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The Pharmaceutical Journal Vol 265 No 7126 p844
December 09, 2000 News

No easy answers on generics - OXERA

The fundamental review of the generics market carried out by Oxford Economic Research Associates (OXERA) had shown that there were no easy answers to the problems encountered in 1999, Lord Hunt (Parliamentary Under-Secretary of State for Health) said at the British Generic Manufacturers Association dinner in London on November 29.
Lord Hunt revealed that OXERA had submitted to Ministers a full report on the strengths and weaknesses of the generic medicines supply chain and a set of recommendation for the future. The Government intended to issue a paper setting out options for discussion with interested parties.
"OXERA's detailed work shows that there are no easy answers and this underlines the importance of the discussion process we have in mind. There is no doubt that getting the right arrangements in place calls for constructive engagement by all the interested parties, " Lord Hunt said.

Oxera
Lord Hunt (left) and Andrew Kay

He added that he was keen to maintain momentum on the issue because, under European law, the maximum price scheme put in place earlier this year had to be reviewed by November, 2001. This was a useful target date for developing new arrangements.
One specific point which the problems of the past 18 months had shown was that the Government had little information about how the market for generics was operating. It was necessary to identify where supply might be concentrated in a few hands or where a supply problem at a single company could cause serious difficulties. The Government was to invite bids for a consultancy project to look at how capacity could be improved.
Mr Andrew Kay (chairman, BGMA) said that any new system of reimbursement which was developed as a result of the fundamental review had to achieve five things: it had to be sustainable, stable, transparent, pro-generic and fair.
Any new system had to provide adequate returns for those companies in the market to ensure continuity of supply and the development of new products.
"We do not believe that the historically low prices of generic products in the United Kingdom are sustainable for the industry. A system which relentlessly forces prices down leads to consolidation and reduces competition. It is self-defeating. What we need is a fair price for the full range of products. "
The system had to be able to cope with shocks to the market, avoid anomalies and waste, and reflect reality in its reimbursement.
Mr Kay said that the role of generics in the National Health Service was to create the headroom which allowed for the costs of research into new drug molecules. For example, in 1999, the total drugs bill was around £5bn of which branded products accounted for just over £4bn. However, if there were no generics the total bill would have been £8bn. That was the headroom created by generics.