Policies and Legislation

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First posted: 12 August 2011 

Concerning biosimilars policies in the UK, view the following related articles:

UK outlines process for developing biosimilars guidances

Biosimilar policies in the UK

In the UK generic pricing is regulated by the voluntary Pharmaceutical Price Regulation Scheme (PPRS), enabling free pricing.

Generic prescribing is reinforced by the fact that medical students in the UK are taught to prescribe by international non-proprietary name (INN). Physician budgets and computer systems to assist generic prescribing also encourage generic prescribing.

Pharmacists, however, may only substitute if the prescription is written by INN, however, since in 2008, 82% of all prescription items were prescribed by INN in England this is not seen as a major issue.

Patients have no incentives to buy generic medicine, however, the government has attempted to inform patients of generic medicines through leaflets.


In the UK, with respect to reimbursement, generics are not subject to the same laws and regulations as branded medicines [1].

Generic medicine prices in the UK are some of the lowest in the developed world [1].

Regulation of originator medicine prices is governed by the voluntary PPRS, which does not control prices directly. Under the PPRS, companies have freedom of pricing for new active substances and do not have to undergo negotiations over pricing and reimbursement [2].

The PPRS does not apply to generic medicines and companies are, in general, free to set prices of generic medicines. This system has led to price competition between generic medicines and falling prices for those medicines supplied by multiple companies in the late 1990s. However, to qualify for reimbursement generic prices have to—depending on their category—be either negotiated between the Department of Health (DoH) and the British Generic Manufacturers Association (BGMA) (for Category M and W) or to be calculated by the NHS Business Services Authority (for Category A – most common generics) [3].

In 2005, the DoH introduced a new Category M of generic medicines under Part VIII of the Drug Tariff, for the reimbursement of generic medicines. The scheme allows for freedom of pricing allowing changes in market prices to be influenced by existing market mechanisms. There is a provision, however, for the DoH to intervene where market mechanisms have failed to protect the NHS from significant increases in expenditure. This scheme was reviewed in 2010 and accepted as being the best way forward and will now run until 2015 [4].

The 2009 PPRS includes measures aimed at reducing NHS expenditure on branded medicines by an average of 5% per year over the lifetime of the scheme (five years). The measures include a price cut of 3.9% in February 2009 with a further price cut of 1.9% in January 2010 and, subject to discussion with affected parties, the introduction of generic substitution [5].

Reference pricing (RP)

The UK does not have a reference pricing system (RPS) [3, 6].

Incentives for physicians

A principal factor in stimulating generic medicines use has been the fact that medical students are taught to prescribe by international non-proprietary name (INN) in British medical schools. In 2008, 82% of all prescription items were prescribed by INN in England [7].

The UK has used medicine budgets to control pharmaceutical expenditure and to increase generic prescribing by physicians [14].

Initially, medicine budgets were set at the level of the general practice under the fundholding scheme which ran from 1991 to 1997. Reviewing the fundholding experience, Gosden et al. [8] concluded that the medicine costs of fundholding practices had increased at a lower rate as a consequence of increased generic prescribing than those of non-fundholders. However, as fundholding practices had different characteristics than non-fundholders, this effect may have stemmed from selection bias rather than from fundholding [14].

Budgets have also been set for groups of general practices as for example in the case of GP and locality commissioning groups, total purchasing pilots and, more recently, PCTs. Many PCTs have set generic prescribing targets supported by incentive schemes, prescribing guidelines and formularies, and guidance issued through the National Institute of Clinical Excellence, the Royal Colleges and National Service Frameworks [9-11].

PCTs in the UK have also introduced incentive schemes where prescribing GPs are rewarded for switching patients to cheaper generic medicines, or introducing new patients to generic medicines rather than more expensive brand-name products [14].

Generic prescribing by GPs has been supported by computer programs such as PRODIGY (PRescribing ratiOnally with Decision support In General practice studY) which was introduced in 2000 [12]. This system, as well as giving clinical advice and patient information leaflets, also indicates generic alternatives to the GP. Preliminary findings pointed to a 3.2% increase in generic prescribing following the introduction of PRODIGY [13].

Incentives for pharmacists

Generic substitution by pharmacists is not permitted if the proprietary name is written on the prescription. Pharmacists earn a fixed fee per prescription item for a minority of medicines and the difference between NHS reimbursement and the purchase price. In the case of an INN prescription, the reimbursement level is listed in Part VIII of the Drug Tariff and depends on the category in which the medicine is placed [14].

The corresponding Drug Tariff is calculated as the average price charged by two major wholesalers and three companies. Drug Tariff reimbursement levels tend to be well below the price level of originator medicines. Therefore, pharmacists generally fill INN prescriptions with generic medicines and increase their income by dispensing generic medicines that offer discounts. Pharmacists receive the NHS price for a generic, which means that they are encouraged to buy the cheapest available generics [3, 14].

In response to this, companies of originator medicines compiled a ‘brand equalization formulary’ a list consisting of originator medicines that may be substituted for INN prescriptions. This enables companies to sell originator medicines at Drug Tariff levels that otherwise would have led to the dispensing of a generic medicine. In addition, pharmacists receive a discount from originator medicine companies, which appears to be attractive enough to pharmacists to not dispense a generic medicine [14].

As competition in the generic medicines market takes the form of discounts to pharmacists and the NHS does not fully benefit from the cost-saving potential of generic medicines, a claw-back system was introduced that aims to recover the discounts that pharmacists receive. However, a study of the UK generic medicines market estimated that a significant portion of discounts is not recouped by the NHS [14]

To reduce NHS reimbursement, a new category M of generic medicines was added to Part VIII of the Drug Tariff in 2005, which includes some medicines previously in Category A (readily available generic medicines). The reimbursement level for Category M medicines is set at a volume-weighted, net average price charged by pharmaceutical companies after discounts [4].

Incentives for patients

Patients have no incentives to buy generic medicines. Patient’s co-payment consists of a fixed fee per prescription item. In 2010 this cost per prescription item was GBP 7.20 in England and GBP 3.00 in Scotland [15].

The government has attempted to inform patients of generic medicines through leaflets [14].

Policy analysis

Key factors aiding the development of the generic medicines market

  • Generic medicines companies compete with each other on price, enabling the NHS to capture the cost-saving potential of generic medicines [1, 2].
  • Prescribing by INN is encouraged but not obligatory, however, there are budget sanctions for NHS doctors [3].
  • Medical students are taught to prescribe by INN and INN prescribing by physicians is common practice. In 2008, 82% of all prescription items were prescribed by INN in England and 65% were dispensed generically [7].
  • Generic prescribing has been stimulated by setting physician budgets in combination with generic medicines prescribing targets, incentive schemes, and prescribing guidelines [14].

Key factor hindering the development of the generic medicines market

  • Patients have no incentives to buy generic medicines [14, 15].


1. British Generic Manufacturers Association (BGMA). BGMA Briefing Paper. June 2010 [monograph on the Internet]. London, UK, BGMA c2010 [cited 2011 May 13]. Available from: www.britishgenerics.co.uk/support/pdfs/bgma-briefing-paper.pdf

2. Office of Fair Trading (OFT). The Pharmaceutical Price Regulation Scheme: An OFT market study. February 2007.

3. Österreichisches Bundesinstitut für Gesundheitswesen (ÖBIG). Surveying, Assessing and Analysing the Pharmaceutical Sector in the 25 EU Member States. July 2006.

4. Department of Health (DoH). Revised long-term arrangements for reimbursement of generic medicines: Scheme M. March 2010.

5. Department of Health (DoH). The proposals to implement ‘Generic Substitution’ in primary care, further to the Pharmaceutical Price Regulation Scheme (PPRS) 2009. 5th January 2010.

6. Bridgehead International. Why don't we have reference pricing in the UK? Jim Furniss of Bridgehead International asks [monograph on the Internet]. Melton Mowbray, UK, Bridgehead International c1998‑2010 [cited 2011 May 13]. Available from: www.bridgehead.com/page/23/reference-pricing.htm

7. NHS National Statistics. The Information Centre (Health Care).Prescriptions Dispensed in the Community Statistics for 1998 to 2008: England. 2009.

8. Gosden T, Torgerson DJ. The effect of fundholding on prescribing and referral costs: a review of the evidence. Health Policy. 1997 May;40(2):103-14.

9. Wilkin D, Gillam S, Leese B. National Tracker Survey of Primary Care Groups and Trusts. Progress and Challenges 1999/2000 – Report. National Primary Care Research & Development Centre. The University of Manchester. Manchester. 2000.

10. Wilkin D, Gillam S, Coleman A. National Tracker Survey of Primary Care Groups and Trusts 2000/2001: Modernising the NHS? – Report. National Primary Care Research & Development Centre. The University of Manchester. Manchester. 2001.

11. Wilkin D, Coleman A, Dowling B, Smith K. National Tracker Survey of Primary Care Groups and 2001/2002: Taking Responsibility – Report. National Primary Care Research & Development Centre. The University of Manchester. Manchester. November 2002.

12. Purves IN, Sugden B, Booth N, Sowerby M. The PRODIGY project--the iterative development of the release one model. Proc AMIA Symp. 1999:359–63.

13. Purves IN, Sowerby M. PRODIGY Interim Report. 1996.

14. Simoens S, De Coster S. Sustaining Generic Medicines Markets in Europe. April 2006. [monograph on the Internet]. Brussels, Belgium, European Generic Medicines Association (EGA) [cited 2011 May 13]. Available from: www.egagenerics.com/doc/simoens-report_2006-04.pdf

15. Patient UK.Free or Reduced Cost Prescriptions [monograph on the Internet]. Leeds, UK, Patient UK c2010 [cited 2011 May 13]. Available from: www.patient.co.uk/health/Free-or-Reduced-Cost-Prescriptions.htm

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