Why do generic drug prices sometimes go up? :: C+D

The content of this article was written by Accord Healthcare

Q. Why do generic drug prices sometimes go up?

A. In many sectors, supply and demand have a major influence on prices and generic pharmaceutical drugs are no exception. Due to the freedom of pricing that operates in the UK, combined with being one of the largest prescribers of generic drugs, this often means that there are a number of competitors for a given drug at a given time.(1) With a few clinical exceptions, pharmacists are able to swap medicines, which encourages competition between pharmaceutical manufacturers, often leading to the UK having the lowest prices in Europe.(1) In fact, the average cost of a 28-day supply of generic medicines provided by Accord to the NHS is less than £1.15 – less than a cup of mass-market coffee.(2)

So why are prices rising? The answer is a myriad of potential factors. Sometimes when a price gets too low, it is no longer viable for manufacturers to produce the drug and the competition goes down. This can trigger a cost-raising catalyst, luring manufacturers in until drug prices stabilize again.

Likewise, in the event of shortages and disruptions in supply, often caused by logistical challenges in transporting raw materials across countries, the laws of economics usually take over and prices rise.

Other inflationary factors in raw materials, logistics or supply shocks due to Good Manufacturing Practices (GMP) issues may also play a role. As the UK market can react and prices can change quickly, supply is very often maintained and, although prices can rise in the short term, they usually always fall back and reconcile. This ‘virtuous circle’ was explained in a report by independent economics consultancy Oxera, which was commissioned by the British Generics Medicines Association (BGMA) to prepare a report on the supply of generic medicines in the UK to determine whether the existing market and regulatory mechanisms were fit for purpose.(1)

Their analysis showed that typically when a generic drug first hits the market, the price of the generic drops by 70% in the first six months from the date of origination, dropping to 80 to 90% over a four-year period.(1)

However, in our experience, the 90% drop usually occurs a few weeks after the initial 70% drop.

This is a trend that we can see when we analyze the price trends of the past few years. Despite major events such as the Falsified Medicines Directive (FMD), Brexit, the Covid pandemic and incidents such as the blockage of the Suez Canal, price fluctuations were short-lived, with temporary spikes resolving within months to reflect a well-supplied market.

Figure 1: Excerpt from Accord Partner Platform: Beyond the Headlines February 2022

As mentioned, pharmacists play a central role in balancing the “virtuous circle” and keep manufacturers on their toes when it comes to offering a competitive price. It is a system that has proven effective and works. However, looking at the big picture, sometimes when there is a difference of a few cents between prices, it is worth considering environmental credentials, supply chain reliability and service providers. additional assistance provided. These additional factors may have greater value, lead to longer-term sustainability, and help maintain consistent market supply levels.

If you want to see analysis of generic drug reimbursement prices and longer term price trends, you can find monthly ‘Beyond the Headlines’ reports at www.accordpartnerplatform.co.uk. You will also find a copy of our recent white paper “Generics and Biosimilars: Innovation not Imitation” here, which explores and challenges perceptions of the generic drug industry.

Biography of Peter Kelly

Pete Kelly is managing director of Accord UK and vice-president of the British Generics Medicines Association (BGMA). Accord is one of Europe’s largest generics and biosimilars manufacturers and currently supplies 1 in 5 generic medicines in the UK. Pete has worked in the pharmaceutical industry for over 20 years, the last 15 years at Agreement in a number of senior business positions. Alongside his role as Vice President of the BGMA, Pete previously chaired the BGMA’s Economic and Trade Working Group.

1. Oxera. The supply of generic drugs in the UK. 2019.

2. Health Agreement. Data on file.