Branded Generics, VPAS and The Future of the Generics Industry

Nov 17, 2022 | Generics

Branded generics as well as originator brands are included in the VPAS (The Voluntary Scheme for Branded Medicines Pricing and Access) reimbursement scheme. This is agreed by Government, NHS and industry to ensure the consistent and affordable supply of branded medicines to UK patients.

VPAS caps spending on branded medicines, but if there is an overspend, the additional amount is collected as a rebate from pharmaceutical companies. This rebate has increased over the last few years starting at 3.74% in 2014 and reaching 15% in 2022. However, the rebate being discussed for 2023 is forecast to be over 30%.

For companies with large £ sales pharmaceuticals this should be acceptable, but where the branded products with low £ sales there may be difficulties. This mainly means branded generics, as the majority of these (89%) are sold to pharmacies at the same price or less than the generic.

Branded generics are developed either to improve on the quality of the originator brand or to give patients some degree of consistency. They can additionally help manufacturers to guarantee orders when most of the supply is generic and goes to the supplier with the lowest price.

The NHS relies on generic companies to supply the vast majority of its pharmaceutical requirements. Some of these companies also supply branded generics alongside traditional generic medicines. If the branded generic medicines they supply are priced at generic levels, then this is very close to being a rebate on generics.

Of the 635 instances of branded generics being sold to pharmacies in November, 572 (90%) were made by companies which also sold generics. The remaining 10% were sold by specialist branded generic companies. The average sales price of branded generics being sold to pharmacies was 15% less than the generic drug tariff. Additionally 85% of the branded generics recorded were reimbursed at the price or at a lower price than the generic.

If the NHS presses through with a 30% rebate on branded generics, a number of things could happen. Firstly branded generics might disappear from the market. Secondly those 10% of companies which only sell branded generics may vanish. Thirdly the generic companies which also market branded generics may see their sales decline, discouraging their involvement in the UK market.

One additional part which branded generics play is in competition for generic prescriptions.  They do play this role despite having brand names because pharmacies can use branded products if the prescription is generic. Fewer products competing to fill generic prescriptions reduces the amount of market competition will result in increased prices.

The speed with which generic prices come down after patent expiry, loss of exclusivity and generic launch, is closely linked with the number of competing generic and branded generic license holders. If some of these organisations leave the UK, the amount of competition will decline and prices will rise.

So the NHS is in danger of shooting itself in the foot.

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