MPs say the market for generic drugs is “ripe for manipulation”

BMJ 2000; 320 doi: (Published 01 January 2000) Cite this as: BMJ 2000;320:7
  1. Linda Beecham
  1. BMJ

    A committee of MPs has criticised the present system for determining the price of generic drugs in the NHS as being “unsatisfactory.” It said in a report, published last week, that the “stratospheric price rises in the past 18 months must have enriched many individuals at the expense of the NHS.”

    The House of Commons health select committee set up an inquiry in October 1999 to highlight the shortages andsudden sharp price rises in the cost of non-branded drugs(30 October, p 1151).

    In its report, published last week, it admitted that drug pricing in the NHS was very complex and did not readily succumb to simplistic analysis. However, it criticised the system whereby the scarcity, and consequently the price, of generic drugs was determined by the drugs industry itself.

    It disapproved of the method by which some drugs that are considered to be in short supply could be designated category D drugs, which automatically meant that the Department of Health refunded pharmacists for the full invoiced price of the drug rather than the average cost.

    The system meant that it was in the interests of the industry to hoard stocks of certain drugs, generate an artificial shortage so that the drugs were then designated category D drugs, and then sell the stocks when the price had risen. Pharmacists were prepared to pay higher prices because they were reimbursed in full. The committee said that it was “unsatisfactory” that it was the wholesalers and manufacturers who determined the levels of stocks and supply (and thus triggered category D status).

    The number of generic drugs classified as category D drugs increased from 30 to 190 from September 1998 to September 1999. The committee acknowledged that the closure of Regent GM, one of the largest manufacturers of generic drugs, contributed to the shortages and the consequent price rises. But it added: “We believe that it is significant that production levels have now returnedto normal whilst prices andcategory D levels have remained abnormally high.”

    The MPs say that the category D system “rewarded all in the supply and distribution chain when products were allegedly in shortage.”

    These facts, the committee said, together with the limited number of manufacturers involved, all made the market “ripe for manipulation.” It welcomed the fact that the government had eventually decided to instigate a wide ranging review of the operation of the generics market.

    The price rises of the past 18 months, including some of more than 700%have had an impact on GPs' and hospitals' drug budgets. West Sussex Health Authority, for example, is anticipating a £750000 ($1.2m) overspend.

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