NHS doesn't care about cost of medicine’: Drugs firms accused of profiteering by raising prices by ONE THOUSAND per centBy Jason Lewis
Millionaire who raised the price of widely-used drugs by 1,000% over two years says: ‘I don’t have to justify my profits to anyone’
Drugs companies making everyday medicines for the NHS are facing claims of profiteering after imposing huge price rises for commonly prescribed drugs.
The increases – some as high as 1,000 per cent in just two years – coincided with some of the firms involved earning massive profits.
One company boss said the NHS ‘doesn’t care what it costs’.
Instead, they are unbranded so-called ‘generic’ drugs which have been available for many years and include commonly used antibiotics prescribed to millions of patients.
Last night, The Mail on Sunday investigation prompted the Department of Health to reveal it had launched a review of the price increases and to say that it was examining what action could be taken against manufacturers deemed to be making excess profits.
Last month, in the latest controversial decision of its kind, the UK’s medicines advisory body, the National Institute for Health and Clinical Excellence, recommended against the NHS paying for a new breast cancer drug.
One of the medicines under the spotlight after a huge unexplained price increase is hydrocortisone tablets – a daily lifesaver for thousands of kidney patients.
The main supplier of the drug is a small pharmaceutical firm called Auden McKenzie, based in Ruislip, North-West London, which sells 60,000 packets a month to the NHS.
Earlier this year, the price peaked at £48 a packet which – allowing for the High Street chemists’ profit – meant the firm was earning an estimated £2,400,000 a month from the drug, or up to £28million a year.
The prescription-only medicines are taken when a patient’s body is not making enough hydrocortisone, either because part of the adrenal gland is not working or because of surgery or other injuries. It is used in the treatment of Addison’s disease.
The firm’s current accounts are overdue, according to Companies House, and its current turnover and profits are not available. However, its most recent accounts for 2008 – signed off by its board last year – showed a massive increase in profits.
In 2007, its turnover was £5.3million and it was making profits of £2.3million. In 2008, turnover was up to £10.6million and profits had trebled to £6.2million.
Auden McKenzie is owned by Amit Patel, an accountant, who founded the firm in 2001, starting out making only one drug. Today, Auden Mckenzie sells more than 30 licensed products in the UK and six in continental Europe.
Some of the drugs it sells have been bought from giants such as GlaxoSmithKline, but the company has research-and-development facilities for modifying and improving its products.
Last year, for the first time, 35-year-old Mr Patel appeared on the Eastern Eye magazine Asian Rich List, with a reputed worth of £40million.
He lives in a large double-fronted house in Northwood, North-West London, which cost him £775,000 seven years ago, and where yesterday a three-year-old Aston Martin, worth at least £100,000, and a £70,000 Mercedes ML were parked on the drive.
Last night, Mr Patel appeared reluctant to discuss why he is charging so much more for hydrocortisone. He claimed that the price increase was a result of his firm’s large outlay on a new production line to make the drug.
He added: ‘For hydrocortisone, there is a very specific raw material required. Basically, the plant that made that was no longer prepared to do that. There had to be a multi-million-pound investment put in to ensure that [production] continued.
‘This sort of product cannot be made in a general facility. There are dangers of cross contamination. A new manufacturing plant had to be put up.
‘Either we just let this product go, just let it die. But it is crucial to certain patients, so we can’t do that. Now the majority of the investment which has been made has been recouped.
‘So now you will steadily see [the price] coming back down. It will creep back down because the company has recouped what it needed to. It was not simple and it was a very expensive process.’
He added: ‘Joe Public would not know what it takes sometimes to revive these old drugs. Quite rightly, the Government views medicine as public safety. They don’t care what it costs. They will not put people’s lives at risk by allowing us to market substandard drugs.
Asked about his company profits, he added: ‘That is nothing to do with this product.
'That is to do with our European sales of completely different sorts of drugs.’
He refused to give further details of his company’s spending that he said had led to the price increase. ‘This is commercially confidential,’ he said. ‘The Government has those details. I don’t need to justify my profits to anybody. There are companies that make bigger profits than I do.’
Another of the drugs under the spotlight is Flucloxacillin syrup, one of the most common antibiotics prescribed to children. It is used to treat a variety of skin conditions and throat infections.
According to the NHS drugs price list, in October last year a 125ml course cost the NHS around £4 a bottle. Now, the NHS price – which includes the wholesale cost set by the drugs company and a built-in profit for High Street chemist shops – has risen to £21.87, a more than five-fold increase.
The NHS price of the 250ml course, also branded as Floxapen Syrup, has risen from £8.02 last year to £26.87.
Until last year, the medicine, which is prescribed to more than two million patients annually, was made by two of the world’s biggest drug companies, Teva and Actavis.
But the price increases coincided with a decision last year by Teva to stop making the drug – claiming it was too expensive and unprofitable – handing its rivals a virtual monopoly.
The subsequent price increase could cost the NHS and the taxpayer an estimated £44million in extra prescription costs for this drug alone.
Actavis is an international generic pharmaceutical company based in Iceland. Listed on the Icelandic Stock Exchange until 2007, it was taken private by Novator Partners, an investment vehicle of the chairman Bjorgolfur Thor Bjorgolfsson, once his country’s first billionaire.
The entrepreneur was hit by the recent banking crisis and saw his net worth decline from £2.3billion to £600million.
Last night, Actavis, which makes around £1.3billion a year worldwide, ignored requests to explain its price rises. Instead, it issued a statement saying it is ‘very proud of the low-cost, high-quality generics they manufacture which enable the NHS to afford prescription medicines and to fund the vital research into new medicines’.
Analysis of NHS drug prices shows a number of other large price increases involving other generic manufacturers.
Qvar inhalers, used to prevent asthma attacks, have gone from costing a couple of pounds to £16. The inhalers, once made by three manufacturers, are now mainly produced by Teva, which says the price increases are the result of a change in the inhalers’ delivery mechanism.
The device, which pumps the anti-asthma drugs into the airway, previously used harmful CFC gases as a propellant. But the gases were outlawed by the Government, adding extra production costs for the firm.
Other drugs, such as Gabapentin, which prevents epileptic fits, have been hit by shortages of active ingredients which explain, according to the manufacturers, why the price of a 600mg pack has risen from £5.52 to a cost to the NHS of £41.06.
Other increases, one of the big drug companies claims, are caused by a low demand for a drug or less competition as some companies decide it is not economic for them to continue production.
This, it is claimed, is behind the 400 per cent increase in the price of acne infection antibiotic Minocycline, with the price of a 100mg dose rising from 26p to £1.20.
The same cause is blamed for the price hike of Erythromycin. A 250mg pack of the antibiotic cost £6.64 in August 2008. The July 2010 NHS price list now shows they cost £13.50 a pack.
And an 800mg pack of stomach ulcer treatment Cimetidine now costs £22.09, up from £16.01.
Tory MP Peter Bone, a former member of the Commons Health Committee, described the findings as ‘staggering’.
He said: ‘This a classic example of the malaise in the NHS where more and more money is being pumped in without any regard for whether we are getting value for money.’
He added: ‘What is amazing is that this seems to have happened under the noses of hundreds of highly paid bureaucrats whose job should be to keep an eye on this sort of thing and stamp it out.
‘If you were running a business and one of your suppliers said they were putting their prices up by 1,000 per cent, you would want to know why – but when this happens in our Health Service it appears nobody blinks.
‘I shall be raising this issue in Parliament. It needs to be investigated as a matter of urgency.’
Former Tory Health Secretary Stephen Dorrell, now chairman of the Commons Health Committee, said: ‘On the face of it, this seems to be profiteering by the drugs companies and they must answer for that.
‘The question for the NHS is who agreed to these enormous price increases and why?’
He added: ‘It will not be for the Commons Health Committee to negotiate drugs prices with the pharmaceutical companies but we will be announcing a series of investigations which will look at how to tackle the inefficiencies in the way the Health Service is run.’
Last night, the Generic Medicines Association, which represents a large number of the drugs firms supplying the NHS, said competition in the industry kept drug prices down and meant that the Health Service paid less for its drugs than anywhere else in Europe.
It said that the Department of Health also had powers to sanction firms profiteering on drug sales but was unaware of any recent cases of the Government intervening in this way.
The spokesman said: ‘Each quarter, manufacturers report their sales and net revenues for each medicine to the Department of Health which in turn sets pharmacists’ reimbursement prices for the following quarter at a level that gives community pharmacies a margin of £500 million in total.
‘This provides the incentive for the competitive buying behaviour of pharmacists and wholesalers to drive down prices of generic medicines.’
But last night the Department of Health said it had launched a review to examine why the cost of some generic drugs had risen dramatically.
A spokesman said: ‘We are aware that the prices of a small number of medicines have risen in recent times and we are reviewing what action may be taken.’
He added: ‘The average price of a generic medicine has actually gone down. There are approximately 3,700 generic medicines prescribed on the NHS. Between 2004-2009 the average price of a generic medicine fell from £5.24 to £3.96.’