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For a number of years, it has been National Health Service policy
to increase the percentage of generic drugs prescribed in order to achieve
better value for money. This is particularly relevant with chronic conditions
such as coronary heart disease where prescribing is a major component
of overall costs, accounting for £558m of the estimated £7.06bn
CHD costs per annum.1
What is now the most cost-effective solution for primary care organisations
faced with a confusing choice between branded and generic statins? |
Each year in the United Kingdom many long-standing products reach the
end of their patent-protected period, resulting in the introduction of
new generic products. This year is no exception and one of the most notable
was the expiry of the patent on Zocor (simvastatin) which occurred on
5 May. Patent expiries have traditionally provided an opportunity for
the NHS to reap “windfall” savings, although there is increasing
evidence that it is taking longer for the NHS price of generic drugs
to fall by an amount significant enough to affect prescribing budgets.
The UK generic drug industry and its effect on the NHS
In order to understand this issue, it is necessary to discuss the UK
generic drug industry’s relationship with the NHS in the recent
past. When a prescription is written generically, the dispensing contractor
can supply any version of the preparation that is licensed that meets
the required specification. This allows generic medicines to compete
on price at the point of dispensing. In this way, the generics market
is essentially a commodity market, where prices rise or fall depending
on supply and demand.
Dispensing contractors are reimbursed for the majority of generic prescriptions
by means of the Drug Tariff system, administered by the Prescription
Pricing Authority in England and Wales. In the past, when there were
difficulties in supply of a generic product, it was classified as a Category
D preparation, which allowed pharmacists to supply branded products against
generic prescriptions and claim for the cost of the brand. Between September
1998 and November 1999, the number of Category D products increased from
30 to 192. Among them were many of the most common generic drugs. This
increase had an enormous impact on NHS budgets, with generic drug costs
rising by 45 per cent overall during 1999.2 The effect was exacerbated
by the increased numbers of Category D items slowing processing of prescriptions
at the PPA, with the effect that the full cost implications for primary
care organisations only became known after several months.3
As part of the response to these problems, the Government commissioned
a fundamental review of the generics market from Oxford Economic Research
Associates (OXERA) in November 1999.2 As a result of its recommendations,
the Government put in place a statutory maximum generics price scheme
to protect the NHS from such price increases in the future and to stabilise
the generics market.2 Since the introduction of the scheme, the supply
of generics to dispensing contractors has remained stable. The Government
has recently announced that through this market stability, it estimates
the NHS has saved around £330m a year.
What are the factors affecting NHS generic drug prices?
The cost of manufacturing generic medicines depends on a number of factors,
including the availability of raw materials and the complexity of the
manufacturing process. Once manufactured, the cost to the NHS is based
on a sample of prices from major suppliers assessed monthly by the
Department of Health/PPA. These prices essentially depend on the level
of competition in the UK market place.
The market price for generic prescription medicines is, however, a wholly
different issue and one which must not be confused with the price to
the NHS and the consequent impact on primary care prescribing budgets.
Many generic drugs are available to dispensing contractors at a price
significantly lower than that listed in the Drug Tariff. This is to some
extent adjusted for by the discount clawback, effectively creating a
balance which supports some of the activities of community pharmacy.
What does history tell us?
Over recent years, a number of branded drugs have seen their patents
expire, including some of the blockbuster products like Prozac (fluoxetine)
and Innovace (enalapril). The pattern with these drugs was that prices
fell quite rapidly in the months following patent expiry and the subsequent
launch of generics such that within around a year, the NHS price of
the generic, as set in the Drug Tariff, had more or less stabilised
at around half the price of the parent brand. The result was that the
NHS inherited a significant saving within a relatively short period.
However a different situation has been seen with other drugs following
the expiry of patents. One such is gliclazide, where today, many years
after the patent expiry on Diamicron, the NHS price of the generic is
only around 12 per cent less than the brand. For others, such as domperidone,
the NHS price of the generic has actually remained slightly higher than
that of Motilium, the original branded version.
Recent experiences
Last year more major pharmaceutical products came off patent than in
any other recent year. Among the most notable were Losec (omeprazole),
Cardura (doxazosin), Zestril (lisinopril), Ciproxin (ciprofloxacin)
and Zirtek (cetirizine). In all cases, generic versions soon followed.
However, monitoring the trends in NHS prices through observation of the
Drug Tariff for these products shows that the financial savings have,
to date, been modest. It is therefore interesting to contemplate how
long it will be before there are really significant price reductions
and consequently savings for the NHS. Projections relating to this are
shown in Table 1.
Table 1: Projected time for the NHS generic price of cetirizine,
doxazosin and omeprazole to fall by 40 per cent
|
Product |
Price of
branded equivalent (£) |
Date
of generic launch |
NHS generic
price in July 2003 (£) |
Projected time for
NHS generic price to fall by 40% (years) |
Omeprazole 20mg capsules |
28.56 |
April 2002 |
23.20 |
2.7 |
Doxazosin 2mg tablets |
14.08 |
April 2002 |
10.97 |
2.2 |
Cetirizine 10mg tablets |
8.73 |
May 2002 |
7.39 |
3.0 |
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At a time when primary care prescribing budgets are under intense pressure
and increasingly performance managed, the potential savings from patent
expiries are considered by some to be highly significant. Indeed, some
primary care organisations build anticipated savings into their budget
projections for the financial year; in some cases these have been based
on the fluoxetine/enalapril model. Where this is the case, these PCOs
are likely to be left facing a search for additional economies in order
to deliver a balanced financial position as the year progresses.
Statin prescribing
The fact that Zocor (simvastatin) came off patent in 2003 is potentially
significant since the increase in statin prescribing has been one of
the most dramatic ever seen for a group of drugs. Prescriptions for
statins increased by 30 per cent in 2001, with 2.6 million more items
in 2000–01 than in 1999–2000 and they now cost the NHS
more than any other class of drug.4
National guidance has been the major factor that has driven growth in
statin prescription volume across the UK. Prescribers are actively introducing
a statin in patients with diagnosed CHD or a significant CHD risk, in
order to reduce low-density lipoprotein cholesterol to 3.0mmol/L or by
30 per cent, whichever results in the lowest level.5,6 The recent publication
of the Heart Protection Study (HPS)7 and the Anglo Scandinavian Cardiac
Outcomes Trial (ASCOT) study,8 has highlighted that statin treatment
may be justified in an even wider group of patients who are at risk of
CHD, including people with stroke, those with diabetes, the elderly,
women and those with baseline cholesterol levels which are currently
considered below the threshold for treatment. Estimates have been made
that almost eight million people in Britain could benefit from statin
therapy. Even if national or local decisions are made that moderate these
projections, it is likely that there will continue to be growth in statin
prescribing for the foreseeable future. In the face of such massive predicted
growth, it is obvious that PCOs need to manage the costs associated with
statin prescribing carefully.
The UK lipid-lowering market is dominated by two statins: simvastatin
and atorvastatin (Lipitor), which increased by 16.9 per cent to 4.3 million
items and by 62.6 per cent to 3.2 million items, respectively, in 2000–01.9 The rise in cost parallels the rise in prescribing volume, such that
in 2000–01, £151.4m was spent on simvastatin and £110.8m
on atorvastatin.9 The question is, what is now the most cost-effective
solution for PCOs faced with a confusing choice between branded and generic
statins?
The capacity of atorvastatin 10mg to reduce LDL cholesterol lies between
that of simvastatin 20mg and 40mg.10 However, at the time of writing,
the NHS costs are quite different, with atorvastatin 10mg at £18.03
for 28 days, whereas simvastatin 20mg and 40mg cost £29.69 for
28 days. It follows that the NHS price of these strengths of generic
simvastatin would need to fall by around 40 per cent from the current
price of branded Zocor to match the cost of atorvastatin 10mg. Those
interested in delivering, and budgeting for, cost-effective statin prescribing
over the next few years are thus asking how long it might take for such
a price reduction to be realised.
As we have seen, history gives us a variety of models on which to base
such estimates. Optimists hope that the NHS price of generic simvastatin
will follow the pattern seen with fluoxetine, whereas pessimists can
cite examples of other widely used drugs, such as gliclazide.
With a product as valuable as simvastatin, there are already many generic
companies in the market place and price competition at the point of dispensing
is significant. Nonetheless, this situation is replicated with other
recent major patent expiries, such as omeprazole and doxazosin. As these
examples, in contrast with fluoxetine, post-date the turmoil in the UK
generic drugs market, they give justification to the argument that significant
price reductions for generic simvastatin may only be seen a number of
years after patent expiry, as shown in Table 1.
Branded generics
To add further to this complex area, there has recently been talk of
branded generic simvastatin entering the market to “guarantee” PCOs
lower prices. The case for such a product is based entirely around the
argument that the NHS generic price will fall slowly after the patent
expiry and it works by by-passing the Drug Tariff system. Such an option
may at first glance appear appealing to those focused on budget control,
but more detailed consideration highlights a number of far-reaching concerns
that should to be taken into account.
Probably the biggest question mark is over the sustainable availability
of a single branded generic product whose manufacture is out-sourced
by the promoter. A second concern is the work required to switch prescriptions
safely to the brand in order to achieve the savings, which, given the
volume of statin prescribing, are not insignificant. Another concern
is over the potential for confusion from such brand prescribing because
this could have the detrimental effect of blurring the important message
to prescribers that generic prescribing is still appropriate for the
vast majority of drugs.
Looking ahead, a concern for many is the likelihood that competition
in the generic simvastatin market will eventually see the price of the
branded generic undercut. Although there is talk of branded generic prices
being renegotiable should this situation arise, some see the spectre
of switches being reversed, introducing yet more potential confusion
for prescribers and patients. In addition to these factors is a potentially
significant negative financial impact on dispensing contractors. This
is particularly concerning at a time when community pharmacy, which has
so much to offer in terms of enhancing medicines management, already
faces uncertainty about its future.
In summary, history has seen this type of approach before and in such
cases the benefits tended to be short lived and had a residual effect
which caused many to regret their initial enthusiasm.
PCO policy decisions
Mindful of the long-term nature of statin prescribing and the foreseeable
growth, many PCOs are now taking a long, hard look at their first-line
choice for statin therapy. In many PCOs, atorvastatin has been a drug
that has been advocated for a number of years based on its ability,
at a 10mg daily dose, to deliver cholesterol reductions in line with
current national guidance in a single step for many patients. The availability
of generic simvastatin has already led some of these organisations
to consider a change in these long-standing recommendations. However,
it is clear that many factors need to be considered and those looking
to make a quick saving may find the reality in the longer-term different
from their current hopes.
Conclusion
The UK generics market has seen significant upheaval in the past few
years and whereas in the past events following patent expiries could
have been predicted with confidence, outcomes are now far less certain.
With the current plethora of major patent expiries, some PCOs are considering
changing their current formulary choices to recommend drugs that have,
or are about to, become available generically, with the expectation of
reaping significant savings. Although history provides us with examples
where savings have been made soon after patent expiry, more recent trends
suggest that such savings may not materialise so quickly in the future.
Changes in the statin market, will without doubt be significant. However,
a knee-jerk reaction to recommend switching patients, to either generic
or branded generic versions of simvastatin, carries significant risks
that over-stretched PCOs would do well to avoid. In contrast, a policy
of watchful waiting has a great deal to commend it.
Stop press
Since this article was written (July 2003) the Department of Health has
published proposals to change the way in which community pharmacies
are reimbursed for purchasing generic medicines. These may affect the
conclusions drawn in the article.
From the proposals, the current gap between what contractors pay for
generics and the Drug Tariff price will be
narrowed. This may mean that the NHS price of generics may fall sharply
or it may mean that manufacturers will be less keen to discount so heavily
to maintain their margins within the boundaries of the scheme. The former
would make “new generics” like simvastatin more financially
attractive to the NHS, but the latter would not.
In addition, the DoH has only this month proposed a maximum
NHS price for generic simvastatin to come into effect from 1 December 2003 (see
PJ, 18 October, p533).
References
1. Liu JLY, Maniadakis N, Gray A, Rayner M.
The economic burden of coronary heart disease in the UK. Heart 2002;88:597–603.
2. Department of Health. Options for the future supply and
reimbursement of generic medicines for the NHS. A discussion
paper. Available as a PDF file
(230K) (accessed 20 March 2003).
3. House of Commons Select Committee on Health. First report: The
cost and availability of generic drugs to the NHS. The impact. Available
here (accessed 20 March 2003).
4. House of Commons Select Committee on Health. First report: The
cost and availability of generic drugs to the NHS. 1999 Available
here
(accessed 20 March 2003).
5. Department of Health. National Service Framework for Coronary
Heart Disease. 2000. Available here (accessed 20 March 2003).
6. Boyle R. DoH explains thinking behind national service framework
for coronary heart disease. BMJ 2000;321:1083.
7. Heart Protection Study Collaborative Group.
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in 20,536 high-risk
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M et al for the ASCOT investigators. Prevention of coronary and
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arm (ASCOT-LLA): a multicentre randomised controlled trial. Lancet 2003;361: 1149–58.
9. Prescription Pricing Authority. Growth in prescription volume
and cost report. 2001. Available as a PDF file
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10. Jones P, Kafonek S, Laurora I, Hunninghake D, for the CURVES
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