Charles Joynson, WaveData MD, has conducted some indepth analysis to try to identify early warning signs of generic shortages. Here’s the second instalment
In the first instalment of this series, we looked at Losartan Tabs 12.5mg 28 and at the four shortages of this product which have occurred over the last ten years. We also concluded that each shortage was preceded by a low ‘unprofitable’ price which would force manufacturers out of the market, and that the lowest of these £1.64 would have had this effect on all four occasions.
Today we want to look at these low guaranteed shortage inducing prices for larger groups of products and the first step is to find a way to compare products with widely differing prices. For example, the average market price of Irbesartan Tabs 75mg 28 is less than £1.00, whereas the market price of Famciclovir Tabs 500mg 14 is over £100.00. So, we can’t simply say that any price below £3.00 risks a shortage, because some products are easy and cheap to make and transport, and others more difficult and cost more. To put all products on a level footing we need to find a better way to describe this unprofitable (£1.64) point, so the supply chain can look out for it.
The obvious choice is to use the reimbursement price of the original brand, as this is only changed sporadically every five years as part of the VPAG negotiation between the Department of Health (DHSC) and the Association of the British Pharmaceutical Industry (ABPI). Then the selling price which makes the market unprofitable and triggers a shortage could be expressed as a percentage of this reimbursement price.
Next the long-term 10 year lowest pre-shortage prices were collected from WaveData’s BPPI online service for over 500 generic products and compared with the number of concessions granted over the same time period.
In the example we used previously Losartan Tabs 12.5mg 28 the lowest shortage inducing price was £1.64 and the reimbursement price of the originator brand Cozaar Tabs 12.5mg 28 was £8.09. This means that the price that induces a shortage for this product is 20% of the brand’s reimbursement price. We can now compare this 20% point with the product’s shortage vulnerability, for which we used the number of times it had been granted a concession in the last 10 years (14).
In theory these two factors should give us a clear relationship, because very low prices should be unprofitable for manufacturers. However, the graph does not show this, so in the third and final instalment we’ll look at another approach.