The National Audit Office (NAO) has issued a report about its investigation into NHS spending on generic medicines in primary care. 

Last year, the prices of certain generic medicines purchased by pharmacies for the NHS increased unexpectedly, placing what NHS England described as a “significant unbudgeted pressure” on clinical commissioning groups.

The NAO investigation sets out the possible causes of the price increases from 2017-18 and how the Department of Health and Social Care (DHSC) and NHS England responded in order to maintain the supply of generic medicines for patients and manage spending.

The Department identified a range of supply-related and other factors which may have driven the 2017 price increases.

It also identified increases in manufacturers’ prices and unexpected growth in wholesalers’ margins in 2017, which it could not fully explain.

The NAO estimates the net spend by CCGs on concessionary priced medicines at £315 million in 2017-18 (i.e. over and above what would have been spent if the Drug Tariff price applied), which is seven times greater than the equivalent spend in 2016-17. In May 2018, NHS England reported an unaudited end-of-year deficit of around £250 million among CCGs, partly attributed to concessionary pricing increases.
 
The cost of obtaining certain medicines increased more than tenfold, including those used to treat conditions such as high blood pressure and mental health conditions. For example, at its peak, the concessionary price that the Department set for Quetiapine 100mg tablets (which is used to treat mental health conditions) was £113.10, 70 times higher than its previous set price of £1.59.
 
The Department’s analysis also demonstrated that the concessionary prices it had granted were set higher than necessary above wholesalers’ selling prices. It estimated that this amounted to £86.3 million of additional costs for CCGs in 2017-18 which it expects to be recouped in subsequent years through the established reimbursement mechanisms.
 
The Department took a number of actions to maintain the supply of generic medicines on concessionary prices for patients in 2017-18, including liaising with manufacturers to identify whether supplies were available, permitting one manufacturer whose license was suspended to supply certain medicines considered critical and releasing supplies of one medicine from a centrally held emergency stockpile. The Department received intelligence from a variety of sources about potential impacts of the price increases. This included information about how supply issues were affecting pharmacies’ ability to obtain medicines, although the Department does not know how many patients experienced problems getting their prescriptions.
 
The Department will now have new powers – expected to come into force in July 2018 – to control the price of generic medicines and obtain sales and other information from manufacturers and wholesalers. The new legislation will also introduce mandatory information-sharing arrangements, as the Department has had to rely on voluntary arrangements which limited its ability to identify and respond to the price increases. However, its new powers are untested and will require sufficient resources.

PSNC chief executive Simon Dukes said: “PSNC was pleased to assist the National Audit Office in investigating the unprecedented situation in the generic medicines supply chain seen last year. Community pharmacy teams were caught in the middle of the many factors at play, working extremely hard to obtain medicines as quickly as possible for the patients who needed them. PSNC welcomes the moves towards developing a more refined price setting system; this must enable pharmacies to continue to purchase generic medicines effectively on behalf of the NHS for the benefit of patients.”

Commenting on the report, RPS England Board Chair Sandra Gidley said: “This NAO investigation brings clarity to an issue which has hit community pharmacists hard over the past year.  Many have found themselves out of pocket and experienced problems with their business operations.  This has been a double whammy as it comes on top of the community pharmacy cuts and we are past the stage where community pharmacists can prop up the health service out of goodwill.”

“Community pharmacy plays an important role in negotiating the prices of medicines reimbursed by the NHS.  Pharmacists do such a good job in fact that the UK is in the lower half of the EU15 countries for spend on medicines.

“Every day, community pharmacists are ensuring that patients receive their medicines promptly. Medicines shortages and fluctuating prices mean that pharmacists have to devote more time to track down supplies for their patients, in what is already a highly pressured environment.

"This frequently occurs ‘behind the scenes’ without patients being aware and so goes unrecognised. However, it prevents many patients from otherwise having to go back to their doctor, so saving the NHS time and money by preventing unnecessary GP appointments.

“The financial value of this work in enormous.  A 2016 report commissioned by the Pharmaceutical Services Negotiating Committee found that “community pharmacies’ interventions on drug shortages result in an estimated annual cost saving to the NHS of £53.2 million and an overall contribution to wider society of £92.4 million.”

“We must have greater stability in generic prices – without it pharmacists struggle, CCGs are left in debt and patients suffer.”

Andrew Lane, chair of the NPA’s policy and practice committee, said: “Independent pharmacy contractors have had a torrid time because of increased generic medicines prices. 

“We have displayed professionalism and great patient care by continuing to supply patients promptly - dispensing in good faith every time with the hope that we will be paid adequately for the items dispensed.

“Pharmacists have put patients first throughout all this, spending many extra hours hunting down supplies, to ensure continuity of therapy is maintained.

“Most independents cannot buy bulk stock in advance, so are particularly vulnerable to price instability. 

“At a time of deep cuts in pharmacy remuneration, the uncontrolled and unpredictable purchase costs hiked up working capital and many pharmacies have had to seek overdrafts at higher than normal costs.

“It adds insult to injury that independents will face a claw back of profit they were unlikely to have made in the first place, as clawback is applied evenly across the contractor network.

“Smaller pharmacy contractors will yet again get squeezed from both ends.

“Lessons must be learnt from this difficult period and pharmacists must be better supported to maintain a quality medicines supply service.”