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What is behind February's large number of price concessions?

The Department of Health and Social Care (DH) has granted a whopping total of 76 price concessions for February so far* –  C+D spoke with medicines supply chain and manufacturing experts to find out why 

Last week (February 15), the DH granted price concessions for seven medicines, the Pharmaceutical Services Negotiating Committee (PSNC) wrote in an update.


Another update followed two days later, listing 57 drugs the DH had made available at lower prices following applications from PSNC.


Today (February 24), it was announced that a further 12 drugs have been granted price concessions, bringing the total number for February to 76*.


Read more: Wholesalers: Supply chain back to normal after storms


“We are concerned to see that pricing issues are on the rise,” PSNC director of pharmacy funding Mike Dent told C+D earlier this week (February 22).

“A number of complex factors [are] at play in the supply chain,” he explained, leading contractors to report “problems obtaining more and more drugs at Drug Tariff prices”.


PSNC typically liaises with the DH to agree on concessionary prices for drugs reported to be unavailable at Drug Tariff prices each month.


The negotiator said it is continuing to raise “concerns” with the DH over this issue and “will continue to identify to them where we believe price concessions or other measures such as serious shortage protocols may be required”.


C+D contacted the British Generic Manufacturers Association (BGMA) and the Healthcare Distribution Association (HDA) to gain more insight into the recent spike in price concessions.



How do price concessions work?



Pharmacists in the UK are reimbursed for NHS prescription drugs by the DH “based on the manufacturer and wholesaler sales data from the previous quarter”, BGMA chief executive Mark Samuels told C+D.


“This system works well,” he said, as “pharmacists are covered for the medicines they purchase, with a margin for their service built in”.    


However, pharmacists make losses on dispensing medicines when their manufacturer or wholesaler prices rise to “close to or above the reimbursement price”, which “the previous quarter’s data cannot take account of”, he explained.



Concessionary prices do not always mean shortages



Mr Samuels told C+D that the BGMA has been tracking medicines shortages or supply issues since January 2021. It determined that in January 2022, about 1% of the generic medicines listed on the DH’s January concessionary price list had no licensed alternative.


“Several factors” could be behind rising manufacturer prices, such as “higher energy prices, raw materials and transportation costs, an unsustainable pricing scheme (VPAS) for branded generics and biosimilars, and regulatory problems affecting many suppliers”, Mr Samuels said.


“We should not automatically equate concessionary prices with shortages that mean patients are unable to receive their prescription medicines from community pharmacists,” he warned.



HDA: Price concessions down to manufacturing issues



Healthcare Distribution Association (HDA) executive director Martin Sawer told C+D that he believes the increase in price concessions for generics is largely attributable to “manufacturing issues”.


“The price concessions only reflect the fact [that wholesalers] have had to charge pharmacies more for some products,” he said.


This could be due to manufacturers charging wholesalers “increased prices”, he suggested, which would lead to the cost being passed “down the supply chain”.


He attributed the hike in product prices to rising costs in production – “raw materials, energy prices” – for manufacturers.


“I can only imagine that [manufacturers'] cost of production will have increased by quite a lot in the last six months,” which is “reflected” in product prices, he said.


Manufacturing prices “were at an all-time low” in 2021, Mr Sawer said, so it is “unsurprising” that “prices have gone up a bit”.


*A further 15 price concessions were announced on February 25, taking the total for February up to 91


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