Revelations that drug companies and pharmacies are colluding in fraud to overcharge the NHS could have long term implications for government procurement.

Earlier this week, a Daily Telegraph investigation revealed that drug company executives have been boasting about how they can sell prescription drugs that cost pennies to make for hundreds of pounds to the NHS.

In 2011, the government set a cap on the prices it was willing to pay for common prescription drugs, but because the cap is so high and current supply chain price controls are so weak, pharmacists and drug companies are taking advantage to turn a profit.

The investigation found that drug companies are offering discounts to chemists of up to 70 per cent on drug tariff items, allowing the pharmacies to keep the difference. For example, the NHS would pay £100 for drugs that only cost the chemist £30 to buy.

Following the revelations, the health secretary Jeremy Hunt said that the allegations were "deeply concerning". The drugs firms contacted for comment by the Daily Telegraph said they were looking into the claims but have clear bribery guidelines in place. One firm said it would conduct an investigation but considered the comments to be "over-enthusiastic claims made at a sales meeting".

Writing for the Guardian, Colin Cram said the Telegraph investigation illustrates the need for a radical overhaul of procurement processes at the NHS.

"It is truly astonishing that there are no central procurement agreements for the several hundred millions of pounds – possibly more than £1bn of procurement – spent on 'specials'," he said.

"More fundamentally, it may be time for an external examination of the NHS drugs bill."

He argued that not only is the NHS not taking advantage of its huge purchasing power, but it does not have the processes in place to negotiated the best deals. Even after drugs have been purchased millions of pounds worth are wasted each year – with the recent York Health Economics Consortium estimating unwanted prescriptions cost the NHS £300 million each year.

Whatever the outcome, the NHS will need to take steps to avoid being the victim of procurement fraud again.

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