The Department of Health commissioned Oxera to undertake a fundamental review of the supply and distribution of generic medicines. This review arose from the Department’s concerns about the generic medicines market in the UK, and, in particular, the significant price rises in an unusually high proportion of generic drugs during 1999. The aim of the review was to provide the Department with remedial and radical options for reforming the existing market structure and government procurement arrangements, in order to deliver the Department’s objectives.
Oxera undertook a high-level analysis of the generic manufacturing and supply industry, and the wider pattern of relationships for wholesaling and retail of medicines for the National Health Service (NHS). This involved substantial primary research, including around 200 interviews with companies and regulators in the UK, the USA, the Netherlands and New Zealand.
The study covered a detailed investigation of ownership links, an analysis of operational characteristics at all levels of distribution and supply, and an examination of how the NHS reimbursement arrangements and distribution margins affect participants’ behaviour. It explained the incentives at each stage in the distribution chain and considered how these are changing through time. The first stage of the report developed a set of remedial and radical reform options for the distribution and supply of generic medicines. The second phase focused on investigating the working arrangements for the preferred options.