News: Generics options not viable, says AAH

The Pharmaceutical Journal Vol 267 No 7170 p537-541
20 October 2001

Generics options not viable, says AAH

Two of the proposed options for the future supply and reimbursement of generic medicines (PJ, 28 July, p109), are not viable in the United Kingdom market, and could possibly have severe consequences for pharmacy, according to Dr Mandeep Mudhar, marketing manager at AAH Pharmaceuticals.

Dr Mudhar explained AAH’s response to three options on the future supply and reimbursement of generic medicines — reference-based pricing, competitive tendering and keeping existing arrangements, the first to of which the company believes are not viable. The consultation period for the options ends on 22 October.

In the reference-based pricing option, the Government fixes a price for each medicine and pharmacists purchase (and are reimbursed) for at this price, plus a fixed distribution margin. Dr Mudhar said that major administration and accuracy issues would hamper this scheme. The huge task of supplying information from which prices could be calculated on a monthly basis should not be underestimated. The distribution fee would have to reflect the true costs of full-line wholesaling, with deliveries twice daily and within an hour of ordering, he added.

“Competitive tendering is not viable within the UK generics market place,” he said. In this option, the NHS purchases drugs centrally and manufacturers compete to win tenders to supply the NHS with a particular medicine. Dr Mudhar said that this option created risks in supply failure, supply security and product monopolisation. The outcome of these individual risks would be a severe risk of patients not being able to obtain their medicines, he said.

AAH welcomes the option of keeping existing arrangements. However, it suggests the following enhancements. First, capping prices via a mechanism similar to the Pharmaceutical Price Regulation Scheme (PPRS), reviewed every three years with members of the supply chain. In addition, any savings made should be reinvested into pharmacy to meet the objectives set out in the NHS plan.

Dr Mudhar pointed out that gross profit in pharmacy has decreased from 23 to 14 per cent over the past 15 years. There are a number of escalating costs, for example, the introduction of the minimum wage, the loss of resale price maintenance and costs from refurbishing premises. “Current remuneration arrangements alone are insufficient to sustain future requirements, ie, the demands made in the NHS plan,” he said. The Department of Health has used a vigorous discount inquiry process for years so why does it believe that it is flawed now? He added that the Department believes that an additional sum of between £90m and £130m a year could be clawed back: this equates to around £10,000 per pharmacy.

Asked which option he believed would be introduced, Dr Mudhar said that he thought that existing arrangements would be kept for the next year or two while the options are considered.

Dr Mudhar was speaking at the National Association of Co-operative Executive Pharmacists annual conference on 13 October (see report).