The Pharmaceutical Journal Vol 264 No 7094 p642
April 29, 2000 News

Government to scrap Category D and impose generics price cuts

The Government is planning to scrap the Category D system for reimbursement of medicines in short supply and to impose statutory maximum prices for most generic products. Prices will be cut to the level of 15 months ago. Announcing consultation on the proposals, Lord Philip Hunt (Parliamentary Under-Secretary of State for Health) said on April 20: "I am determined that the National Health Service will not be ripped off. Prices will be reduced to their average level over the period from November, 1998, to January, 1999. This will correct the effect of the steep price increases last year which are likely to cost the NHS around £200m." The Government is to use its powers under the Health Act 1999 to set maximum prices for around 90 per cent of the generic medicines supplied to the NHS through community pharmacies. It is doing so in response to the shortages and price rises which occurred last year. The Government has already cut prices of branded medicines through the Pharmaceutical Price Regulation Scheme.

Generic price cuts aim to save £200m

The Department of Health is inviting comments on its proposals by May 24. It intends to place regulations before Parliament in June for implementation in July. Changes in prices would take effect from August's prescription.
Lord Hunt said at a press conference in London on April 20 that over the past 15 months the NHS had been let down by the generics market. There had been shortages and steep price rises. Prices had risen by around 45 per cent and had stabilised only recently. Unless the Government acted this would cost the NHS a further £200m this year. At the same time, the Government was awaiting the results of the "fundamental review" of the generics market being undertaken by Oxford Economic Research Associates (OXERA).
Lord Hunt said that the way in which reimbursement had operated under the Category D system had worked well for a number of years. However, the recent shortages had shown that the system could be abused, and this had set in place a chain of events that had led to steep price rises. The system was obviously no longer up to it and had to be replaced.
Asked who exactly was "ripping off" the NHS, Lord Hunt was at pains to absolve community pharmacists. "Community pharmacists have had to work hard to make sure that patients did not suffer as a result of the shortages," he said.
Speaking exclusively to The Journal after the press conference, Lord Hunt said that community pharmacists had been very responsible over Category D. However, if the Government set statutory maximum prices and it was illegal to charge more than these, then the need for Category D would disappear. He would be writing to pharmacy contractors with details of the proposals.
Asked if the Government should not just buy generic medicines for the NHS itself, if it was setting the prices, Lord Hunt said that the Government would have to wait for the results of OXERA's fundamental review and see what was recommended.
Mr Warwick Smith (director, British Generic Manufacturers Association) said in a statement issued on April 20: "We are disappointed that the Government has chosen to act without waiting for the results of the fundamental review, and at a time when manufacturers' prices are falling." British generic medicines were the cheapest in Europe.
Mr Stephen Axon (general secretary, Pharmaceutical Services Negotiating Committee) told The Journal that the only way in which community pharmacists could avoid losing out through price cuts would be to be completely out of stock of all of the main generic lines at close of business on July 31, but fully stocked again on August 1.
Details of the consultation package are available from the Department of Health's website (www.doh.gov.uk/gendcon).