I move: "That the Bill be now read a Second Time."
I welcome the opportunity to address the House on Second Stage of this Bill, which will introduce a system of generic substitution and reference pricing for prescribed drugs and medicines. These reforms will promote price competition among suppliers and ensure that lower prices are paid for medicines, resulting in savings for taxpayers and patients.
The Bill sets out the Government's proposals to allow the substitution of medicines by pharmacists at a patient's request and to improve and update the statutory basis for the supply of medicines and other prescribed items under the General Medical Services, GMS, and community drugs schemes. It sets out a clear legislative basis for the supply and reimbursement of items to patients under both schemes. It also sets out criteria that the HSE must take into account when making reimbursement decisions.
The Bill will allow the HSE to attach conditions to the supply of certain items, provided that any restriction is evidence based and in the interests of patients and value for money. However, it is important to note that the Bill does not change the existing arrangements for the supply of items through community pharmacies.
The Bill is patient focused and will allow patients to continue to be able to access prescribed medicines in line with their clinical requirements. In addition, if a particular brand of medicine is required by a patient for clinical reasons, he or she will face no additional charge for it. In the current economic climate, it is important that we take every step possible to provide public services efficiently, limit costs to the greatest extent possible and involve the users of resources in better understanding the value of those resources and their appropriate use.
Public expenditure on drugs provided to patients under the GMS and other community drugs schemes has increased significantly in the past decade, with the year-on-year increase in spending on medicines among the highest in Europe. In 1998, we spent just under €400 million in this regard. By 2009, expenditure had increased to just over €2 billion. However, due to action taken by my Department and the HSE, expenditure reduced in 2010 and 2011, with expenditure of approximately €1.9 billion in the latter.
Several factors drive increases in expenditure on drugs. The number of items prescribed has increased in the past decade from approximately 30 million to approximately 70 million in 2010, general practitioners, GPs, are prescribing newer, more expensive products, and greater numbers of people are eligible for medical cards.
My Department and the HSE have taken a number of actions to control expenditure on drugs. Savings are being achieved through ongoing off-patent price cuts agreed with pharmaceutical manufacturers, the pricing mechanism for new products has been changed and we now have a review mechanism that takes account of price reductions in other countries. Since 2010, these actions have achieved savings in the region of €250 million. In 2009 and 2011, regulations were made under the Financial Emergency Measures in the Public Interest Act 2009 to address margins and mark-ups in the pharmaceutical supply chain. The combined full year savings from these measures amount to €154 million.
My Department and the HSE have had ongoing negotiations with the Irish Pharmaceutical Healthcare Association, IPHA, throughout 2012 with the intention of securing a new pricing and supply agreement to replace the recent agreement, which expired on 1 March. The terms of the previous agreement and savings secured under it continued to apply for the duration of the negotiations.
In June, an interim agreement with the IPHA to reduce the price of certain off-patent medicines was reached and is expected to deliver €10 million in savings in 2012 or €20 million in a full year. These price reductions were implemented in advance of further discussions on a new agreement that was expected to deliver more significant savings.
As the House will be aware, the Minister for Health, Deputy Reilly, announced on Monday that intensive negotiations involving the IPHA, the HSE and the Department of Health had reached a successful conclusion with a major deal on the cost of drugs in the State. The deal is an important step in reducing the cost base of the health system. With a value in excess of €400 million over the next three years, the deal will entail significant reductions for patients in the cost of drugs; a lowering of the drugs bill for the State; greater access to new cutting edge drugs for certain conditions; and an easing of future financial pressures on the health services. In broad terms, approximately half of the financial value of the deal relates to reductions in the cost of patent and off-patent drugs while the other half is related to the State securing the provision of new and innovative drugs for the duration of the agreement in an exceptionally difficult economic climate.
The new deal, when combined with the IPHA deal reached earlier this year, means that €16 million in drug savings will be made this year, with much greater savings to be achieved during the next three years. It is estimated that the deal will generate savings of up to €116 million gross in 2013.
I warmly welcome this agreement. The current cost of drugs in our health system at over €2 billion per year represents a major challenge to the State. However, the value of life saving and life enhancing drugs to patients is incalculable. The importance of the new deal to the State and patients alike will be felt into the future. In addition to the IPHA deal, the Department and the HSE will shortly finalise discussions with the Association of Pharmaceutical Manufacturers in Ireland, APMI, which represents the generic industry, to deliver further savings in the cost of generic drugs.
A national task force on prescribing and dispensing has been established to deal with prescribing and dispensing existing medicines. It will address these issues from the perspective of quality and patient safety primarily. However, it can be anticipated that the work of the task force will also deliver significant cost savings in terms of achieving more cost conscious prescribing. Therefore, the task force provides a platform to secure a sustainable means of improving value for money from the significant expenditure of the State on prescribed medicines.
The task force comprises a number of key leaders in the health care system. Its terms of reference require it to oversee and direct analysis of the extensive information that is held on prescribing patterns through the Primary Care Reimbursement Service, PCRS. The task force's work will be wide ranging and include providing advice, guidance and support to prescribers and dispensers to help them improve prescribing practices. Its work will also include assessing the suitability of maintaining the supply of certain items with limited efficacy where more appropriate items are available.
Despite the progress I have outlined, pharmaceutical expenditure continues to pose a challenge, particularly in light of our ageing population and increased usage of medicines. Further changes in the form of generic substitution and reference pricing are required to secure a sustainable system of pharmaceutical expenditure while ensuring that patients can continue to have access to necessary and innovative medicines.
Generic substitution allows pharmacists to substitute a cheaper generic equivalent at the patient's request when a more expensive product has been prescribed. Generic medicines are equally as safe and efficacious as proprietary products and are subject to the same requirements for quality, safety and efficacy. The Irish Medicines Board, IMB, will have responsibility for the designation of interchangeable medicines.
Reference pricing involves setting a common reimbursement amount for selected groups of medicines. Only the reference price is reimbursed by the State. Eligible patients can avoid out-of-pocket payments by opting for a generic medicine at or below the reference price. Coupled with generic substitution, reference pricing provides patients with an incentive to opt for the cheapest available product, but does not impose any unavoidable additional cost on them.
These two measures represent a significant structural change to the system of pricing and reimbursement of medicines. As more medicines come off patent, the introduction of generic substitution and reference pricing will ensure that both taxpayers and patients will benefit from increased competition in the pharmaceutical market. Giving patients more choice and promoting price competition between suppliers will help to reduce the overall drugs bill without compromising the efficacy or safety of the treatment that patients receive.
Savings will be achieved by limiting reimbursement to the reference price, allowing patients to opt for less expensive versions of the prescribed medicine and promoting price competition between the manufacturers of interchangeable medicines. The level of savings will be dependent on a range of factors, including the number of medicines included in the reference price system, prescribing practices and the behaviour of manufacturers of interchangeable medicines. As the system will be introduced on a phased basis, savings will also be achieved on a phased basis.
I turn now to the main provisions of the Bill. Part 1 provides for the definition of certain terms used in the Bill and the laying of regulations. Part 2 provides for the establishment and maintenance of a list of interchangeable medicinal products, setting out the duties of pharmacists regarding prescriptions for interchangeable medicinal products under their branded names and including a number of scenarios. It also sets out the duties of pharmacists regarding prescriptions for interchangeable medicinal products under their common names. Part 2 also contains some miscellaneous provisions. These include the provision that no action or other proceeding shall be instituted against a pharmacist or prescriber when a pharmacist substitutes a medicinal product for a branded interchangeable medicinal product in accordance with the legislation. Also included is the provision that a prescriber may indicate on a prescription if a branded interchangeable medicinal product should not be substituted for clinical reasons.
Part 3 provides for the dispensing of medicinal products under their common names where they are not interchangeable medicinal products. Part 4 provides for the establishment and maintenance of the reimbursement list. It also provides for the conditional supply of listed items by the HSE and the setting of prices for items and listed items. This part of the Bill provides the HSE with discretion to supply non-listed items to certain patients.
Part 5 provides for the setting of a reference price for groups of interchangeable medicinal products. Part 6 provides for appeals to the High Court against relevant decisions of the Irish Medicines Board, IMB, or HSE; power to specify form of documents; fees to be paid to the IMB or the HSE; and amendments to relevant Acts. Schedules 1 and 2 pertain to procedural provisions relating to decisions by the IMB or the HSE. Schedule 3 sets out criteria for the purposes of decision making by the HSE under section 18.
Two issues were to the fore when the Bill was being drafted. The first was the sustainability of the supply of medicines and the other was the safety of generic medicines. Shortages of essential medicines are currently a cause of concern not just in Ireland but throughout Europe and the rest of the world. It is a global problem affecting health systems in all countries and affecting patients worldwide. Medicines shortages can be caused by a combination of factors throughout the pharmaceutical supply chain, such as manufacturing difficulties, industry consolidation and commercial decisions by manufacturers to withdraw unprofitable lines.
Irish medicines regulations place an obligation on both manufacturers and pharmaceutical wholesalers within the limits of their respective responsibilities to ensure the adequate availability and supply of medicines on the Irish market in order to meet patient needs. My Department has been engaging with the Irish Medicines Board, the Health Service Executive and the Pharmaceutical Society of Ireland to identify ways in which the Irish system can manage medicines shortages as effectively as possible in order to minimise the impact on patients. International efforts to effectively manage medicines shortages are also being considered.
Pharmaceutical production is carried out by private enterprises and the State or my Department can only intervene to a limited extent to prevent medicines shortages occurring. The IMB and HSE continue to work closely to operationally manage medicines shortages when they arise. In addition, the Pharmaceutical Society of Ireland works with the pharmacy profession and has recently published guidance to registered pharmacists on managing medicines shortages. Manufacturers, wholesalers and pharmacies all have responsibility to work together to identify shortages quickly and implement alternative arrangements to meet the needs of patients. In this context, Section 24(3)(a) of the Bill provides that when the HSE sets a reference price or reviews a reference price for a group of interchangeable medicinal products, it must take into account the ability of suppliers to meet patient demand. In other words, reference prices will be set at levels which will facilitate rather than jeopardise supply.
The safety of generic medicines underpins this Bill but it is important to point out that generic medicines must meet exactly the same standards of quality and safety and have the same effect as the original medicine. All of the generic medicines on the Irish market are required to be properly licensed and meet the requirements of the Irish Medicines Board. To further enhance the safety aspect of generic substitution, section 13 gives a prescriber the option of indicating on a prescription that a branded interchangeable medicinal product should not be substituted, if there are clinical reasons not to do so.
The programme for Government includes the commitment that "reference pricing and greater use of generics will be introduced to reduce the State's large drug bill and the cost to individuals of their medicines". This legislation will introduce a system of reference pricing and generic substitution for prescribed drugs and medicines which will ultimately lead to savings for taxpayers and patients. It is envisaged that this Bill will contribute to an increase in the rate of generic prescribing in Ireland, which currently stands at approximately 18%. I will, of course, keep the implementation of reference pricing and generic substitution under constant review and will report back to both Houses, as appropriate. I commend the Bill to the House and look forward to hearing the views of Deputies during the course of the debate.