Drug firms told to cut 'rip-off' prices by 45%

NHS drugs suppliers were ordered to slash their drug prices by ministers yesterday to end a £200m-a-year "rip off" against the health service.

Ministers took emergency action after drug prices soared by 45 per cent. They were angered by evidence that suppliers of so-called "generic", unbranded drugs were hoarding them to push up the prices to the NHS.

"I am determined that the NHS will not be ripped off," said Lord Hunt of Kings Heath, the Health minister. "It would seem to me to be impossible to justify a situation where in 15 months prices have risen by 45 per cent. There is no doubt that we have been forced to pay them money which should have been used for other health care."

The Government will use statutory powers to cut the price of generic drugs supplied to the NHS to the level of 15 months ago. Companies could be fined up to £10,000 a day for breaking the rules. Pharmacists will be stopped from charging the NHS more than the agreed tariff price for the drugs they dispense.

Family doctors may lose out, however. The Government estimates that overcharging cost the NHS £200m last year and the extra drugs bill would have been higher if action had not been taken to force prices down.

Alan Milburn, the Secretary of State for Health, announced in December an emergency injection of £90m to pay the additional costs faced by doctors in prescribing unbranded drugs, but Lord Hunt signalled that there would be no more compensation. The new measures will not be introduced until July, leaving doctors to meet the higher costs for the first four months.

Ministers are concerned that the steep rise in the cost of the generic drugs bill has dented its attempts to improve health care. The generic drugs industry rejected the Government's claims as "total tosh" and denied that manufacturers were to blame for unusually high price rises. "You are talking about a generic drugs bill of £700m out of an overall NHS drugs bill of £5bn. Generic manufacturers provide 50 per cent of the NHS drugs at only 12 per cent of the overall cost. I think that is a pretty good deal," said Warwick Smith, director of the British Generic Manufacturers Association. Ministers blame the wholesalers for holding back supplies to artificially push up prices. Some cashed in on a scarcity of supplies last year - and the complicated system which enables pharmacists to claim back more than the approved tariff for a drug when there is a shortage.

"There is no adequate explanation for the steep price rises we have seen - nor for prices remaining high for so long. What is clear, however, is that some players took advantage of the situation within the supply chain, at the expense of the NHS," Lord Hunt said. The measures are a stop-gap pending reform of the way the NHS fixes the prices of its drugs.

The BMA yesterday welcomed the European Parliament proposal to require the health warning "smoking causes male sexual impotence" to be put on cigarette packs. "Most people know that smoking causes heart disease and stroke but they may not realise that it also damages small blood vessels in the penis resulting in impotence," said Dr Vivienne Nathanson of the BMA.