Cut-price drugs firms make pounds 150m from NHS

DOZENS of import businesses are making hundreds of millions of pounds from the NHS by buying British-made drugs abroad at bargain-basement prices and selling them on in this country at four times the price.

Up to pounds 500m worth of drugs and medicines are being bought abroad and re-imported. The businesses make their money by buying drugs which cost as little as pounds 1 in countries such as Spain and Greece and re-importing them to Britain, where they are sold at a Government-approved price of pounds 4. Some of the 24 small businesses involved estimate that the trade's combined profits are worth more than pounds 150m.

The business has grown so much that some Spanish pharmacies were last week reported to be running out of popular drugs. Some British drug companies have threatened to stop selling a range of products to Spain in an attempt to thwart the importers.

The booming trade is flourishing because of a combination of the strong pound and rules on price-fixing of drugs. The exchange rate makes drugs abroad even cheaper than usual, while EC rules allow the price of drugs to be set country by country.

Prices are fixed to take account of the companies' investment in research and development as well as the cost of producing the drug. Spain and Greece are among the countries that insist on low prices.

Yesterday, according to the price list of one of the importers, a tube of Zovirax, the Glaxo cold sore treatment, was selling for pounds 1.95 in Spain and pounds 3.36 in the UK. A 12-pill pack of the antibiotic Amoxil made by Smith Kline Beecham was priced at pounds 1.46 in Greece and pounds 4.62 in the UK.

Pharmaceutical firms complain that they are losing out on profits which can be re-invested in research because they get the bulk of the money from drugs made and sold in Britain, rather than the wholesalers.

Glaxo Wellcome is now trying to stop the trade by insisting that Spanish wholesalers sign undertakings not to resell for export at the local price, but the move is being challenged on the grounds that it breaks the competition laws of the EU.

The major producers also claim that the trade can be harmful to patients. They argue that imported drugs can deteriorate through incorrect handling, can become contaminated during repackaging or storing, may be missed if a product has to be recalled for safety reasons, and can be given to patients with Greek or Spanish instructions.

At the heart of the row over drugs prices are the EC rules on pricing which the Community is due to debate this week. European rules on the free movement of goods allow consumers to take advantage of different prices which manufacturers have in different countries. But the pharmaceutical companies say that they are in a unique position because with drugs it is each national government which fixes the selling price.

"In almost all other areas of business, the manufacturer sets the price and he suffers if he sets different prices in different countries and people exploit that," said Frances Charlesworth, international and commercial affairs director of the Association of the British Pharmaceutical Industry. "We are trying to get the EC to accept that the pharmaceutical industry is suffering because prices are set by the governments. The importers do have to be licensed by the Medicine Control Agency, but it is against the European law to impede parallel imports."

Dr Brian McEwan, marketing director of one of the bigger companies involved in importing, Waymade Healthcare, said: "The multinationals would prefer it not to happen, but while it remains a lawful and legitimate business we will practise it to the best of our ability. Our quality standards are just as high as the pharmaceutical companies."

A Glaxo spokeswoman said: "Prices in Spain are at extremely low levels and the damage being done to our business really forced us to take action there.

"It is hard to quantify the amounts involved, but we can say around 50 per cent of some of the medicines dispensed in the UK are actually parallel imports. There are patients in the UK who are actually getting medicines dispensed here that may have a Spanish explanation leaflet."