Penny-pinching is leading to avoidable medicine shortages

A longstanding drive to save money on the medicines bill is leading to easily preventable medicine shortages and avoidable harm to patients.

Company Chemists’ Association (CCA) analysis finds that:

The Government has squeezed the price it is willing to pay for many medicines so much that the UK is no longer an attractive market to many manufacturers and suppliers.
Many common medicines subsequently go into short supply.
The taxpayer is forced to pay inflated prices to secure the supply of those medicines, far outweighing the savings made from driving down prices in the first place.
Patients and pharmacies find themselves at the very end of a complex medicines supply chain, bearing the brunt of perfectly avoidable medicine shortages.

Read the report on medicine shortages

Atorvastatin

An 8-month ‘price concession’ cost the taxpayer £24.5m – more than three times the savings made (£7.2m) by reducing the rate paid for the medicine over a 16-month period (January 2022 – April 2023).

Between January 2022 and April 2023, the government reduced the rate it paid for 28 x 20mg tablets[1] from an average of £1.27 to £0.92[2]. A major manufacturer subsequently pulled out of the UK market, leading to a shortage and a surge in prices.

The Government paid 7% less for atorvastatin between September 2020 and April 2023, despite prescriptions increasing by more than a fifth (17%) during that time[3]. Atorvastatin was prescribed 65m times in 2023/24 and has been the most prescribed medicine since 2016[4]. It helps to lower cholesterol and reduce the risk of heart attacks and strokes.

Omeprazole

The taxpayer footed a £43.2m bill during an 8-month price concession period. This followed a decision to reduce the average price paid for a 28 capsule box of omeprazole 20mg by 24% (27p)[5], saving £9.3m.

The medicine is widely used to control indigestion, heartburn and acid reflux as well as treat and prevent stomach ulcers.

Urgent action required to ensure patients receive the medicines they need

The CCA warn that without action, the vicious cycle of shortages will continue, leading to more and more patients being affected. They call for immediate action by:

Investing in competitive pricing for medicines to make the UK market more attractive for global manufacturers and suppliers.
Increasing the ‘retained margin’ available for community pharmacies to further incentivise the effective buying of medicines by pharmacies, giving the NHS best possible value.

Longer-term, the CCA urge the Government to support an end-to-end review of the UK medicines supply chain to ensure it is resilient and ensures ‘medicines security’.

Malcolm Harrison, Chief Executive of the CCA said: “Saving pennies is costing the taxpayer pounds with patients facing a ‘new normal’ of rolling medicine shortages.

Pharmacies find themselves at the sharp end – either being forced to dispense medicines at a loss or simply unable to source medicines for patients that urgently need them.

The current model of penny-pinching simply no longer works in the public interest.

The stranglehold placed on community pharmacies must be released so that they have breathing space to competitively buy medicines for the NHS.

The Government must invest to make the UK a far more attractive place to supply medicines”.

ENDS

NOTES TO EDITORS

Company Chemists’ Association (CCA)

The CCA is the trade association for large pharmacy operators across England, Scotland, and Wales. The CCA membership includes ASDA, Boots, Morrisons, Pharmacy2U, Rowlands Pharmacy, Superdrug, Tesco, and Well.

Medicines supply in the UK

Medicines, appliances, and medical devices cost the NHS an estimated £18.5 billion in 2022/23[6]^.
Medicines are the second biggest cost to the NHS[7], with £1 in every £7 spent on medicines.
The annual cost of medicines dispensed by community pharmacies continues to rise and in 2023/24 totalled £9.5 billion[8].
The NHS writes prescriptions for over 1.1 billion medicines in primary care every year[9].
Community pharmacies purchase the medicines needed by NHS patients on an open market and, after they are dispensed to patients, pharmacies are reimbursed by the NHS at a price determined by the government.
Most of the medicines used in the UK are imported from around the world, in what is a global marketplace.
The British Generics Manufacturers Association[10] explains that “some of the world’s largest generic companies do not provide their complete portfolios to the NHS”. They see the UK as an “…increasingly difficult, and commercially unattractive, market to supply”.
The Department of Health and Social Care (DHSC) publishes a list of what it will pay for every medicine supplied to the NHS in the ‘Drug Tariff’. This list is updated every three months. To save taxpayer money, the DHSC continually reviews the market price for medicines and keeps the price they pay as low as possible.
If pharmacies can buy medicines for less than the Drug Tariff price, they retain some of this difference – the ‘retained margin’. The retained margin available to pharmacies in England is closely monitored and capped at £800m each year.
The Pharmacy Pressures Survey 2024[11] found that:
- 72% of community pharmacy staff report facing multiple medicine supply issues on a daily basis.
- 79% of pharmacy team members report that patient health is at risk due to medicine supply issues.
- 94% of pharmacy owners report that their teams now spend more time sourcing medicines compared to last year.
- 84% of pharmacy team members said that medicine supply issues had led to patient aggression in their pharmacy.

Retained margin

The retained margin mechanism incentivises community pharmacies to buy medicines at the lowest possible price for the NHS.
Community pharmacies save the NHS on average over £750 million each year by procuring medicines efficiently. This is based on estimated figures in the first four years following the introduction of retained margin[12].
The core value of retained margin has remained static for a decade. This is despite a nearly 14% growth in the number of medicines dispensed by community pharmacies. It was last increased in 2014. The amount of margin now available per medicine is 12% less than it was a decade ago. This is before inflationary growth in pricing and costs are considered. Static retained margin has led to a real terms cut of nearly a third when accounting for inflation; around £330 million a year.

Price concessions

If the Drug Tariff price is found to be significantly below the market price the DHSC will occasionally introduce a temporary higher price (‘price concession’), to enable procurement and protect supply.
In the last ten years, 2014/15 to 2023/24, the number of price concessions has risen from 195 to 1,640 per year; an increase of over 740%[13].

[1] English Prescribing Dataset (EPD) – Datasets – Open Data Portal BETA (nhsbsa.net)

[2] Drug Tariff Part VIII | NHSBSA

[3] Atorvastatin: BNF Code 0212000B0 | OpenPrescribing

[4] Prescription Cost Analysis – England 2023/24 | NHSBSA

[5] Drug Tariff Part VIII | NHSBSA

[6] NHS launches latest report on prescribing costs | NHS Business Services News (nhsbsa.nhs.uk)

[7] NHS England » Breaking down the barriers

[8] PD1 Reports | NHSBSA

[9] PD1 Reports | NHSBSA

[10] BGMA-Manifesto-Final.pdf (britishgenerics.co.uk)

[11] CPE, Pharmacy Pressures Survey 2024 – Medicines Supply Report

[12] The Community Pharmacy Contractual Framework and the retained medicine margin (nao.org.uk)