The Department of Health has introduced a new Bill in parliament that will enable the government to limit the cost of unbranded medicines in case of unreasonable price increases.
The Health Service Medical Supplies (Costs) Bill aims to improve how the government controls the cost of health service medicines, so that the two existing voluntary and statutory scheme for price regulation are better aligned.
According to the Department of Health, this will deliver additional savings for the NHS of around £88 million per year from products covered by the reformed statutory scheme, based on a payment percentage of 7.8 percent, through the exact percentage will - subject to the passage of the Bill through parliament - be consulted on next year.
The Bill will also allow the government to take action on excessive price increases on an unbranded medicines, regardless of whether the manufacturer or supplier is taking part in the voluntary price regulation scheme for their branded products, and give a new power requiring those who manufacture, distribute or supply health service medicines and other medical supplies to provide information to the Secretary of State, such as on pricing.
"This government values the contribution made by the pharmaceutical sector to UK industry and to patients, but on behalf of taxpayers and the NHS we must ensure that we get the best possible value for money - and this Bill will help us to do just that," said Minister for Health Lord Prior of Brampton.
"We will continue to work closely with the pharmaceutical sector to make a success of these new measures, and all the money saved will be reinvested in the NHS to help provide the highest quality of care for patients."
Commenting on the Bill, Warwick Smith, Director General of the British Generic Manufacturers Association (BGMA), said: "We understand the government's desire to monitor and control the prices of NHS medicines where they are not effectively limited by competition. But we must recognise that the UK benefits from one of the most competitive generic medicines markets in Europe delivering some of the lowest prices available.
"Where competition is not controlling prices, our arrangements provide for the Department of Health to intervene and if necessary they can refer cases to the Competition and Markets Authority. We need to make this intervention work effectively in these rare extreme cases and not put at risk a system which generally works extremely well for patients and the NHS."
In 2014 the statutory scheme covered around 6% of branded medicines sales in the UK, equating to around £710 million, while the PPRS covers around 75% of branded medicines sales, worth around £8.3 billion.