Drugs firms told to cut British NHS prices in move to slash medicines bill

Prices paid by the National Health Service to drug firms will be cut by up to a fifth from early 2014 unless the companies offer substantial reductions of their own, as British ministers try to cut more than £2 billion from the NHS’s £13 billion annual drugs bill.

"We cannot simply spend more and more on drugs – this would mean spending less and less elsewhere," said minister for health Earl Howe, warning that the NHS may pay more for drugs that perform best.

Prices for branded drugs bought by the NHS are negotiated between the government and the industry. The system, which was last negotiated in 2008 and which imposes a price cap, does not regulate prices of generic drugs or branded products sold over the counter by chemists.

British ministers have demanded cuts in prices charged to hospitals, which already get discounts from the drug firms for bulk purchases. In future the NHS would tot up the average paid by hospitals and then impose a further discount.

Rejecting the criticism, the Association of the British Pharmaceutical Industry said: "The price of our medicines is amongst the lowest in Europe and the department of health's own research confirms this. Compared with our European counterparts, we continue to struggle at getting the latest and most innovative medicines to patients.

“In fact, spending on medicines as a proportion of the entire NHS budget has fallen from 12.5 per cent in 1999 to 9.6 per cent in 2011.”

However, the industry’s negotiating hand has been weakened following accusations that firms are in league with chemists to overcharge the NHS for 20,000 drugs covered by the price regulations.

Posing as chemists, reporters from the Daily Telegraph secretly recorded drug firm sales staff offering to supply falsely inflated invoices for drugs that would be passed on to the NHS for payment. Some companies are alleged to have been ready to supply generic drugs free in return for the right to become the sole supplier to a chain of pharmacies for drugs not covered by price regulations.