Government interrogates prices to stymie £200m-plus drugs overspend

Unexpected generic drug shortages cost clinical commissioning groups an additional £229m between April 2017 and January, because prices have been increased with the aim of securing stock.

Reasons cited have included regulators closing some factories, the pound’s weaker exchange rate with the Euro, and artificial inflation of prices by industry.

A Department of Health and Social Care spokeswoman told HSJ it had begun taking action. She said: “We have been working with the Pharmaceutical Services Negotiating Committee and the British Generic Manufacturers Association to ensure concessionary prices reflect the market as closely as possible.”

Warwick Smith, the BGMA’s director general, told HSJ he understood recent prices had been solely based on information from manufacturers, rather than also examining wholesale data.

Mr Smith said manufacturers had been working with the DHSC to improve the quality of data provided, so it can monitor the medicines market much more regularly and accurately. This is intended to ensure the price to the NHS is not higher than necessary.

Concerns have previously been expressed that prices charged to the NHS can be higher than prices charged by manufacturers to wholesalers.

Mr Smith said: “We have been urging the department to… [make] clear [data] requests to ensure data is as accurate as possible and in the last couple of months they have [done so]”. He added: “We will keep refining the data collection methods.”

Additional costs in January, according to prescribing data, were 46 per cent lower than in December – £14.9m compared to £27.8m, although the January data is provisional.

NHS England and NHS Improvement said in planning guidance for 2018-19, published earlier, that “CCGs should assume that the current high level of discretionary prices for generic drugs in short supply will not persist in 2018-19”. NHS England has not specified whether or why they believe this assumption is correct, but CCGs will not be funded for higher prices.

Mr Smith said: “We expect to see these prices coming down. I wouldn’t expect to see anything of [2017-18] level but it is too soon to say what it will be [next year].”

He said one of the factors thought to be underlying the cost increases – some factories being closed by regulators therefore reducing supply – had been resolved. However, another likely factor – unfavourable exchange rates following the Brexit vote – has not, he said.

HSJ analysis shows that between April 2017 and January, the issue – known by many as the “no cheaper stock obtainable” problem – had cost 17 CCGs at least half a per cent of their total allocation for services this financial year.

Although NHS England is assuming the generic price pressure will not apply next financial year, it has committed to pass on the cost benefit from another generic drug price change – to what are known as Category M drugs – to CCGs in 2018-19. During 2017-18, savings have been held centrally by NHS England.

NHS Clinical Commissioners chief executive Julie Wood called for NHS England to also release the “clawback” during this year to CCGs.

She said: “No cheaper stock obtainable pressures on CCG budgets are around 10 fold greater than they were last year.

“The extent to which a CCG can or can’t absorb the costs depends on the CCG financial starting point – as money gets tighter it is this sort of thing that could be the straw that breaks the camel’s back.

“What would be extremely helpful is if NHS England considered redistributing the £120m of Cat M windfall gain this year into individual CCG bottom lines rather than holding it all centrally.”

NHS England was approached for comment.