Generic drugs are identical in dose, strength, safety, efficacy, administration and intended use to their branded counterparts. They are produced after a product’s patent has expired, after 20 years. They are much cheaper to produce and these savings are passed on to the buyer: generics are much cheaper than their branded counterparts.
An investigation by UK newspaper The Times, the findings of which were released in a June 2016 report, found that a small number of UK companies have made huge profits after increasing the prices of generic drugs. The report found that more than 50 generic drugs had increased in price, with over 30 increasing by more than 1,000%, with the cash-strapped NHS forced to accept these prices.
The companies were able to do this mainly due to two reasons: regulatory loopholes and a lack of competition.
The regulation that usually controls the price of drugs, the Pharmaceutical Price Regulation Scheme, applies only to branded drugs still protected by patents. The Price Regulation Scheme does not apply to generics. In these cases, what usually stops prices from being driven up is competition. The UK’s market is usually “highly competitive”, says Dr Richard Torbett, executive director commercial at the Association of the British Pharmaceutical Industry (APBI). However, the drugs that have experienced price hikes in recent years have been chosen because they have little to no competition, giving the companies a monopoly and giving them the freedom to set prices themselves.
The companies involved have been widely criticized by the APBI, the government, and the NHS. The government is looking into closing the existing loophole so that companies can no longer exploit the NHS, but it is not clear how long it will take.