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AIMp: Pharmacy and NHS lose money from branded generic prescribing

“Prescribing branded generics undermines the function of the generic market”

Prescribing branded generic drugs reduces profit and investment for community pharmacy, warn AIMp chief executive Leyla Hannbeck and chair Peter Cattee

The system of reimbursement from the NHS incentivises pharmacy owners to buy generics as cheaply as possible, allowing them to make a profit, while ensuring the NHS pays less for drugs than health services in almost any other country.

However, this arrangement is under threat by the branded generics some clinical commissioning groups (CCGs) are encouraging GPs to prescribe.

Common drugs for which a branded generic exists include metformin, co-codamol, quetiapine, atenolol and some inhalers. A pharmacy might buy one packet of atenolol for 50p. If the Drug Tariff reimbursement price is £1, the pharmacy will make a 50p profit.

The Drug Tariff creates a competitive environment in which generics are sourced at the lowest price. Category M of the tariff is designed to allow the community pharmacy network to retain £800 million a year from the profit on generics, and to enable the Department of Health and Social Care (DH) to claw back any profit above this annual figure.

Take the atenolol example above. If the branded generic version, Aimolol, has been prescribed, pharmacies will be forced to buy Aimolol at the supplier’s price. If, instead of buying atenolol for 50p, a pharmacy must buy Aimolol priced at 90p, the pharmacy will only be reimbursed for the supplier’s price, so cannot make a profit.

Someone unfamiliar with the complexities of pharmacy funding might question why pharmacies should complain about being unable to profit from the NHS reimbursement of drugs.

The answer is that this profit is part of their overall remuneration for providing services to the public. And the public benefits when pharmacies are incentivised to buy drugs as cheaply as possible.

The wider implications of prescribing branded generics include:

  1. If pharmacies make less profit than the annual £800m they can retain, the DH will have to make up the balance. Any profit generated by pharmacies above that figure is clawed back by the DH to spend elsewhere in the NHS, so any loss of profit from branded generics may cost the DH tens of millions of pounds a year.
  2. The growth of branded generics undermines the function of the generics market and reduces its competitiveness.
  3. The use of branded generics varies across the country. Pharmacies in some parts of England face a double whammy that sees them unable to make the same level of profit as pharmacies elsewhere, but suffer the same clawback if profits across the board exceed £800m.
  4. Profits made by pharmacies can be used to develop their premises and services, so investment in community pharmacy falls when money is lost to branded generics.
  5. The more brands that appear, the more stock pharmacies hold. This increases wastage if commissioners swap from one branded generic to another at short notice, as they often do.
  6. The more branded generics are prescribed the more fragile the supply chain becomes, as it depends on a product having a single supplier reliant on economic factors rather than patients’ needs.

CCGs and other commissioners may benefit in the short term from the use of branded generics. So do the suppliers. But pharmacies lose out and the knock-on effects will disadvantage patients.

Over the coming months, the Association of Independent Multiple Pharmacies (AIMp) will be collaborating with a range of stakeholders to explore all the issues involved in the use of branded generics and make representations accordingly.

Leyla Hannbeck is chief executive of the AIMp, and Peter Cattee is chair of the organisation

10 Comments

John Ashworth, Community pharmacist

Had this conversation loads of times with CCG pharmacists . They haven't a clue about how the DT prices are set . Competition pushes the price down ,but the CCGs keep going for quick short term savings in order to justify their existence. Good luck to Chiesi they came along at a  good time for their business model . Their success has been NHS's loss

Medicine Master, Primary care pharmacist

Branded generics is a misnomer there are  only two types of drugs in DT Branded or generic.

Different DT rules apply to brands

A.S. Singh, Community pharmacist

Branded generics do exist from a contractors point of view there  are 2 types:

Generic - profit to be made

Branded/Branded Generic - loss maker

Mahesh Sodha, Superintendent Pharmacist

This fact has been known for years by PSNC and NPA. Also by the CCG pharmacists with any intellect (and who have knowingly continued with this strategy and still are doing NOW).  The politicians within our profession have totally failed to act on this. At this steg it may be too little and too late for people like me who fought agianst this but for the sake of my younger volleagues I do hope that the CCG pharmacists stop this now. CCH pharmacists should alsdo stop taking pay backs formt he companies for promoting branded generics

 

 

Meera Sharma, Pharmacy owner/ Proprietor

Good to see that this issue is being highlighted by AIMp and the plans to do something about it. Good luck! 

R A, Community pharmacist

It's a scandal how these companies think its okay to profit from public fund by hawking products at extortionate price which actually cost 1% of the wholesale price. Inaddition some were made in the 70s and 80s therefore no R&D costs either.

At least big pharma have a genuine reason to charge high price for a new drug, given the failure rate of a new drug in clinical trials and the limited patent life for a granted drug it becomes necessary to charge high price both to make enough capital to return back to the business investors and plough back into R&D. Since for every one drug that comes onto the market many drugs failed in the process costing these companies billions. Therefore that is the only way they can remain profitable. 

After all without such incentive the hope of finding cures or treatment for some of the terminal conditions that plague the modern society would remain illusive. However not sure what these branded generic manufactrer bring into the table apart from overcharging the NHS.

However this should maybe go to the goverment  because the humble pharmacist cant do much here. 

David Moore, Locum pharmacist

Working in Cornwall, scripts for these branded generics presented by a holidaymaker from upcountry could be a nightmare to obtain if the major wholesalers didn't stock them.

Medicine Master, Primary care pharmacist

simple

you are allowed to recover any out of pocket expenses to obtain a brand I suggest a specials supplier to act on your behalf to obtain the brand

Dave Downham, Manager

Totally agree...but I can't help thinking that you are saying this to the wrong audience.

If I worked in a CCG, I'd be delighted to show that we've mugged off the local pharmacies compared to other surrounding CCGs and decreased our drugs bill. 

Ebers Papyrus, Pharmaceutical Adviser

Spot on.

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