefit the NHS.

· In certain cases, manufacturers would be able to alter the price at which the generic medicine is sold to wholesalers or dispensing
contractors without any prior requirement to discuss such changes with the Department of Health.

(10/9/03)