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British Generics Manufacturing Association (BGMA)
The BGMA has rejected the HS's suggestion of purchasing generics through competitive tendering as it would lead to shortages and price rises.  The Association also rejects the current maximum price arrangement because the DoH has not made its suggested changes clear.

Government wants changes following the turbulent state of the generics market in 1999 when prices increased by 45% overall together with supply problems.  At present dispensing doctors and chemists have a free choice from where to buy their drugs and reimbursement prices are given in The Drug Tariff.  These prices are based on those of the major manufacturers.   Clawback attempts to eliminate discounts.  The government believes it is not getting value for its money.

Two options have been proposed:  reference based pricing and competitive tendering.

Reference based pricing
The current structure is retained so dispensing doctors may continue to buy from where they wish but the NHS price for each product would be set by government based on the wholesaler's purchase price plus an element to cover distribution.  The dispensing doctor would be reimbursed the set price plus the distribution fee.  It is said there would be regular reviews of prices. and these would be set out on a dedicated web-site.  The Drug Tariff prices would be one month in arrears.   The BGMA prefers this option and it represents 90% of all generic suppliers.   It has been suggested that "short line wholesalers" would be driven out of business leaving the big fish in control.   Pharmacy representatives do not like the suggestion.  Dispensing doctor's representatives, the GPC, have yet to air their views.

Competitive Tendering
In this case the government would give contracts to suppliers for the exclusive rights to supply a fixed volume of the drug at a fixed price.   An obvious deficiency of this is that other manufacturers may leave the market and reduce competition thus increasing prices.  As a way out of this it has been suggested that more than one contract would be going simultaneously but for different quantities of the drug.   Another objection is that those who fail to get contracts will cease trading and again reduce competition.

Distribution of centrally purchased generics
Again two suggestions: in the present way or by giving contracts to wholesalers for the entire supply of each product.   Reimbursement would be according to a new Drug Tariff category, category T.   It would be an average of all the competitively tendered prices plus the wholesaler margin.

The government intends that the contract source should be the source from which all doctors and chemists purchase.  If they find a cheaper source then, in line with this government's autocratic principles, it "will take appropriate measures".

COMMENT
The government's whole objective is to pay less for its drugs - the building blocks of health.  In short, it wants health on the cheap.  However, as in many matters relating to dispensing practice it has not thought through its proposals.

Any measure which reduces the dispensing income of practices reduces their ability to provide first rate general medical services and/or the income of the doctors themselves.   Should this loss be large then it will provide a positive disincentive for dispensing doctors to use generics.  Branded preparations are, almost by definition, more reliable.

As dispensing doctors, being also prescribers, still retain the freedom of whether to use generics or proprietary drugs it would be my advice, should incomes show signs of falling, to switch immediately to proprietary preparations where possible and hang your generic ratio.

PCTs will object to this but they will also object to having to further subsidise poor rural practices.  The case for the switch should be strongly put to the PCT together with a list of services to be cut by the practice should the PCT objection be too strong.

In no way should the practitioner pay for the government's measures from their own pockets.   The DDA Ltd appears to agree with this because it issued a joint statement with the Pharmaceutical Services Negotiating Committee stating there should be no adverse effect on the viability of dispensing services.

(2001)