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Reimbursing Generics in the UK: Is There a Better Way?

01 March 2001
By NERA Special Advisor Ian Senior

European countries have varied and often complex ways of intervening on the prices that health funds pay for generic medicines. The latter are off patent and can be supplied at prices well below those charged for the original when under patent. In general, European health authorities use instruments that impose a single or maximum reimbursement price on all products that use a given active ingredient.

NERA considers that such systems are interventionist, do not permit competition in the market, and make less savings than expected. In the UK, however, the system is to allow generic medicines to reach the market at prices determined by market forces. This has worked well in the past, but in 1999 the system appeared to become unstable. NERA studied what happened and proposed a simple improvement to the scheme that would permit the market to work better and would prevent a substantial unintentional leakage of public funds into the distribution chain. The leakage is estimated at about US$160 million per year currently.

This article was published in Scrip Magazine, March 2001.