Charles Joynson, WaveData MD, has conducted some indepth analysis to try to identify early warning signs of generic shortages. Here’s the first instalment.
Over the last few years, WaveData has repeatedly analysed shortages and concessions, trying to find links with market prices. The connection seems fairly obvious to us, with 24 years of historical market price data we have the luxury of having the right data to be able to analyse long term pricing and concessions side by side. We strongly believe that the primary triggers that cause shortages are based on two key factors.
The first is the reduction in the Drug Tariff month on month, and the second is the free enterprise price based competition between manufacturers. This eventually leads to a situation where a product is being sold to pharmacies and dispensing doctors for prices which manufacturers realise are unsustainable and unprofitable. At this point, companies will typically decide not to commission further stock from their contract manufacturers. This results in a shortage as supplies start to dry up and stock on pharmacy shelves becomes depleted. Eventually, in consultation with Community Pharmacy England (PSNC) the department of health (DHSC) grants a concessionary price to help pharmacist remain profitable. But which price is the unprofitable one which precedes and triggers a shortage? Is it any price below £5? Or is there some better way of expressing this?
As an example we looked at Losartan Tabs 12.5mg 28 which has had four blocks of concessions granted over the last 10 years. Each of these was accompanied by a shortage and a temporary price increase. Each was also preceded by a low price which caused manufacturers to cancel further batches of stock. The four low prices which preceded the shortages were £1.64, £2.86, £2.11 and £1.65. However, which of these is the ‘unprofitable’ price which would always force manufacturers out of the market in the future? We can say that £2.86 had this effect on one occasion, but on the others the market price dropped to this level without causing a shortage. Market prices falling to £2.11 indua shortage on two occasions, and £1.65 on three. Only the lowest price of £1.64 would have induced a shortage on all four occasions. Therefore we can be fairly confident in predicting that if in the future the average price of Losartan Tabs 12.5mg 28 falls to £1.64 there will be a shortage.