Re: Competition authority will investigate price hikes of generic drugs
We welcome the news that the Competitions and Market Authority (CMA) is now taking pharmaceutical companies such as GlaxoSmithKline, Pfizer and Flynn Pharma to task for overcharging the NHS for generic medication (1). In December, the CMA announced that it is in the process of investigating Actavis for inflating the price of Hydrocortisone, a WHO essential medicine used in the treatment of adrenal insufficiency (2). Actavis has been accused of hiking the price of hydrocortisone by 12,000% since 2008, costing the NHS an estimated additional £69.5 million per year.
The action taken by the CMA is welcome but long overdue. It is widely accepted that newly developed and patented drugs are sold at higher prices to recoup the costs of research and development incurred by the innovating company. The expectation however, is that market forces and competition drive down these prices when the drug comes off-patent and generic formulations are produced. This trend has seemingly reversed and the victims of this are the NHS, patients and the tax-payer, who are indirectly funding the pharmaceutical companies responsible. In the face of an underfunded and under-pressure NHS with a growing yearly deficit of £2.45 billion [3], the actions of these companies are morally reprehensible. The extortionate cost of hydrocortisone has been an issue since 2008, and was identified in the media as early as 2010 [4]. It has taken 8 years for this to be formally investigated, and despite this the price of hydrocortisone continues to rise. Hydrocortisone costs £93.98 for a month’s supply in the UK [5], but only €3.12 when bought over the counter in Spain.
Importing and distributing medication is regulated in the UK by the Medicines and Healthcare products Regulation Agency (MHRA), a government organisation. An individual or company is required to obtain a parallel import licence or manufacturers licence to import and repackage the medication, and a wholesaler dealer licence to supply the medication to other wholesalers. This process can be lengthy but involves the payment of the relevant fees to the MHRA, who then inspect to ensure that the party complies with the EU good manufacturing and good distribution practises. It is not clear why no other company in the UK is importing, manufacturing or distributing hydrocortisone.
The secretary of state for health does have the power to limit the price of generic medication, but is prevented from doing so by loopholes in the current laws (6). It is reassuring that the government is looking to introduce legislation in the form of the Health Services Medical Supplies (Costs) Bill, that will circumvent these loopholes and allow better regulation of the cost of unbranded generic medication. It is however crucial that we consider other more industrious mechanisms to protect the NHS from these market failures. One option would be to develop an arms-length NHS organisation to manufacture essential drugs. This would enable the NHS to set the market price for generic drugs itself. Such a company could be run as a non-profit making NHS Trust with an aim of making generic drugs at cost prices, setting prices to ensure solvency, and ploughing profits back to getting approval for other generics. It would be subject to all the normal regulatory processes of the MHRA to maintain the excellent safety standards in the UK, but it would not have a profit motive. This would not affect innovation of new drugs, which will remain protected by patents, but it would ensure that once off patent, prices fall to the cost of manufacturing. Big pharma would actually focus on making profits from new discoveries, which will improve motivation to innovate.
Self-regulation in the pharmaceutical industry and the current status quo is clearly not working. Tactics such as relaunching minor variations of drugs, but with a new licence and indication should be resisted by bodies such as the MHRA, but the launch of esomeprazole to replace omeprazole or escitalopram to replace citalopram are obvious examples where such regulation has not occurred.
The rapid increase of the cost of drugs is one reason why the NHS needs more funds, but it is shocking to discover that much of this increase is not due to development of new drugs but simply down to the marketing practices of big pharma relaunching old drugs.
(1) Hawkes N. Competition watchdog finds new target: overpriced generics. BMJ 2016 Dec 14;355:i6712.
(2) Competitions and Markets Authority. Hydrocortisone tablets: suspected excessive and unfair pricing. https://www.gov.uk/cma-cases/pharmaceutical-sector-anti-competitive-prac... (accessed 22 December 2016).
Rapid Response:
Re: Competition authority will investigate price hikes of generic drugs
We welcome the news that the Competitions and Market Authority (CMA) is now taking pharmaceutical companies such as GlaxoSmithKline, Pfizer and Flynn Pharma to task for overcharging the NHS for generic medication (1). In December, the CMA announced that it is in the process of investigating Actavis for inflating the price of Hydrocortisone, a WHO essential medicine used in the treatment of adrenal insufficiency (2). Actavis has been accused of hiking the price of hydrocortisone by 12,000% since 2008, costing the NHS an estimated additional £69.5 million per year.
The action taken by the CMA is welcome but long overdue. It is widely accepted that newly developed and patented drugs are sold at higher prices to recoup the costs of research and development incurred by the innovating company. The expectation however, is that market forces and competition drive down these prices when the drug comes off-patent and generic formulations are produced. This trend has seemingly reversed and the victims of this are the NHS, patients and the tax-payer, who are indirectly funding the pharmaceutical companies responsible. In the face of an underfunded and under-pressure NHS with a growing yearly deficit of £2.45 billion [3], the actions of these companies are morally reprehensible. The extortionate cost of hydrocortisone has been an issue since 2008, and was identified in the media as early as 2010 [4]. It has taken 8 years for this to be formally investigated, and despite this the price of hydrocortisone continues to rise. Hydrocortisone costs £93.98 for a month’s supply in the UK [5], but only €3.12 when bought over the counter in Spain.
Importing and distributing medication is regulated in the UK by the Medicines and Healthcare products Regulation Agency (MHRA), a government organisation. An individual or company is required to obtain a parallel import licence or manufacturers licence to import and repackage the medication, and a wholesaler dealer licence to supply the medication to other wholesalers. This process can be lengthy but involves the payment of the relevant fees to the MHRA, who then inspect to ensure that the party complies with the EU good manufacturing and good distribution practises. It is not clear why no other company in the UK is importing, manufacturing or distributing hydrocortisone.
The secretary of state for health does have the power to limit the price of generic medication, but is prevented from doing so by loopholes in the current laws (6). It is reassuring that the government is looking to introduce legislation in the form of the Health Services Medical Supplies (Costs) Bill, that will circumvent these loopholes and allow better regulation of the cost of unbranded generic medication. It is however crucial that we consider other more industrious mechanisms to protect the NHS from these market failures. One option would be to develop an arms-length NHS organisation to manufacture essential drugs. This would enable the NHS to set the market price for generic drugs itself. Such a company could be run as a non-profit making NHS Trust with an aim of making generic drugs at cost prices, setting prices to ensure solvency, and ploughing profits back to getting approval for other generics. It would be subject to all the normal regulatory processes of the MHRA to maintain the excellent safety standards in the UK, but it would not have a profit motive. This would not affect innovation of new drugs, which will remain protected by patents, but it would ensure that once off patent, prices fall to the cost of manufacturing. Big pharma would actually focus on making profits from new discoveries, which will improve motivation to innovate.
Self-regulation in the pharmaceutical industry and the current status quo is clearly not working. Tactics such as relaunching minor variations of drugs, but with a new licence and indication should be resisted by bodies such as the MHRA, but the launch of esomeprazole to replace omeprazole or escitalopram to replace citalopram are obvious examples where such regulation has not occurred.
The rapid increase of the cost of drugs is one reason why the NHS needs more funds, but it is shocking to discover that much of this increase is not due to development of new drugs but simply down to the marketing practices of big pharma relaunching old drugs.
(1) Hawkes N. Competition watchdog finds new target: overpriced generics. BMJ 2016 Dec 14;355:i6712.
(2) Competitions and Markets Authority. Hydrocortisone tablets: suspected excessive and unfair pricing. https://www.gov.uk/cma-cases/pharmaceutical-sector-anti-competitive-prac... (accessed 22 December 2016).
(3) NHS Improvement. Performance of the NHS provider sector: year ended 31 March 2016. https://improvement.nhs.uk/uploads/documents/BM1653_Q4_sector_performanc... (accessed 22 December 2016).
(4) Lewis, J. ‘NHS doesn't care about cost of medicine’: Drugs firms accused of profiteering by raising prices by ONE THOUSAND per cent. http://www.dailymail.co.uk/news/article-1295610/NHS-doesnt-care-cost-med... (accessed 22 December 2016).
(5) Joint Formulary Committee. British National Formulary. 72 ed. London: BMJ Group and Pharmaceutical Press; 2016
(6) Department for Health. Guidance: Health Service Medical Supplies (Costs) Bill factsheet. https://www.gov.uk/government/publications/health-service-medical-suppli... (accessed 03 February 2017)
Competing interests: No competing interests