Accord’s MD Pete Kelly reviews the Oxera report.
An independent report released in June 2019 by economics consultancy Oxera ‘The supply of generic medicines in the UK’ emphasised how generic medicines are indispensable (if you excuse the pun) in stimulating growth and providing healthcare providers with significant cost savings, which in turn release vital resources to spend on new medicines and patient care. More importantly it concluded that, despite the bumps in supply and pricing that often provoke headlines in the pharmacy and national press, the UK system works. They specifically said ‘the supply of generic medicines in the UK is functioning well’.
According to the report, the UK system works due to many factors; from the freedom of pricing encouraging a number of competitors in the market, to generic manufacturers being quick to respond to variations in market supply and demand, all of which ultimately leads to prices reducing and subsequent value being delivered. What it also brought into the spotlight is that the inherent incentives for pharmacists to procure well are pivotal to the system and the economic cycle.
The UK writes the most generic prescriptions across Europe and yet on average offers the lowest prices for generic medicines. The report confirmed that in general once an originator medicine loses its patent and becomes generic – the price drops by 70% within the first six months, falling to 80-90% lower over a four-year period. In our experience that drop to 90% frequently happens much quicker and can often happen weeks after the initial 70% drop.
These steep drops in price can in part be contributed to pharmacists being incentivised by a retained buying margin resulting in cost effective purchasing, which drives manufacturers to lower their prices.
This means that despite varying elements, such as whether the pharmacy is independent or within a chain, the therapeutic area or the number of manufacturers involved there is one consistent element – the incentivisation of the pharmacist keeps the market competitive and prices low.
As many pharmacists will undoubtedly have experienced, there are times when prices do rise. There is rarely a single simple reason behind this and is likely as a result of any number of factors, such as; because raw ingredient or component costs have risen, some of the manufacturers have left the market, regulatory or legislation change or a problem elsewhere in the supply chain. The report found that in most cases, these short-term price rises were completely or substantially reversed within 12 months and again in most cases even at their peak the prices were considerably lower than that of the originator product.
The findings of the Oxera report show that the mechanisms governing the supply, demand and price of generic medicines is fit for purpose and the system is equipped to right itself when supply or access is challenging.
The findings from this independent report, very much mirror our own previous investigation into the generic medicines price situation, and which prompted our development of a White Paper ‘UK generic medicine price flux? – the real data behind the headlines’. We all know that the ‘generic drugs do work’ and now we have confirmation that the system, that we and the pharmacist community have crucial roles within, does too.
