It would seem sensible to assume that profitable products are less likely to suffer shortages, concessions and price spikes than products where profit is hard to come by. Charles Joynson, WaveData MD, compared the reimbursement price and the average market price for all the products in the English drug tariff over the last 10 years.
Those products which had not been granted any concessions by DHSC had an average ratio of 1.75 between the market price and the drug tariff. This means that on average the drug tariff was 1.75 times the average market price. For example, for an average product could have a market price of a £1 and a reimbursement price of £1.75.
At the other end of the scale, those products which have been granted DHSC concessions on at least 40 occasions had an average ratio between drug tariff and the market price of 0.87. In real terms, this would mean that a product would have a market price of £1, but a reimbursement price of £0.87.
Between the two extremes there are two trigger points. The first is about 1.6, which means that if the reimbursement price is less than 1.6 times the average market price the product is likely to be granted concessions.
The second trigger point exists at the 1 to 1 level. This means that the reimbursement price is less than the market price. In these grossly unprofitable situations, concessions occur far more frequently, with an occurrence of at least 30 over the last 10 years, or 3 months of concession per year.
Concessions bring with them the cost of the concession payments to pharmacies, but other costs include pharmacist and GP time, the difficulty of sourcing products and the harm done to patients who are unable to get their medications.