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'No concrete evidence' to explain wholesalers' profit growth, DH says

DH was among organisations called to face a government committee over generics price increases
DH was among organisations called to face a government committee over generics price increases

There is “no concrete evidence” to explain why some wholesalers’ profits grew in parallel with last year’s generics price increases, the government has said.

Representatives from pharmacy, the Department of Health and Social Care (DH) and NHS England were called in front of the Public Accounts Committee – the parliamentary office responsible for scrutinising government spending – last week (July 4), to discuss findings from a National Audit Office (NAO) investigation into increased generics prices.

The NAO report – published last month (June 8) – referred to government evidence of “unexpected increases in wholesalers’ margins, which it could not fully explain”. The following week, the UK’s largest wholesalers denied any knowledge of the “unexplained” margin growth.

Responding to a question from the committee on whether the DH knew if any wholesalers were “profiteering” from increased generics prices last year, DH chief commercial officer Steve Oldfield said his department did not have “any concrete evidence” to explain why wholesalers’ margins increased.

However, he stressed that a “perfect storm”, including the closure of a Dr Reddy’s and a Bristol Laboratories manufacturing site, which led to generics supply issues, had “created a huge amount of turbulence and confusion in the market”.

“It is entirely possible there was a disconnect between different parts of the supply chain,” he insisted.

How the DH responded to price increases

In December 2017, after becoming aware of “the changing relationship” between manufacturers’ and wholesalers’ selling prices, the DH “fundamentally changed” the way it collects data to calculate concessionary prices, Mr Oldfield explained.

However, the committee questioned why the DH had not intervened sooner, despite signs of prices beginning to “rise noticeably” between June and August 2017.

“We were, to some extent, hostage to the data collection system that was in place at the time,” Mr Oldfield explained, which relied on voluntary data from manufacturers collected on a quarterly basis.

At the end of October, “we had absolute insight into how the different parts of the supply chain were contributing to the problem”, Mr Oldfield claimed, and the DH “immediately took action”.

“I personally met with the five main wholesalers to try to gain some insight. We had meetings or calls with the key generics manufacturers,” he added.

How is your pharmacy coping with the generics supply and pricing issues?

Dave Downham, Manager

Shouldn't they be asking the wholesalers? Compare sales and purchase invoice for same product in June 2018 and compare to 2017 and 2016. Adjust for backhanders and there you have it. If they are daft enough to be looking at gross margin %, then they are thick.

Jonny Johal, Pharmacy Area manager/ Operations Manager

What do people think about the possibility of collusion between manfacturers and wholesalers?

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