Price gouging is where companies substantially raise prices above costs of production and investment, often due to a lack of competition. Generic drugs are non-brand, off-patent medicines. They benefit from a legal loophole, facing much less price regulation than branded drugs.
We have shown that an easy way to substantially bring down prices is to increase the supply of the drug. We did this by making hydrocortisone for a research study, and then asked the company that made it to launch it on the open market, and the price rapidly fell between 2017 and 2021, before the CMA had done anything about it.
NHS improvement or NHS England are ideally placed to either build factories in the UK that can make these essential drugs, or commission other companies with the relevant expertise to make the drug for the NHS at a reasonable price. Alternatively hospitals that have kept their pharmaceutical ability can be commissioned to undertake such work. We call in NHS Improvement, NHS England or the Department of Health to either make generic drugs in the UK by building plants in the UK, or commissioning companies that already have this expertise to do this.
The NHS should commission the manufacturing of generic drugs for its own use to prevent a supply shortage and compete with industry. Sign the PETITION HERE.
Hydrocortisone is an essential drug according to the World Health Organisation but this did not prevent Auden McKenzie increasing the price of this generic drug from £1.07 to £147.50 for 1 month’s supply between 2008 and 2017. The NHS was forced to pay an extra £60 million per year until 2017. Imperial College commissioned the synthesis of low strength hydrocortisone from Genesis Pharma, who then launched the drug on the open market. Until then, there was no competition.
The study, funded by the NIHR (the research arm of the NHS), required a modest investment of approximately £100,000 to initiate the process. This contributed to a reducing trend in hydrocortisone prices, from over £147.50pcm to £3.55pcm between 2017 and March 2021.
This demonstrates the effectiveness of non-profit motivation in competing with industry; an investment of £100,000 has saved the NHS over £50 million each year, without the need to invoke the CMA. The CMA has now fined industry £260 million for colluding to prevent competition, but this happened after the price fell (https://www.gov.uk/government/news/cma-finds-drug-companies-overcharged-nhs).
Hydrocortisone is just one example of the abuse of market position, but there are many more. Synacthen, Liothyronine and Lithium carbonate are examples of very cheap generics that have been “debranded” and then the price increased substantially. Very recently, Advanz pharma have been fined for raising the price of liothyronine https://www.bbc.co.uk/news/business-58009149 , but the price remains high and there will be an appeal.
The NHS should protect itself from such market failures. The fines imposed by the CMA do not affect the price and when the companies appeal, the price does not fall. An arms-length body or an ethical drug company that will make the drug for the NHS is needed.