Will the greater powers the Government now has bring the roller coaster ride of shortages and price hikes to an end at last?

Shortages of generic medicines in recent times have caused problems and created extra work pressures and serious cashflow issues for many contractors. This came to a head with the dramatic and well-publicised price hikes of 2017, which sparked a National Audit Office report and an inquiry by the House of Commons Public Accounts Committee (PAC), which earlier this month published its report, calling on the Department of Health and Social Care (DHSC) to make plans to help address the impact of these price rises on the NHS by the end of the year.

The Health Service Medical Supplies (Costs) Act 2017, which came into force in July this year, has already given the DHSC more powers to control generic prices and obtain information from manufacturers and wholesalers.

Pharmacists report that the price hikes have had a distressing impact on both themselves and their patients. Mike Hewitson, owner of Beaminster Pharmacy in Dorset, describes the situation as “barbaric” and the supply chain as “third world” – but what caused the price hikes in the first place?

Gino Martini, chief scientist at the Royal Pharmaceutical Society (RPS), says it is partly a “supply and demand” problem. A lot of generic drugs are “quite old medicines” that have been in existence for over 20 years, he says. As new drugs come on the market, generics are often outsourced to other companies, who may then pass on manufacturing responsibility to other suppliers. Then the number of suppliers dwindles, as does access to the raw materials to make these generic drugs, which can drive up prices.

The closure of manufacturing plants has also contributed to the price hikes, says Warwick Smith, director general of the British Generic Manufacturers Association (BGMA). “It is important to recognise – as the NAO report and the Public Accounts Committee hearing recognised – the reasons for the turbulence in the market was that three generic manufacturing plants had stopped producing for regulatory reasons. Therefore, there was less supply in the market than normal, which puts up prices.”

Mike Hewitson points the finger at wholesalers for creating at least some of this situation. “Some [wholesalers] use high pressure sales tactics, saying ‘this is going short, only a few left’, and try and get you to buy more than normal,” he says.

Different perceptions

Perceptions of the impact the price hikes have had on pharmacists – and their patients – differ. According to the NAO and PAC, the concessionary prices the DHSC set have made sure contractors “are not out of pocket”, says Warwick Smith. “That is to the credit of pharmacy, wholesalers, manufacturers, and indeed the Government, working together to fill the gaps.

“Looking back, it was a very unusual time. The number of products supplied was constrained,” but the system still worked, he says.

From PSNC’s perspective, last year’s spike in generic medicines shortages had “a significant impact on community pharmacies, particularly when combined with other workload and financial pressures”. According to Mike Dent, PSNC director of pharmacy funding, “these combined pressures are having an impact on the longer term future of community pharmacies, as well as on employees and the lives, families, and indeed the mental health of pharmacy contractors”.

Shortages and subsequent price rises still persist for many medicines, he says. “Pharmacies continue to work extremely hard to ensure that patients receive their medicines, and we have made all of these points including, most recently, as part of the PAC inquiry on this topic.”

As well as providing written evidence to the PAC, PSNC North East and Cumbria regional representative Mark Burdon gave oral evidence in which he highlighted the impact that the shortages had had on pharmacies.

Above and beyond

If price increases were reflected in the Drug Tariff, and contractors were correctly reimbursed, they would not be affected by price hikes, says Lila Thakerar, superintendent pharmacist, Shaftesbury Pharmacy in Harrow. However, price hikes by manufacturers often take time to be amended by the DHSC and, in the interim, “it is extremely time-consuming and challenging to get the drugs at the price in the Drug Tariff ”.

Mike Hewitson points out that sporadic price increases have added a huge degree of volatility to managing medicines purchases. “There is great uncertainty. Just this July, a product that cost me approximately £100 a month was suddenly costing £1,500.”

Pharmacists are often in the dark about how much the Government intends to pay, he says. “I don’t know any other industry where you would be expected to operate like that.”

As to the efforts undertaken by pharmacies to minimise any knock-on effects on their patients, Mike Dent says they have gone “above and beyond” to secure stock and make sure patients did not go without their medicines. This has included dispensing part packs, making contact with a wider number of wholesalers in order to track down available stock, and liaising with prescribers to find alternatives. “The workload on pharmacists has been massive,” he says.

PSNC discussed margin delivery including the impact of concession lines at its meeting in July, Dent says, adding that the committee is “united in its view that we must find solutions and get the best possible outcomes for community pharmacies”.

“Although the impact of medicines shortages on any individual pharmacy will vary depending on its specific circumstances, as part of our ongoing margins survey work we identify the financial impact of concession lines and make sure they are taken into account in the final result,” he says.

For pharmacists, “patient care is always top of their minds”, says Salim Jetha, managing director of the Avicenna marketing group of independents. “Shortages have left pharmacists ringing various suppliers to source the required products.”

Having spent so much time sourcing, he says, it is depressing to find out that you actually made a loss. “Then you are in no man’s land where the NHS contract stipulates that you must fulfil the prescription – no right of refusal on commercial grounds – while bankers insist their loans need to be repaid,” he says.

Pharmacists have “bent over backwards” to minimise the impact of price hikes on patients, and this has meant “absorbing losses on medicines” at a time when the sector is already dealing with reduced margins because of funding cuts, says Mike Hewitson.

Such efforts, he says, have come at a price – not only in terms of financial costs, but workload. And then there is the human cost, which he describes as “massive”. “It is about people’s livelihoods, increased stress levels, the impact on the pharmacy team’s health, and on the patient’s health,” he says.

New cost framework

Responding to price hike issues, the Health Service Medical Supplies (Costs) Act 2017 has established a new framework for the DHSC to manage the costs of health service medicines, appliances and borderline substances, “by obtaining comprehensive information about costs in the supply chain”, says Mike Dent.

As part of the Act, the Health Service Products (Provision and Disclosure of Information) Regulations 2018 were introduced on July 1. These regulations give the DHSC greater powers to request information about the price and costs associated with products purchased for the NHS. PSNC’s Mike Dent expects that, “in time, this will help improve the information available for reviewing shortages, which in turn will have an impact on managing price concessions”. The negotiating body “continues to seek a fairer system that is more responsive to price rises and ensures community pharmacy contractors do not carry unreasonable costs on behalf of the NHS”, he says.

Warwick Smith believes the Act is “good news” because the DHSC is now receiving information from all those in the supply chain and, because the Act’s powers relate to all wholesalers, there is a “much better view of prices being charged in the market as a whole”. This means decisions taken by the DHSC that impact on contractors “will be based on fuller and more accurate data”.

While the Act enforces “better controlling of the pricing of generics, there needs to be standardisation of the prices for all manufacturers and suppliers so contractors can fulfil the demands of prescriptions for generics,” suggests Lila Thakerar. “The contractor has to negotiate with suppliers, which should not be the case. This is an absolute distraction from the responsibilities of a pharmacist,” she believes.

Mike Hewitson wants to see “more transparency from and greater regulation of wholesalers”. And he hopes that, in the future, the Government will support pharmacy’s procurement role rather than taking over that responsibility – “as Government interventions in markets rarely do well”.