Do Monthly Price Concessions (NCSOs) Mask Inefficiencies in the Drug Tariff?

Nov 22, 2022 | Generics

Where pharmacies are unable to purchase generic products at prices less than the drug tariff the DHSC sets price concessions in consultation with the PSNC using information derived from manufacturers and wholesalers.

The number of price concessions granted in each month has been growing since they were introduced in 2003. The majority of the growth has occurred since 2013, and major spikes in the number of monthly concessions have occurred in Nov 2017, Feb 2019, May 2020 and Sept 2022.

The sequence of events which ends with a concession being granted starts with competition between manufacturers. As this competition becomes more intense it forces prices down. This can take years to happen if there are few manufacturers, but can be quick when there are lots. Eventually some of the manufacturers realise that the product is no longer profitable, and decide to not to commission or release new stock. Then competition between pharmacies for the remaining stock forces prices up to a peak and may require the granting of a concession.

However, the non-profitable price which triggers manufacturer withdrawal is determined by two primary factors. The first of these is the number of active manufacturers and license holders who compete to fill generic prescriptions with either brands or generics. The second is the drug tariff.

If the number of manufacturers is low, it can take much longer for the non-profitable price to be reached because competition is less intense. Equally if the drug tariff is higher the non-profitable price may be delayed by years.

A higher drug tariff price can attract in more manufacturers, but this is dependent on their manufacturing capability.

This logic suggests that products for which concessions have been granted most frequently since 2003, either the number of manufacturers could be limited or the drug tariff could be set to a higher £ value. The former is questionable on legal and ethical grounds, but the latter might work if it were monitored and analysed.

As an example, Gabapentin Caps 300mg 100 has been granted four concessions since 2006. It has also experienced five major price spikes However, the drug tariff follows the market price of this product increasingly closely, which means it is difficult to keep it profitable. This may mean that a slight increase in the drug tariff for this product could reduce the number of shortages, concessions and price spikes. More analysis is needed though.

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