A new bill will enable the UK government to limit the price of unbranded medicines and save an estimated £88m per year.
The Health Service Medical Supplies (Costs) Bill aims to help the government control the cost of health service medicines.
Action has been taken after an investigation by The Times found entrepreneurs were buying up the rights to old drugs and then ramping up prices by up to 600%.
The Department of Health estimates the bill will save £88m annually by enabling the government to take action where there are excessive price rises on unbranded medicines.
The government will be able to take action regardless of whether or not the manufacturer or supplier is taking part in an existing voluntary price regulation scheme for branded medicines.
At the moment companies supplying medicine fall under two different price regulation schemes: a voluntary scheme established by Pharmaceutical Price Regulation Scheme (PPRS) and a statutory scheme established by the health service regulations.
The bill will also mean medicine suppliers will be obliged to provide information to the secretary of state and to allow the disclosure of information in certain circumstances.
It aims to limit the prices of generic medicines where there is no competitive market and companies falling foul of it can face fines of up to £100,000 or a daily penalty of up to £10,000.
Health minister Lord Prior of Brampton said: “This government values the contribution made by the pharmaceutical sector to UK industry and to patients, but on behalf of taxpayers and the NHS we must ensure that we get the best possible value for money – and this bill will help us to do just that.”