Sustainability
The off-patent industry in the UK is among the most efficient in the world, with prices currently the lowest in Europe. Targeted policy and proportionate regulation are required if the industry is to remain sustainable while delivering savings and funding the necessary development of more complex medicines, including biosimilars.
Market sustainability
The price paid by the NHS for generic medicines is not that charged by manufacturers but includes distribution costs (which vary depending on the product type) and the retained margin for community pharmacy.
Typically, the reimbursement price of a generic medicine listed in Category M of the Drug Tariff may amount to approximately twice (or more) the manufacturer's actual selling price (ASP).
For years, competitive procurement of medicines for the NHS by community pharmacies has driven down the prices of generic medicines. This model has saved taxpayers billions of pounds. Unfortunately, prices for generic medicines are at a potentially unsustainable low point.
At present, the reimbursement price for over 850 million generic medicine packs is less than £1 for up to a month's supply. This needs to be addressed for the market to continue successfully functioning.
Market reform
Prices cannot continue to go down without a risk of eventually breaking a system of medicines pricing and reimbursement that each year drives generic competition, saving the NHS £20 billion each year. In the short to medium term, it could mean that more patients will be unable to get their treatments from their local pharmacy despite an adequate supply existing.
This risks exacerbating public perception that NHS medicine shortages are on the rise, when the market is comparatively well supplied.
Medicines UK is working with the government to look at ways to spread the reimbursement margin so that it goes further and makes it more profitable for pharmacies to dispense more medicines. But this will only do so much. For the next community pharmacy agreement, which takes effect from April 2026, the system needs reform, or the reimbursement margin needs to rise.
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