How to create a shortage…….

Jan 30, 2024 | General, Generics, WaveData News, WaveData Updates

We were chatting about shortages with some peers last week at the HDA conference.  This got us playing devil’s advocate, how would we create a shortage?

Firstly, we’d cut the reimbursement price of a commonly used generic product to a fraction of its former value. That would do the trick quite nicely, provided it was done quickly. It might help if this price cut happened just before the CPHI conference which last year was in late October in Barcelona. This would give manufacturers a chance to take the product off their requirements list and for contract manufacturers to remove it from theirs. Then make another even more drastic cut to the reimbursement price shortly after the conference to make sure that any foolishly optimistic manufacturers took it off their lists and incurred legal costs at the same time.

There was a time when generic manufacturers continued to make a long list of unprofitable products. These were considered as ‘door openers’ and helped sales people get into pharmacies. But profit margins and reimbursement prices have fallen over the years, with category M and VPAG eating into manufacturer profits. Now any unprofitable product is likely to be dropped very fast, as companies have to remain profitable so they can pay their employees and pass on dividends to shareholders (which may be our own pension funds). Therefore, their ability to absorb price cuts has been drastically eroded.

The danger with any prediction, particularly of shortages, is that as soon as market players see this they start stockpiling. However, the cuts to the reimbursement prices of Apixaban Tablets have been so dramatic that the market almost certainly know and is already reacting to them.

At launch in May 2022 the drug tariff reimbursement price of Apixaban Tabs 5mg 56 was £53.20. In October 2023 this fell to £15.73, and in January 2024 to £4.97.

This was a category C product which was switched to category M in July 2023 with a cut in the reimbursement price from £53.20 to £43.12. But the switch to category M may have been taken as a warning of further price cuts to come by some market players, which is very much what happened as the current English drug tariff is £4.97.

WaveData and others suspect these dramatic cuts to the drug tariff will induce a shortage. We’ll see what happens in the next couple of months……

Share This