COMMITTEE FOR HEALTH, SOCIAL SERVICES AND PUBLIC SAFETY
Pharmaceutical Contractors Committee (NI): Generic Tendering
22 January 2009
Members present for all or part of the proceedings:
Mrs Michelle O’Neill (Deputy Chairperson)
Mr Thomas Buchanan
Dr Kieran Deeny
Mr Alex Easton
Mr Tommy Gallagher
Mr Samuel Gardiner
Mr John McCallister
Ms Claire McGill
Witnesses:
Mr Terry Hannawin ) Pharmaceutical Contractors Committee (NI)
Mr Gerard Greene )
The Deputy Chairperson (Mrs O’Neill):
I welcome Terry Hannawin, the chief executive of the Pharmaceutical Contractors Committee (PCC), and Gerard Greene, also of the Pharmaceutical Contractors Committee. Gentlemen, I invite you to lead off with your presentation, after which Committee members will ask a set of brief questions.
Mr Gerard Greene (Pharmaceutical Contractors Committee (NI)):
I thank the Committee for inviting us to speak about the important issue of generic tendering. We want to make the Committee aware of this issue and several related issues.
As the Deputy Chairperson said, we are from the Pharmaceutical Contractors Committee. The PCC works on behalf of 200-plus pharmacy contractors — they own all 520 pharmacies in Northern Ireland — whom it represents in its negotiations and discussions with the Department, the boards and various officials.
We provided the Committee with a copy of our statement in advance of this evidence session. We propose to go through that statement, while providing more information and background. After we have done so, the Committee will have the opportunity to ask questions.
We kick off with an explanation of the current arrangements for the supply of generic medicines in Northern Ireland through community pharmacies, as well as an examination of the Department’s proposals and the PCC’s views on those. I pass you over to my colleague Terry Hannawin, the chief executive of the PCC.
Mr Terry Hannawin (Pharmaceutical Contractors Committee (NI)):
Thank you, Deputy Chairperson. It is nice to meet you again. I thank the Committee for giving us this opportunity.
The use of generic medicines in the National Health Service has been growing steadily in recent years. In 2003, generic medicines accounted for 41% of the items that were dispensed in community pharmacies. By 2007, that figure had risen to just short of 51%. It is the Department’s policy objective to encourage the prescribing of generic medicines, where appropriate, in order to achieve maximum value for money for the NHS. I place on record that we, the Pharmaceutical Contractors Committee, fully support that policy objective.
Currently, generic medicines are supplied to patients through a well-established and extremely reliable system. Community pharmacies are able to order their NHS stock of generics from a number of wholesalers and suppliers, who provide efficient logistics cover, ensuring prompt delivery of products into pharmacies daily, and sometimes twice daily. That means that the system works very smoothly in the interest of patients.
That arrangement has been in place for many years. It has guaranteed a prompt, safe and cost-effective supply system. The presence of a number of wholesalers and suppliers in the marketplace ensures stiff competition among them to provide keen prices, which eventually benefit the NHS. That, combined with the astute purchasing practices of pharmacies, has ensured both healthy competition and good value for the NHS.
Most importantly, the system has ensured that patients can obtain their medicines when and where they need them. The system is able to manage market shortages — although rare, they are always a possibility in an international market such as ours — in order to avoid any disruption to patients. Later, I will focus specifically on the possibility of disruption to the marketplace.
There are factors at play now that did not exist before, such as the falling value of the pound and the fact that generic medicines are now being exported from the UK to other parts of the world because of the currency difference. Other pressures on the marketplace that could contribute to the possibility of shortages must also be taken into account.
We now come to the issue of the Department’s proposals. In 2008, the Department of Health, Social Services and Public Safety — under a programme that was previously titled “pharmaceutical services improvement”, but which now has been conveniently changed to “pharmaceutical clinical effectiveness” — proposed the introduction of a number of new arrangements relating to the prescribing and dispensing of generic medicines.
A key element of the Department’s plans is the introduction of regional competitive-tendering arrangements for the supply of generic medicines. Were that to be implemented, the PCC would be extremely concerned that it would create problems in the security and safety of the supply of medicines, through, for example, administrative errors and, more importantly, reduced diversity of supply sources; prices and the quality of service would, undoubtedly, be adversely affected; the process would result in reducing access for patients to a diverse range of generic medicines; and community pharmacies would suffer significant financial loss, raising the prospect of service reduction and pharmacy closures.
The PCC has grave concerns, not only about the proposals themselves but about the way in which the Department has conducted itself since raising them. There has been no consultation with the PCC, and the concerns that we, and many other organisations, have raised seem to have fallen on deaf ears. It appears that they do not want to listen. The fact that at least three of the major suppliers of generic medicines in the UK have declined to participate in the process or to participate in the prospective central-tendering arrangement should have, one would have thought, caused the Department to think again. Apparently not.
Pharmacy contractors in Northern Ireland are efficient and effective procurers of NHS medicines. The supply-chain arrangements are secure, reliable and safe. Any proposal for such a radical change needs to be developed carefully and risk-assessed. Moreover, the case for change must be proven in advance. Just over a year ago, the Department made a similar change to the supply of wound-care products and dressings in Northern Ireland. Since July 2007, we have a new Northern Ireland-specific drug tariff for dressings — wound-care products generally. That has resulted in 95% of the wound-care products available in the rest of the UK not being available in Northern Ireland, and that bodes ill for this, even more radical, proposal.
The PCC has commissioned an analysis and critique of the proposal from an independent, world-leading expert, Professor George Yarrow of Oxford University. His report will be available soon — hopefully within the next week — and we intend to provide each Committee member with a copy. It is a fairly weighty document, and we hope that members will give it some time and think carefully about it.
The generics central-tendering proposal is a distraction from more important, patient-related matters that we should be discussing with the Department. In particular, I suggest the introduction of a new pharmacy contract to help us build on the recently agreed minor-ailments service.
That concludes our presentation. We will be delighted to try to answer any questions your Committee members may have.
The Deputy Chairperson:
Thank you very much. Three pharmacists in my town have raised the issue with me. They are genuinely concerned about the points that you have raised about shortages in supply and about the potential problems to be faced down the line. Am I correct in saying that the proposals are due to come into effect in April?
Mr Hannawin:
I believe that the Department intends to establish central-tendering arrangements from April. However, I do not think that the proposals have, as yet, received ministerial approval. The whole issue is shrouded in mystery and half-truths. Even at this stage, there is a great deal of information that we do not have about the detail of the proposals.
The Deputy Chairperson:
It is a disgrace that the Department is not engaging with the people who are providing the service. As you have said, it has not been proven that this measure will improve services. The Minister will be coming to the Committee in two weeks’ time, and I intend to raise that issue with him before he makes a decision. It is ludicrous to think that he would proceed in the absence of correspondence with the PCC.
I have a question about the similar change to the supply of wound-care products, and the fact that 95% of the wound-care products available are not available to pharmacists here in the North.
Mr Hannawin:
That is correct.
The Deputy Chairperson:
Is that a similar type of project?
Mr Hannawin:
It is of a similar project, yet there is a much narrower focus on products for wound care and dressings. I have with me a heading from a public paper distributed by the Eastern Health and Social Services Board. That paper states that the Department has decided to slash the number of wound dressings available on the drug tariff, without much regard for patients, while promising that the position would be reviewed after 12 months. I have yet to see any review, and I doubt whether any such review exists. If it does, the PCC has certainly not seen it.
The Deputy Chairperson:
It should be noted that the PCC actually supports the Department’s policy and encourages the prescribing of generic medicine. Therefore, you are not totally opposed to the proposals, but you are opposed to the fact that no proper consultation or engagement has taken place with the PCC on how the initiative should progress and how it will benefit the public.
Mr Hannawin:
The PCC is absolutely not opposed to the promotion of generic prescribing. However, it is opposed to the very high-risk strategy that the Department is considering in order to reduce the competition in the marketplace and reduce the number of suppliers. We also want to highlight the fact that the Department has not properly assessed the associated risks
Furthermore, as part of a much wider study some seven or eight years ago, the Department of Health in Whitehall rejected a similar proposal as being unworkable, unrealistic and not in the NHS’s long-term interests. That is a matter of public record.
Mr Greene:
We support of the uptake and increased use of generics. Through the current practices of community pharmacy and the industry in the UK, the generic prices here and in the rest of the UK are among the lowest in Europe. We are already at rock bottom when it comes to prices, and we are delivering good value for money.
The PCC is not the only organisation to voice concerns about the proposals. Other bodies and groups such as generic-medicine manufacturers, generic-medicine associations, and wholesaling organisations and suppliers involved in the supply of medicines have also voiced concerns. Those organisations have examined the situation from their point of view, and are unhappy with the proposals, the process and what is trying to be achieved. They have seen the risks involved, are not prepared to be involved, and, as a result, three of the leading suppliers and manufacturers of generic medicines in the UK — one of which is number one in Europe — have withdrawn from the tendering process. There is industry-wide concern about the proposals, and, as Terry has said, similar proposals that were examined before for England and Wales were rejected.
Mr Gallagher:
I thank the witnesses for their presentation. There seems to be a high level of satisfaction with the services our pharmacies provide to the public; therefore, it is very surprising that that initiative is to be introduced and that there has been no consultation with the PCC about it. The Committee must urgently examine that issue, and the Deputy Chairperson has recognised that.
The Department has a competitive tendering process in mind. Terry has referred to the keen competition in the process that this region plays, and to the loss of business and possible closure of pharmacies as a result of that process — factors that could have a great impact in all areas. Will you elaborate on those points, and on how they will impact on pharmacies?
Mr Hannawin:
The PCC obviously regards the financial impact on pharmacies as being extremely important. However, we want the Committee to focus much more on the risk to patients than on the risk to community pharmacies, because the former are substantive.
There are currently up 50 sources for commonly used generic medicines, but the main source of generic medicines for pharmacies in Northern Ireland is the two major wholesalers, which, in turn, source their products from a variety of suppliers. In all situations, everyone is trying to get the best financial deal, so competition exists in the marketplace to keep a squeeze on prices. If the Department’s proposals are adopted, they will remove a significant chunk of that competition, because the tendering process will reduce the number of suppliers to three, by the Department’s reckoning. That is a very dangerous situation for the Department to be in.
I will give members a dramatic example that suits the story. I recently came across a drug that our own pharmacy at home had purchased. It is a hypnotic tablet — a sleeping tablet. It is not widely used, admittedly, but, inside two years, the price has risen from around £5 for a pack of 28 tablets to £69. Manufacturers have decided that demand for that product is so slight that they are not going to continue making it, leaving only one manufacturer, as far as I am aware, to make it. Therefore, that manufacturer can charge whatever it likes for that product. That is a danger that the Department underestimates.
I now wish to describe the effect that the proposals will have on pharmacies. Pharmacies depend on purchase profits, which are available on generic medicines and other products as an income stream with which to support their existence. Three years ago, the situation became much clearer, and above board, when, jointly with the Department, the PCC (NI) conducted a cost inquiry, which showed a significant gap between the funding that was provided for us by the Department and the resources that we needed in order to run the service. That study established the cost of running pharmaceutical services in Northern Ireland at that time. The funding gap is currently being met by our ability to make purchase profits on the products that we supply.
Mr Easton:
First, it is not right that you have not been consulted — that must be corrected. Is the Department introducing central tendering because it thinks that it will save money? Is that what this is all about?
Mr Greene:
There is a financial aspect to the Department’s proposals, but it also believes that the proposed new arrangements will improve compliance and provide uniformity of product so that there is less confusion. However, I return to the point that was made about the main suppliers of generic medicines in Northern Ireland, such as Teva and Actavis, who have pulled out. Those suppliers have made strident efforts in recent years. They were responsible for bringing the vast majority of generic medicines into Northern Ireland, standardising the products and improving their appearance so that less confusion arises. They are already doing that, but they have looked at the new tendering initiative and said that they do not like what they see. As a result, they decided not to be involved and withdrew from the process. That flies in the face of the Department’s stated aim of improving product presentation.
Mr Easton:
In theory, the Department’s proposals could make medicines dearer because there is a smaller supply.
Mr Greene:
Prices come down and product availability is ensured when there is competition in the market. The supply of medicines to the patient will be compromised if there is a reduction in the number of suppliers to two or three. When the tender is renewed in a couple of years’ time, those suppliers will have a captive market, because every other supplier will have gone, and prices will go up. Mr Hannawin has given some example of what might happen. I can also give members examples of branded products that are cheaper than the generic medicines because of that very situation.
As community pharmacists, we welcome the opportunity to see patients taking their medicines correctly and appropriately, thus improving compliance. We want to be involved in that process. However, the vehicle for achieving that goal is a new pharmacy contract. We should be sitting down with the Department and having conversations about the services that we will provide in future so that we can improve compliance and work with the Department in achieving its objectives. However, that must form part of a package that allows for the effective provision of services. We must attain the current levels of patient satisfaction.
The Deputy Chairperson:
We will not arrive at that point without dialogue.
Dr Deeny:
Thank you, gentlemen; it is good to talk to you again. It is a disgrace that you were not afforded proper consultation. Sometimes, I despair. I have worked in the Health Service for years, and I do not believe that the Department is in touch with what really happens.
You talked about the issue of compliance. This morning, I held a surgery during which I received a phone call from a pharmacist. There are several community pharmacists in my area who play a very important role in patient care. Patients must come first. I have no doubt that the tendering proposal will prove detrimental to our patients. The pharmacist telephoned me to say that a patient had requested a prescription too early, and he was concerned about meeting the compliance requirements. I am aware of situations in which a patient has not received their monthly prescription on time. Therefore, there are pharmacists who are involved in helping people to comply with the requirements.
The merits of generic medication are not up for argument. Every health professional believes that generic drugs represent the way forward. I have seen over the years that competition has brought down prices. The drugs budget has dropped dramatically over the years — particularly during the past 10 years. Alex Easton’s question was valid: is the tendering proposal simply a cost-cutting exercise? As a GP, I can state that if I were to lose half of the community pharmacies in my area, I have no doubt that my patients would suffer.
I have said before that my father, God rest him, was a pharmacist, so I have a particular interest in the issue. Having grown up around a pharmacy and seen the work that pharmacists do, I cannot believe the solution that the Department has come up with.
Terry mentioned that the value of the pound is dropping. If the Department’s proposal comes to pass, there is no doubt that there will be a temptation to export drugs, and we could run out. Most of the drugs that I prescribe for a patient are available immediately at our community pharmacy. If the pharmacist does not have a particular drug, it is usually available the next day. That is how quick the process is at present.
I foresee the Department’s proposal making matters much more difficult, including making it more difficult to access drugs, and I do not believe that the Department is in touch with what is really going on. The Department does not talk to the pharmacists, GPs and nurses who are involved in those processes.
Our Committee has successfully applied pressure on the issue of minor ailments. We should pat ourselves on the back for that. Many of my GP colleagues, through their professional bodies, were furious about that matter and wanted to see minor-ailments provision back on track. The Department has backtracked on that issue, and that is good. They will have to backtrack on this issue, too.
The witnesses mentioned that there may be three suppliers only. Are we expecting regionalisation to the extent of there being three bodies for the whole of Northern Ireland?
Mr Greene:
There is practically no detail on what is being proposed and how it will be operated. We simply do not know. There is some indication that one area will be provided with one particular brand of drug, and other areas may be provided with another. We are living off scraps, and we just do not know the detail. Patients come to us daily, depending on us to supply their medicines. Potentially, a new system will be introduced in which we have no confidence. Many other players in the industry also have no confidence in that system. There is a huge risk.
Dr Deeny:
This is not about saving money. The Department’s proposal is liable to jeopardise the livelihoods of community pharmacists. In some other countries, health professionals such as nurses go on strike. We are not supposed to do that. Do you believe that the feeling among pharmacists, whose livelihoods may be in danger, is that drastic action may have to be taken? There must be consultation, and I presume that the situation will not develop that far. However, we are in a very serious situation.
Mr Hannawin:
It is a very serious situation, but I do not believe that we would ever contemplate such action.
Dr Deeny:
We in the caring professions are not supposed to take such action.
Mr Hannawin:
We could not stand idly by while people’s health was put at real risk, no matter the circumstances. We hope that the situation will never reach that stage.
I thank you for your support. I wish to pick up on the point that was made about the minor-ailments scheme, and the role that many Committee members played in helping to get that restored. I pay tribute to the Minister, who eventually got actively involved, after which matters were sorted out very quickly.
In reference to the point that was made about possible scarcities: the market is very dodgy, it does not take much to upset it, believe you me. The recent outbreak of flu and flu-like illnesses put everybody on the pin of their collar in trying to cope. The wholesalers were under pressure in providing medicines, antibiotics and various necessities. There was a great deal of real pressure put on suppliers at that time. Had there been a demand for additional supplies of flu vaccine, for example, none would have been available in Northern Ireland, because, some years ago, the Department assumed responsibility for providing flu vaccine in Northern Ireland through a system of direct procurement, which is a very ropey system indeed. That decision may be regretted in time.
I now wish to speak about pressure on medicines and other products. I mentioned earlier that the falling value of the pound has contributed to a worsening situation. It is now more lucrative for companies to send their medicines to mainland Europe than it is to send them to the UK. Any spare capacity that those companies have is diverted towards Europe, because it pays better.
Allied to that, and which makes the situation worse, is a Government-inspired scheme that has been in operation for many years called the pharmaceutical price regulation scheme (PPRS). That is a UK-wide scheme, whereby manufacturers of drugs sit down with the Government every five years and do a deal on the cost of medicines — mainly branded medicines. Some branded generic medicines are also affected by that. The outcome of that meeting this year was to impose a 3·9% cut across the board in manufacturers’ drug prices. I understand that that will come into effect on 1 February. Therefore, our currently available stock will effectively be devalued on 1 February by 3·9%. If one supposes that the average pharmacy carries around £30,000 worth of stock, one can work out the total loss to pharmacists.
However, there is a month’s grace before those reduced prices are imposed, but it is another pressure on the system, because pharmacists want to keep their stocks as tight as possible in order to avoid the adverse impact of the 3·9% devaluation. That is another competing pressure.
Thirdly, because of the reduced value of the pound, the big drug companies are now imposing quotas in the UK generally, and in Northern Ireland particularly. They are afraid of any spare capacity in the marketplace that may mean that people can buy excess supplies in Northern Ireland and export them to other parts of Europe, or, indeed, to the Republic of Ireland.
Those are three extra elements that combine to put additional pressure on the whole system. If there is now a possibility of central tendering, when the large companies are stating that they do not want to have anything to do with it, patients are being placed in an extremely risky situation.
Mr McCallister:
First, that the Department is trying to save money and be more efficient is not in itself a bad thing. You are quite right, Terry, to say that the Minister’s involvement in sorting out the difficulties with the minor-ailments scheme was very welcome, and action was taken speedily when he did become involved. I hope that that will also be the case with this issue. Have you had any meetings with the Department on the issue of generic tendering?
Mr Hannawin:
I have had no substantive meetings, but I received a couple of letters informing us of the scope of the proposals — that is all. There has been no detailed discussion. I believe that that applies also to wholesalers, because, as far as I know, wholesalers have not taken any decisions to distribute or stock the drugs in the event of central tendering being put in place.
Mr McCallister:
Is the issue that the Minister should get involved in order to get it sorted out? Not even the Prime Minister has control over the fall in the value of the pound and other issues. It is not something that we have not experienced in the past, although possibly never as dramatically. However, we have had a run on the pound at different times in history. Getting around a table would be the best way in which to sort out the matter.
Mr Hannawin:
We intend to bring the matter to the Minister’s attention, and we will provide him with a copy of Professor Yarrow’s report. If the Committee considers it to be helpful, we are prepared to see whether we can organise for Professor Yarrow to attend one of your meetings. He is a renowned world expert, and when you have had a chance to review and consider his report, you will realise that it needs to be thought about carefully.
Mr McCallister:
Do you hope that that will be the beginning of a dialogue with the Department to try to work through those issues?
Mr Hannawin:
We are always ready to talk.
Mr Gardiner:
Deputy Chairperson, I want to touch on two points that you raised. Mr Hannawin highlighted the fact that the Department made a similar change to the supply of wound-care products in July 2007, which resulted in 95% of the wound-care products available in the rest of the United Kingdom not being available in Northern Ireland. That bodes ill for this even more radical proposal. We should not wait until the Minister appears before the Committee in two weeks’ time. We want to see that pharmacists have the materials available to be able to provide for the sick and needy people of Northern Ireland. Rather than spring the matter on the Minister when he comes to the Committee — when he may not have an answer for us — we should write to him and highlight those points, so that we receive speedy answers. We cannot turn a blind eye to the matter. I propose that the Committee do not wait to take action.
The Deputy Chairperson:
We can certainly send a letter, along with a transcript of today’s meeting. However, the Minister likes to be aware of what we will raise with him so that he comes equipped.
Mr Gardiner:
He may be advised and equipped, but we must put our concerns in writing.
Mrs McGill:
Like you, Deputy Chairperson, I received a briefing from a pharmacist from west Tyrone some time ago, and I found it very helpful. I listened to Mr Greene’s examples about how branded drugs can be more expensive. Branded drugs can be less expensive than generic drugs, and that point is sometimes overlooked. I, and many others, would not have thought that to be the case. Mr Gallagher mentioned community pharmacists earlier, and Kieran Denney responded. Mr Hannawin’s response was that he did not want us to concentrate on that. However, as an MLA who serves a rural community, I do tend to concentrate on that issue, although not entirely. Reduced services and pharmacies having to close are key issues for those of us in rural communities, and we do not want to see that happen.
The Deputy Chairperson:
That concludes the questions. Thank you for attending the Committee. We will be in touch. We will write to the Minister and speak to him in a few weeks’ time. I hope that we can start some dialogue and that the matter can be resolved.