Cost of Prescription Drugs: Discussion

There has been significant public comment on and interest in the relatively high cost of prescription drugs, the affordability of high-tech drugs to treat rare diseases and the rate of penetration of generic drugs in Ireland. Historically, the cost of branded pharmaceuticals has been considerably higher in Ireland. At various stages the European Union, the International Monetary Fund, the Economic and Social Research Institute and the Department of Health have publicly highlighted the cost issue in respect of Irish-patented and generic drugs relative to our European counterparts. The Health (Pricing and Supply of Medical Goods) Act 2013 was introduced to address the comparatively high price of drugs by introducing reference pricing and the better labelling of generic substitutions.

The purpose of today’s hearings is to examine the cost of pharmaceutical drugs, the effectiveness of reference pricing and generic substitution. The joint committee will hold two sessions to hear evidence from a range of stakeholders representing both branded and generic pharmaceuticals, the Irish Pharmacy Union, alternative pharmaceutical suppliers and others. The committee has received communications from one pharmaceutical company which has refused to attend the committee. Separately, the committee will receive a briefing from the Department of Health and the Health Service Executive. The committee intends to prepare a report examining the effectiveness of the initiatives taken in this area, with reviewing the testimony of delegates, before it makes recommendations to the Oireachtas and the Minister for Health.

I welcome from the Irish Pharmaceutical Healthcare Association Dr. Leisha Daly, president, and Mr. Oliver O’Connor, chief executive; from the Irish Pharmacy Union Ms Kathy Maher, president, and Mr. Darragh O’ Loughlin, secretary general; from Teva Pharmaceuticals Ireland Ms Sandra Gannon, general manager, and Ms Aideen Kenny, head of commercial operations.

They are all welcome and I thank them for attending. I remind them that they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

I ask the delegates to keep their contributions to seven minutes. Their contributions will be followed by questions from members. If necessary, responses can be supplemented by delegates by way of written submissions if members cannot receive answers to their questions. I ask Ms Maher to make her opening remarks.

Ms Kathy Maher

I am a community pharmacist in Duleek, County Meath and president of the Irish Pharmacy Union, IPU. I am joined by my colleague, Mr. Darragh O'Loughlin, who is general secretary of the IPU. The IPU which has more than 2,200 members is the professional representative and leadership body for community pharmacists in Ireland. Our members are committed to delivering a quality, an accessible, a personal and professional pharmacy service, putting patients first and which has as its primary goal the optimisation of the health and well-being of society.

I thank the Chairman and committee members for inviting us. The joint committee, justifiably, wishes to understand the key drivers of the State's medicines bill and also wants be assured that the health service is achieving value for the money it spends on medicines.

I must point out that pharmacists do not have a role in the setting of the reimbursement price for medicines. The formula for this price-setting process involves the Department of Health and the Health Service Executive, HSE, on the one hand, and the manufacturers of the medicines, on the other. However, I want to clarify the dynamics of medicines pricing and supply in the State. In economic terms, pharmacists are price-takers, not price-makers.

Medicine prices have fallen dramatically in recent years and continue to fall. The ESRI report entitled, Pharmaceutical Prices, Prescribing Practices and Usage of Generics, published in June 2013, observed that price reductions in the order of 30% per item had been achieved between 2009 and 2013. The average GMS price per item reimbursed by the HSE in 2013 was around the level seen in 2001 and 2002. The introduction of generic substitution and reference pricing have since further substantially reduced medicine prices, with the price of some medicines falling by 85% in the past 12 months. The chief pharmacist of the HSE went on record last summer to say Ireland was no longer paying above the European Union average for medicines. The reference pricing process has seen a much more significant drop since that statement was made. It is worth noting that not only is the State benefiting from these price reductions but that in very challenging economic times pharmacists are passing on the reductions to their customers and patients who are seeing the effect at the pharmacy counter in that the cost of filling their prescriptions has fallen and is continuing to fall.

Our research suggests that, on average, 80% or four out of every five medicines are dispensed under the State's drugs schemes, including the GMS or medical card scheme, the drugs payment scheme, DPS, and the long-term illness scheme, LTI, all of which are funded by the HSE at rates set by the Minister for Health. The fees paid to pharmacists have been cut repeatedly in the past few years.

I will briefly outline the payment system for pharmacists. For all State-funded medicines supplied to patients, or 80% of medicines dispensed, pharmacists are paid the ingredient cost, without a mark-up, plus a regressive flat fee. Regulations made in July 2009 under the Financial Emergency Measures in the Public Interest, FEMPI, Act saw the reimbursement price of medicines reduced from 100% to 91.8% of invoice price. At the same time, under the FEMPI Act, the mark-up was cut from 50% under the drugs payment and the long-term illness schemes to 20%. In July 2013 further regulations made under the same Act saw the mark-up eliminated, leaving pharmacists entirely reliant on the dispensing fee. For the record, the GMS scheme has never attracted a mark-up.

The reimbursement model is dependent on the ability of pharmacists to negotiate terms with their suppliers to subsidise payments from the Government. However, in many cases, this is not always possible and, in some cases, pharmacists are finding themselves dispensing at a loss. This phenomenon is becoming increasingly frequent. To ensure patients have timely access to vital medicines, pharmacists are regularly paying wholesalers more than what the HSE will reimburse. As a result of a recent policy price change by one of the two remaining wholesalers, they now charge pharmacists 9% above the reimbursement price on the first €2,000 of their monthly orders. Effectively, this means that each pharmacy is subsidising the HSE to the tune of approximately €2,000 per year. It is estimated that since 2009 there has been a minimum of €314 million in savings to the State in pharmacy fees. In that period a further €1.42 billion in savings has been realised by the State in reduced payments for medicines. This has affected all stakeholders across the medicine supply chain - pharmacists, wholesalers and manufacturers.

As pharmacists’ fees are unrelated to the cost of medicines, we have no interest in seeing high prices maintained. However, a cautious approach needs to be taken. There is evidence to suggest that, as medicine prices reduce, medicine shortages increase. This is a basic economic fact. This is a small market in a global context and if it is more advantageous for certain suppliers to export out of Ireland to other EU markets where prices are higher, they will do so. We have seen Irish patients bear the brunt of this. IPU research conducted in August 2014 confirmed that there was a significant level of medicine shortages, with 99% of pharmacists confirming they had seen medicine shortages in the previous 12 months. More than half of those pharmacists believed their patients' health or lives had been put at risk by medicine shortages. As such, we believe a mechanism for price modulation needs to be found to balance the legitimate desire of the HSE to achieve lower prices against the need to ensure continuity of supply for Irish patients.

The objective of any review of expenditure on medicines must be to maximise value for money and ensure the best possible health outcomes for patients. While price is part of the equation, it is essential that patients receive their medicines at the right time and take them correctly. We know that the most expensive medicines are not taken at all or taken incorrectly. Pharmacists have an important role to play in this process and there is considerable scope to develop the services delivered by community pharmacists through a more comprehensive, organised and funded service.

Switching more medicines from prescription-only to non-prescription status empowers patients to take better care of their health, with the advice and support of their pharmacist. This allows them speedier access to appropriate treatment, saving the time and cost of a GP visit. It also saves the State the cost of the medicine and frees up valuable GP time to deal with more complex cases. In addition, strong evidence from the United Kingdom demonstrates that introducing a new medicines service allows patients with chronic conditions to obtain greater benefit from their medicines by identifying problems early and improving adherence to medicines taking through an initial consultation with the pharmacy on dispensing the medicine but with a structured follow-up consultation with their pharmacist. Patients who had presented for new medicines service consultations were shown to be more likely to be still taking their medicine or have sought help from their prescriber compared to patients who had not received the service. Economic modelling showed that this service could increase a patient’s length and quality of life, while costing the health service less, when compared to patients who did not receive the service.

The cost of most medicines is falling and will continue to fall in the next few years. As a result, the public, patients and the Exchequer will continue to see considerable savings on their medicines bills. It is appropriate that the committee should seek to ensure prudent use of resources and secure maximum value for the heath budget. It must be recognised, however, that, even as medicine prices continue to fall, there will always be upward pressure on the State as a result of the increase in the number of eligible patients and greater use of exceptionally high cost innovative and biological medicines. In addition, pharmacists are justifiably concerned that constantly falling prices can, in some cases, worsen existing medicine shortages, with a consequential negative impact on their patients’ treatment.

Optimising resources and patient care is fundamental to an efficient and effective health care system. Years of short-sighted cuts in pharmacy payments have undermined the profession’s capacity to deliver the badly needed pharmacy-based services which have been shown around the globe to improve patient health outcomes while reducing spending on health care. It is time for the Government to engage with us on a positive agenda for change, to deliver convenient, accessible and cost-effective health care through a currently under-resourced and under-utilised pharmacy profession. I thank the Chairman and members of the committee for their attention. We welcome any questions from members.

I thank Ms Maher for her presentation. I invite Dr. Leisha Daly, president of the Irish Pharmaceutical Healthcare Association, to make her presentation.

Dr. Leisha Daly

I was elected president of the Irish Pharmaceutical Healthcare Association for a two-year term beginning last September. I am personally honoured to meet the committee today. I am joined by Oliver O'Connor, our chief executive officer.

Our association represents 47 pharmaceutical companies supplying essential medicines to the Irish people. We have American, Belgian, British, Danish, French, German, Irish, Italian, Japanese and Swiss members. Our products are key for health and our presence is important for the economy. We support health and growth. Nine of the top ten pharmaceutical companies in the world have a significant manufacturing presence in Ireland. The industry here employs about 25,000 people in highly skilled jobs. A further 25,000 people are employed indirectly by our industry.

IPHA companies are research-based. Our companies develop innovative medicines supplied first under patent protection. Other pharmaceutical companies can make medicines when they go off-patent. These are so-called generic medicines. It is a very different business from ours. Their representative association, APMI, will meet the committee later today. Their business does not involve the high risk and massive investment required to develop new medicines.

Pharmaceuticals, like other innovations, are granted a 20-year patent life. However, on average, the research and development phase and supply process can take up to 12 of those 20 years. Reimbursement under patent protection may only be for eight years. The cost of bringing a new medicine to patients is around €1.4 billion euro. It is a complex process. For example, an older molecule like aspirin contains 21 atoms whereas the newer molecules currently available for treating cancer can contain up to 25,000 atoms. It has been compared to the difference between a bicycle and jet. Those jets are being manufactured and used in Ireland.

We seek to get the right medicines to Irish patients as quickly as possible. Last year, we brought at least 29 new medicines to Ireland which have the potential to benefit 700,000 patients. These medicines treat a variety of diseases, including Parkinson’s disease, diabetes, cancer, hepatitis C, asthma, schizophrenia and other conditions. Access to new drugs for all patients is a key part of our agreement with the Department of Health. Our members also support at least 65 different patients’ organisations with important information on how to use these medicines properly.

Our economic impact in Ireland is not just in jobs created, taxes paid, investments made and research funded, year after year. It is not confined to the €1.2 billion in savings we have contributed over the past eight years. It is mostly in the value of helping people getting back to work, enjoying a better quality of life, contributing to communities and living longer, healthier and more productive lives. This is the value of public spending on health and on medicines in particular. We have contributed to significant improvements in Ireland in life expectancy, in cancer survival and in cardiovascular disease. Clot-dissolving drugs have saved many stroke victims from permanent disability or death. New cancer medicines have made many cancers treatable and survivable. HIV-AIDS has been converted from a terminal illness to a manageable condition. Hepatitis C is now curable. Rheumatoid arthritis no longer means lifelong crippling pain. Life has been extended greatly for many people with cystic fibrosis.

The value of medicines for people is beyond an accounting calculation. It is certainly well beyond the €750 million the HSE spends on patent-protected and unique medicines in the community drugs schemes.

Our association negotiates and implements a supply and pricing agreement with the Department of Health and HSE. Having an agreement helps the State and the HSE. It means predictability and consistency in pricing and supply. It involves a detailed test of value for money before any new medicine is paid for. It tackles the risk of medicines meant for Irish people being sold to higher-priced countries. Under the current agreement, which started in November 2012, Irish prices were set at the average of prices in nine other EU members states. These countries reflect income levels similar to Ireland. Most other EU member states use similar mechanisms for pricing medicines. Competition law prevents our association from making individual pricing or other commercial decisions for members. However, the agreement means that when a member company proposes a new medicine to the HSE, it must offer it at a price which is at, or lower than, the average of its price in the nine EU member states.

We have audited this process. Last August, a third-party firm checked how close to the average our prices were on that date. The study showed that prices for patent-protected medicines were within 1.8% of the average of the nine countries. Prices in Ireland are neither the highest nor the lowest in Europe. Our member companies see agreed pricing and supply as an essential part of a stable investment and business environment in Ireland. The results of our agreements are good for taxpayers and the health services. Prices are falling, as the Minister has confirmed on a number of occasions, most recently last week. The average price per item in the HSE community drugs scheme has fallen every year since 2009. The Minister confirmed last week that the average cost per item is now running at 2001-02 levels. At the same time, the number of items prescribed for Irish patients has risen by 73%. These price cuts have made some room available to fund new medicines. However, I must caution that we cannot rely on savings alone from off-patent medicines or price cuts to fund the promising new medicines for patients in the coming years.

It is now time to turn to a successor agreement. The current agreement ends this October. We are prepared for detailed discussions on all aspects of a new agreement. Working by agreement between the State and industry is the best way to ensure patients get access to new and existing medicines as quickly as possible. Prices are falling and significant savings have been made Medicines deliver enormous benefits to people, which is a key part of the value of public spending on health and medicines. The challenge we share in Ireland and globally is to bring health science and promising new medicines to people effectively and efficiently. We need to share the benefits throughout our society, ensuring access to medicines and health care for all Irish patients.

I thank Dr. Daly for her presentation. I invite Ms Sandra Gannon, general manager of Teva Pharmaceuticals Ireland, to make her presentation.

Ms Sandra Gannon

I am the general manager of Teva Pharmaceuticals Ireland. I am joined today by my colleague, Aideen Kenny, head of commercial operations at Teva. We thank the committee for the opportunity to discuss the cost of prescription medicines in Ireland. I will give a brief overview of Teva Pharmaceuticals Ireland. Teva is a global pharmaceutical company operating in both the generic and the innovative specialty side of the market. For the purpose of today's meeting, we will focus on the generic element of our business.

Teva employs more than 500 people in Ireland at two locations, in Waterford, which is the global respiratory hub of Teva Pharmaceuticals, and in Dundalk, where we have based a commercial operation. Since 2014, Teva is the largest supplier of prescription medicines in Ireland, the first time a generic provider has occupied this position. In real terms, this translates into almost 8 million packs of Teva medicines being distributed here each year. Every four seconds a patient somewhere in Ireland takes a Teva medicine.

Our innovative and branded portfolio treats conditions such as respiratory disease, multiple sclerosis, cancer pain and a number of other conditions. We feel we are well placed with both an innovative medicines franchise and a very strong generic medicines franchise to comment on the cost of prescription medicines.

In real terms we have seen considerable change in recent years. The catalyst for this change was the decision of the State, the largest purchaser of medicines, to embrace meaningfully the savings that were to be had from switching to a positive and pro-generic medicines policy. The Health (Pricing and Supply of Medical Goods) Act 2013 facilitated generic substitution at pharmacy level and benchmarked Irish prices of generic medicines against the wider European market in the form of reference pricing.

Teva actively supported these reforms, inputting actively into the legislative process. In parallel, we undertook a national campaign called Understand Generics, which with the help of broadcaster, Gay Byrne, aimed to inform patients on the impact of the legislation as they presented their prescriptions in the pharmacy and also in order that they might better manage and pay for their health care costs. We were one of the few pharmaceutical companies to take this approach. At that time just 10% of the medicine volumes were supplied by generic companies, whereas in the United Kingdom the equivalent was 80% of medicines volumes supplied by generic companies. The position now, a few short years later, is that 34% of the total Irish pharmaceutical market by volume is supplied by generic companies. We have come a long way in a very short time.

We estimate that in 2014, which was first full year in operation of reference pricing and generic substitution, more than €150 million of savings were achieved. This advancement comes against the backdrop of broader developments. Let us consider the work of Dr. Sara Burke, a health policy analyst in TCD, on the resilience project. This project shows that between 2005 and 2013, the number of people covered by public health funded medicine schemes increased considerably, as did the number of medicines dispensed through the public health schemes. At the same time, the cost of drugs under public health schemes has decreased and remains the same, despite the volume increases, as the 2009 level. Total payments by the HSE, including professional fees and drug costs, remain below the 2009 level. Credit is due to many, including many members in this room, for ensuring that Irish taxpayers and patients realised the financial and health benefits which were to be had by switching to a pro-generic policy. Progress has been made.

However, it is my firm view that the reforms of recent years are ill-equipped to deal with the future demand for medicines. We must approach this problem head-on with innovative thinking and collaborative solutions. As recently as last week the ESRI published numbers which show that we are living longer but not healthier lives. Life expectancy now stands at 81 years. However, 50% of the population now have two or more chronic diseases. Some 61% of all adults are overweight or obese. The HSE has stated that within five years the incidence of chronic disease will increase by a further 40%. The numbers with heart disease, the killer of the largest number of Irish people, will grow by another 31%. Some 30,000 new patients will be diagnosed with cancer every year between now and 2020. The Irish longitudinal study on ageing, TILDA, also confirms this fact that a "combination of population growth and ageing will increase demands for treatments by between a quarter and a third by 2026 if current approaches to treatment continue". Patients are paying more out-of-pocket expenses. The combination of the new prescription charge and the increasing threshold for the drugs payment scheme has shifted a greater proportion of the cost of medicines to patients. These realities solidify the challenge that we all face.

We all agree that we need to find a sustainable means of meeting our ever increasing health care demands. This is why the pace of reform and our approach to spending on medicine must change. This year we estimate that Ireland will save €95 million on prescription medicine costs as a result of reference pricing and generic substitution. We in Teva estimate that we could almost double this saving by taking a broader approach. We estimate that some €113 per annum in additional savings can be made in four specific areas. Some €60 million could be saved by opening up generic competition in the low value and volume sector of the medicines market, which currently costs more than €200 million each year. Some €25 million can be saved by instructing those who prescribe in our hospitals to switch from expensive biological medicines to the more affordable, equally effective biosimilar medicines where available. This is what all the benchmark countries we look to have been doing for years. Despite this, some of the country's largest hospitals continue to forgo the savings available in their procurement processes. A further €15 million could be saved by allowing pharmacists to dispense more affordable generic medicines to those patients who are presenting for the first time and whose prescription medicines may be included on the non-interchangeable list. We are not asking that existing patients switch medicines, but we are asking that those who are starting out on medication can start on a cost-effective generic alternative. We estimate a further €18 million in savings can be achieved by incentivising cost-effective prescribing for non-interchangeable medicines such as inhaler devices, which currently cost the State more than €72 million a year.

I ask Ms Gannon to conclude because she has been speaking for ten minutes.

Ms Sandra Gannon

We have presented these proposals to the HSE, the Departments of Health and Public Expenditure and Reform and remain open to engaging with them.

We have recently received notice of a further second round cuts to reference price. Let me give members an example of those price cuts. It is proposed that the cost of a month's supply of the 10 mg pack of Atorvastain under the new proposed reference price is €2.52. If this is to be the case, let me outline the financial scenario that will unfold. The State will recoup €2.50 from the patient in the form of the prescription charges, the manufacturer of the drug will earn €2.52, from which the manufacturer will have to pay for the manufacturing of the medicine and packing it in a unique Irish packet. It will also have to pay for the transportation of that product to the Irish market and pay the wholesaler to control the drug and distribute it across the Twenty-six Counties. The manufacturer will have to pay the Health Products Regulatory Authority the annual maintenance fees and licence fees and also the fees to maintain pharmacovigilance for the product in the marketplace, and all of that for a cost of €2.52. In effect, it means the State will recoup almost 100% of the cost of the medicines and those companies who meet the reference price, who need to manufacture, transport and comply with quality and regulatory requirements, carry all the risk and are not able to make a return on that level of pricing. I wish it were otherwise but this approach is simply not sustainable.

The challenge for all of us, Government, the pharmaceutical industry and retail pharmacy, is meeting patients' needs sustainably. We know that 2015 is a major year for all of those involved. The decision-makers in the negotiations have important choices to make. We urge them and the members of the committee to intensify reforms and grasp the opportunities on offer. We take a balanced view of the future.

I thank Ms Gannon for her presentation. I wish to inform members that in correspondence No. 1316 we did invite Alexion to attend the committee, a matter to which Senator Colm Burke will refer later, but it has declined to appear. The letter is contained in the pack supplied to members. We now move to the question-and-answer session.

I welcome the witnesses. This is an issue that causes much concern. Legislation has been brought through the Houses of the Oireachtas in recent years to try to address the cost of medicines to the taxpayer. Clearly, our obligation is to ensure we get the balance right so that we have a vibrant market and we get value for the taxpayer. We have a strong pharmaceutical base in this country, which is critically important to the broader development of the economy, but we cannot subsidise that by paying a great deal for patented medicines or even generics, which are very much to the fore and manufactured here. We have a role to play to ensure there is openness, transparency, and a mechanism in place to ensure value for the patient and the taxpayer.

In the past there were sweetheart deals with companies. The reason the pharmaceutical companies are here is that there was incentivisation above and beyond the traditional grant aid and supports for research and development, employment and so on. That issue has always been left hanging in the air. It has always been denied, and in a previous role I had as Minister of State with responsibility for trade, I denied it. Nevertheless, it has consistently been raised, not only in the context of pharmaceuticals but also with reference to many other multinationals that locate here.

I wish to put a question to the Irish Pharmaceutical Healthcare Association. Most of the companies that locate in Ireland are multinational companies, so obviously the Irish market is very small. I assume they are not locating in Ringaskiddy, Little Island and other places because they want to supply the Irish market but because of other incentives - that fact that there is already a critical mass of pharmaceutical companies, our high-quality graduates, the taxation system, the infrastructure, and the link between the United States and Europe. That is a given, but there is always a concern that we pay particularly high costs for medicines as a sort of a sweetener. That has consistently been said, and I would like to hear the views of the witnesses on that issue.

Dr. Leisha Daly made two points in regard to agreement on supply and pricing. Having an agreement helps the State and the HSE. It results in predictability and consistency in pricing and supply, it involves a detailed test of value for money before any new medicine is paid for, and it deals with the risk that medicines meant for Irish people may be sold to higher-priced countries. I assume there is a contractual arrangement in place between a company and the State in terms of the supply of medicines. Therefore, how could there be leakage if there is a contractual arrangement in terms of medicines that are meant to be sold to the Irish market going to a higher priced market? As that would be a breach of contract, I am wondering how that could happen. It it happens, it should not happen.

In her presentation Dr. Leisha Daly said:

Competition law prevents our association from making individual pricing or other commercial decisions for members. However, the agreement means that, when a member company proposes a new medicine to the HSE, it must offer it at a price which is at, or lower than, the average of its price in the nine member states.

I have two questions which I have asked in other areas before. Who defines the nine countries in that basket? Clearly, if there is limited supply going into that basket of nine countries, obviously there is an inflationary pressure on prices. Is there potential to artificially inflate prices in those nine countries if supply is restricted to those nine countries?

I welcome all the employers in Cork. However, we cannot have a view that they are here because we are paying higher costs for our medicines. That is not a tenable position to hold, but it is certainly a tenable position terms of attracting attention among the broader public. Medicines must be purchased based on the merit of the medicine and not because of the number of people employed.

In regard to generics, the poor relation in the pharmaceutical industry, obviously great strides have been made in recent years. How helpful has the legislation been in trying to tip the balance not in favour of generics but in favour of value for the taxpayer? How receptive is Government, the HSE and the Department of Health to the witnesses' presentations from time to time in terms of reductions in the cost of medicines, and how it can make savings for taxpayers? This issue will not go away.

There is another major issue of concern. Irish people are prone to travel far and wide and make comparisons in their own mind in regard to medicines that they can buy in Málaga or Marbella, or Puerto Banús, sometimes without prescription, although when they come back they must get it on prescription and it costs a great deal more. Perhaps we could have an explanation as to why that is the case. I know there are reasons for it. I appreciate that we have a more restrictive prescription system here, but to a family going on holidays it does not make sense, given that we are all in the European Union.

I welcome the witnesses and thank them for appearing before the committee and for their presentations. I apologise on behalf of my colleague, Deputy Caoimhghín Ó Caoláin, who cannot be present.

I am aware that some medications were said to be in low supply in Ireland, and it has been suggested that this was due to companies being able to get a better price in other countries. Is this the case at present and, if so, what medications are in short supply and what is being done about that? It was mentioned in the presentations that as the price of medicines gets lower there will be medicine shortages. In Spain, Portugal and such places - one may be talking about different medications - the cost of many basic medicines is much lower. I wonder why, if this is the case, there do not appear to be any shortages in the supply of those medications, which are often a tenth of the price that people pay in Ireland.

Ms Sandra Gannon mentioned savings of €113 million and said she had met the HSE and the Department of Health. That is a huge amount of money in the overall health budget. Why have these proposals not been implemented if they are so straightforward? Have the witnesses been given any explanation as to why they have not been implemented?

A recent report on Ireland suggested that up to 70% of medications by volume are now generic. Maybe I picked that up wrong. I think there was a reference in one of the presentations to 34%. Perhaps the witnesses would explain that issue.

What savings have been made to date on the cost of medicines in the State, and how does that compare to other member states? What progress has been made on reducing unnecessary prescribing under the general medical services, GMS, scheme? Is a budget cap for pharmaceutical expenditure being considered? How is the behaviour of prescribers monitored, and has progress been made since the commencement of the 2013 Act? What is the current volume and value of generics in total pharmaceutical expenditure and how has this changed over time following the commencement of the 2013 Act? It was stated that the prices of some medicines had fallen by 85% and that Ireland is no longer paying above the EU average.

That can only be a good thing. It was also stated that some prices are falling and are now at 2001 or 2002 levels. If they are now at 2001 or 2002 levels, the question of why they were so expensive in between arises.

In the second session this morning we have a presentation from Healthwave, the retail pharmacy business that caters for all State drugs schemes as well as private patients. I know the member of the deputation have not seen the presentation, but they would be perfectly aware of the business. That company seems to be able to provide a low-cost service. What are the views of the witnesses on that?

I welcome our guests. This is an important discussion. It is complex and it is important to dig down into some of the specifics. I speak with a little familiarity with this area, having founded the All Ireland Cooperative Oncology Research Group, ICORG, many years ago. Most of my research has in fact involved drug development, and that is what I have been primarily interested in. I am proud of what we had achieved with ICORG. We took on a rather improbable dream in a country that had only four oncologists at the time we founded the group and almost no patients going on clinical trials. Since then we have brought in approximately €30 million to €40 million worth of free drugs to this country and created approximately 100 jobs. In truth, those jobs are in the public sector, but I estimate that we have also created approximately 100 jobs in the private sector, because there are companies here which previously only had a sales force but then developed a research and development office to support the activities of clinical research trials. We have had an honest and honourable role in developing four or five important cancer drugs. I have been invited to present to the US Food and Drug Administration on behalf of a drug which was licensed partly on the strength of that presentation. I have recently undergone an inspection by the Food and Drug Administration, which my team passed with flying colours. We are proud of what we have achieved in that regard.

It is good that we are going to have the equivalent of the US Physician Financial Transparency Reports Act, or Sunshine Act, here in the near future. It will enforce a transparency in the relations between the industry and doctors. This is long overdue and I am supportive of it.

The Irish Pharmaceutical Healthcare Association, IPHA, primarily represents the Irish affiliates of international companies. The typical IPHA customers would be Irish sales and marketing forces selling and marketing drugs in Ireland, rather than representatives of the large manufacturing presence in Cork or west Dublin. Over the years I have managed to get a great deal of money for research from these companies. I have got them to support grants, match grants and so on. However, one of the issues I never quite got to the bottom of was what went into the decision-making process in terms of where they put a manufacturing plant. Were they more likely to put it in Ireland because we carried out good research here? Were they more likely to put it here because the local market was favourable for the sales of the local Irish affiliate sales force? To me that is simply not plausible. I believe there is a complete disconnect between the decision on where a manufacturing plant goes and the minuscule size of the Irish market. Companies put their manufacturing plants here for one reason and one reason only, and it relates to one number: 12%. They come here because of the corporation tax rate. There are other supportive reasons as well, but arguments to the effect that we should not prescribe generic drugs in Ireland because otherwise we would lose the manufacturing base have been advanced by the industry in the past and I believe they are wholly spurious. The industry needs to get its act together on pricing.

The marketing, pricing and costing of drugs has changed dramatically. The old philosophy used to be that a manufacturing company based the price it charged for a drug on the cost of developing it, plus the cost of the many failed drugs that never got to marketing, plus a reasonable market mark-up. It was difficult to argue with that. While science and medicine have become more sophisticated, so has marketing. We now know that one of the key scientific components of marketing is pricing and the question of what the market will bear. The things which determine what a market will bear include the quality of the science behind the drug and the quality of the clinical impact and its reach into medicine, but also emotional and social factors. If a company has an effective drug for a rare disease that affects young people, it is likely that the company will try to yank the price up as high as it can, way beyond the developmental cost of the drug. That is why I am troubled indeed when I hear of individual drugs costing many hundreds of thousands of pounds per annum. That is simply not sustainable.

I know of one cancer drug we are prescribing that costs approximately £120,000 per annum for a patient, and that patient would be on the drug for a year. I know that the drug was licensed on the basis of a trial which included only 100 patients. Therefore, the developmental costs of this drug had no relationship whatsoever to what was being charged for it. Let us compare that to a drug like Herceptin, which was developed in an earlier era and which cost approximately €30,000 per year. It was based on trials that included 20,000 or 30,000 patients. It was expensive to develop. By the way, when we are allowed to prescribe bio-similars instead of Herceptin, I will prescribe them all the time. We need to be absolutely unambiguous about this. Our health service will not be able to afford the high-quality cancer, cardiovascular and cystic fibrosis treatments that are coming if we do not save everywhere we can. In every situation where a generic drug exists that is much cheaper, we should use it. In every situation where a bio-similar drug exists that is much cheaper, we should use it. I take two generic medications with a clean conscience and a light heart every morning and I tell my patients the same thing.

The companies need to have a serious rethink. Increasingly, the purchasers are government collectives throughout the Western world. They probably need to draw a line under this and express to the companies the view that there is an amount of money beyond which they will never pay for one drug and that the companies can still make money on it. I offer one example. A good friend and colleague of mine, Dr. Leonard Saltz from the Memorial Sloan Kettering Cancer Center, was routinely prescribing a widely used colon cancer drug called bevacizumab. A newer drug called aflibercept came along. It was not bio-similar; it was a different company's product. The company wanted to give it and took the view that it was a little better. However, the price was astronomical. Dr. Saltz went to the New York Times, wrote an op-ed and then went to the pharmacy committee of the hospital and said that they should not pay for it because the difference was too small and the cost too great. Immediately, the company was able to drop the price of the drug by one half, which told us that there was no relationship whatsoever between where it pitched the price of the drug and the actual developmental costs of it. The company made a calculation - as it transpired, a miscalculation - that the market would bear a higher cost.

We really need to get our act together on this. If we are going to be able to take these wonderful new cancer treatments into the next generation, we need to look at numerous things. How much money is spent on marketing to doctors? How much money is spent on advertising? Moreover, we need to look at the way pricing works on the drugs. The bad news for the industry is that if they price it too hard, no one is going to pay. That is where it is. We need to work out a way to ensure that drugs become available at a rate that is affordable as well as allowing a reasonable profit for the companies and their shareholders.

I will hand the discussion back to the witnesses. Ms Maher can start. Three other people have indicated a wish to speak as well. You can answer any of the questions directed at yourselves.

Mr. Darragh O'Loughlin

Some of the questions do not directly apply to community pharmacists, so I will leave it to the manufacturing industry representatives to answer those. However, there were some questions from Deputy Kelleher and Deputy McLellan about the differences in price that are visible to Irish patients who travel to Spain on their holidays. Deputy McLellan wondered why Spain does not suffer shortages if its prices are lower than Ireland. First, given that we are in a small island market, we will never have the lowest prices in Europe. If we like, we can claim to have the lowest prices in Europe, but realistically that will mean we will have no medicines. Pitching our pricing level at approximately the European average is probably the right way to do it, because we are a small market within an open market.

People will go on holidays to Spain and discover that it is not only medicines that are cheaper. They will also discover that coffee, restaurant bills, hotel bills and car hire are cheaper. Everything is cheaper in Spain because it is a lower-cost economy. Ireland has a high business cost base. I imagine that is what drives the prices. For example, political colleagues of the committee members who sit in the European Parliament will come back and report on how much more expensive medicines are in Brussels compared to Dublin. This is because Brussels sits above Ireland in terms of pricing in the case of many medicines. There are medicine shortages in Spain, but they do not necessarily have shortages of the same products of which we have shortages. Spain has brought in export bans on some products to address those shortages.

Shortages do not arise because the manufacturer, having manufactured the product, makes a decision not to supply it to the Irish market. Their representatives will defend themselves in a moment, but manufacturers supply medicines, and once they leave the factory gate they have no control over where it goes. They have complied with their obligations.

There is a parallel trade industry throughout Europe. When we had higher prices than we do now we benefited from that because pharmacists were able to source some medicines for Irish patients which were approved by the Irish Medicines Board, IMB, as it was then and by the HSE and supply them at lower prices than were available here, much to the annoyance of the manufacturing industry at that time. We could go to continental Europe then and secure approved medicines for use in Ireland at lower prices but that has turned now. It has tipped over because our prices have fallen and now parallel trading companies that had a big business sending medicines into Ireland from Germany, for example, are now in the business of sending medicines from Ireland out to other markets. The EU is based on freedom of movement of capital, goods and people so we cannot stop that. It is a problem that is affecting more than just Ireland. We are seeing a situation where pharmacists just cannot get some medicines, like certain drugs for chronic pain, epilepsy, thyroid deficiency and depression and so forth. Over the Christmas period, for example, patients were walking into pharmacies with a prescription for Eltroxin which pharmacists did not have in stock. That is an irreplaceable medicine; there is no generic alternative as such. We in the IPU and the HSE were essentially scouring the medicine cupboards of the UK trying to get product in here to meet patient need. The price of the anti-depressant Cymbalta, an innovative drug which is still on patent, is lower in Ireland than it is in the UK. Once it leaves the factories and is supplied into the market, parallel traders can get their hands on it - which is perfectly legal - and sell it into a wholesaler or pharmacy in the UK. It does not happen with all medicines.

There are some medicines which are cheaper here than in the rest of Europe, while others are more expensive. All we can really talk about is where the average sits. The ESRI figure quoted indicates that the average medicine dispensed is at the same price point now as it was 13 years ago.

Ms Kathy Maher

Deputy McLellan asked why, given that up to 70% of medicines are available as generics, we are only seeing penetration of 34%. The law precludes pharmacists from straight switching. We can only give generic medicines for those products that are deemed interchangeable by the Health Products Regulatory Authority, HPRA. We are obliged by law to offer the patient a generic substitute but we cannot switch a medicine if the proprietary brand name is written on a prescription.

Mr. Darragh O'Loughlin

A question was asked about the progress made in monitoring or controlling unnecessary prescribing and whether anyone is monitoring prescribers. The medicines management programme, run by Professor Michael Barry, is starting to address this through the issuing of recommendations. For example, if prescribing for gastric ulcers or gastroesophageal reflux disease, the recommendation is to use Lansoprazole rather than the other drugs in the same category because it is less expensive. If prescribing for cholesterol, the recommendation is to use Sandostatin because it is effective and less expensive than the others. It is only if that one does not work that it is recommended that prescribers move to the more expensive options. That programme has started and Professor Barry uses the Primary Care Reimbursement Service, PRCRS, data from the HSE to monitor prices.

As far as unnecessary prescribing is concerned, while the numbers of items prescribed and dispensed are increasing all the time, arguably that does not prove unnecessary prescribing. Rather, it is a result of the fact that more conditions are treatable now. Diabetes patients 15 years ago, for example, were not taking blood pressure or cardiovascular medicines but then it was discovered that such patients are at greater risk of cardiovascular disease and other organ diseases so doctors started prescribing these medicines before the patients developed such problems. The cardiovascular strategy holds that if patients have high blood pressure, their cholesterol levels should be controlled. Doctors are adding medicines to treatment regimes, the result of which has been to improve health and to increase the length of people's lives. It can also be argued that this results in savings in the context of hospital stays because if patients are at home and taking their prescribed medicines, they are not ending up in hospital.

We have always advocated medicine use reviews where a pharmacist would be paid to sit down once a year with a patient who has a number of different conditions and is taking a lot of prescription medicine and comb through all of the prescriptions and review the appropriateness of and need for each one. The pharmacist could make sure that the medication is both clinically appropriate and cost-effective, that is, that the patient is using the least expensive equivalent to treat his or her condition and is not taking anything that he or she should not be taking. Such medicine use reviews are used in the UK and have prevented people from ending up in hospital, as well as saving money.

Dr. Leisha Daly

Deputy Kelleher asked about the manufacturing base here in Ireland and whether that has had an impact on prices or whether we are using that in some way. The Deputy acknowledged that our parent companies have significant investments in Ireland, unlike in other European countries such as Romania. That said, the methodology for pricing medicines in Ireland is completely independent. The Deputy will be familiar with the process of health technology assessment, whereby every patent-protected medicine that comes to the Irish market goes through a very rigorous cost-effectiveness assessment within the National Centre for Pharmacoeconomics, NCPE. Following that, there is an assessment of pricing based on a basket from nine countries mentioned earlier. While the pharmaceutical industry is a significant presence in Ireland, the methodology for pricing new medicines coming onto the market is a separate process, with independent assessment carried out by Professor Barry and his group in the NCPE.

Who picks the nine countries that we are benchmarked against?

Dr. Leisha Daly

The nine countries are part of the agreement we currently have. They were part of the negotiations conducted in 2012 when we agreed to the significant savings we have contributed over the past three years. Those negotiations dealt with how we would get new medicines onto the market and the process involved in the health technology assessments.

Would it be fair to say that the prices in those nine countries are higher than they are here?

Dr. Leisha Daly

I would refer the Chairman to the supporting material supplied to the committee with our submission, which Mr. O'Connor will now explain.

Mr. Oliver O'Connor

Appendix 4 shows that the price for patented medicines is now at the average of the nine countries. Some of the countries in the group of nine would traditionally have been seen as higher priced than Ireland, while others would have been seen as lower priced. Spain, the UK, Germany, the Netherlands and Denmark are all in the basket and would traditionally have been seen as higher-priced than Ireland. Part of the rationale for the nine countries chosen was economic, in terms of matching Ireland to income levels, per capita income levels, the economic status of the countries relative to others in the EU as well as the pricing levels. We have provided the latest statistics on the basket in the supporting documentation which shows where Ireland is placed in terms of GDP per capita relative to the nine countries and relative to other European countries as well as in terms of the price level. Ireland, relative to other European countries, is well off. Our GDP per capita in 2014 was almost €38,000 and our GNI per capita, which takes away the effects of the profits of multinationals leaving the country, was €35,000. Most of the countries in the batch of nine are around that level. Ireland is a high-income country relative to the rest of Europe and in general our prices for all goods, as Mr. O'Loughlin said, are about 20% higher than the EU average price. We are pitched at that level.

Some of the nine countries are traditionally higher priced while others are traditionally lower priced but they also reference their prices against those in other countries. In terms of population, the group covers about 278 million people in the EU so it is not as if we are priced against a small subset of higher priced countries in Europe. We are priced against almost two thirds or three fifths of the European population.

Dr. Leisha Daly

Deputy McLellan referenced the fact people have been able to get medicines in Spain at one tenth of the price here. The research we have done indicates that this does not refer, generally, to patent-protected medicines but to generics. We have looked at that in some detail and, as I mentioned in my opening statement, our prices are at the average and Spain is included in that calculation. It has been shown that it is generics that are at a much lower price in other countries and not patent-protected medicines.

I take this opportunity to acknowledge Senator Crown's contribution to the All Ireland Cooperative Oncology Research Group, ICORG, and its fantastic work for patients with cancer. The research coming out of that initiative has contributed greatly to the development of our medicines. The Senator made the comment that perhaps our industry does not support the use of generic medicines, but that is not the case. Our business is about providing innovative medicines, bringing new products onto the Irish market, getting a fair price for them and working within the processes we have. We certainly acknowledge that when the patent expires on a product, it is fair that generics be used in whatever quantities are required. It is not IPHA's position to object to the use of generic medicines. That is absolutely not the case.

Mr. Oliver O'Connor

We dealt with the question regarding the nine countries. Senator Crown asked about the general pricing policy of the industry internationally. Unlike the situation under the United States Government at federal level, for example, we have the health technology assessment, HTA, run by the National Centre for Pharmacoeconomics, which is designed by the Health Information and Quality Authority, with the latter having issued substantial guidelines in this regard. The HTA sets a threshold price level above which, in theory, a drug will be rejected. It is a €45,000 threshold per what is called a quality-adjusted life-year. However, the guidelines also state that there is no fixed cost effectiveness threshold above or below which technologies are guaranteed to be rejected or accepted for reimbursement. The process is there as a check on whether a new product is cost effective, how it should be paid for, whether it represents value for money and so on. Price is a factor in that, but it is not a rigid mechanical rule. Not many of us would want such a rule, because we have to take into account social conditions and Irish preferences.

As Senator Crown would know, this is a very complex area. HIQA has set out complex guidelines in this regard and there are many people in our companies, including statisticians and clinically qualified personnel, who spend a lot of time and effort doing the analysis to meet the tests that are set by the State for determining whether new drugs are cost effective.

Is it correct to say that IPHA primarily represents Irish affiliates and is not the professional representative body for major international manufacturers?

Dr. Leisha Daly

Yes.

There is some confusion about that. Without meaning any disrespect, it is important to be clear that we are not talking to the people who represent the manufacturers in Ringaskiddy and so on but to representatives of Irish affiliates, which are mainly about sales.

Mr. Oliver O'Connor

The manufacturing companies are members of IBEC and are represented in that capacity by PharmaChemical Ireland, which is a business association within the Irish Business and Employers Confederation, IBEC. However, in terms of their representation in Ireland, we represent the aspects of those international businesses that concern the supply of medicines into the Irish health services. We represent them in that function and PharmaChemical Ireland represents them in regard to their function of manufacturing, taxation and so on.

To clarify, we are talking about the same businesses?

Mr. Oliver O'Connor

Yes, they are the same companies.

Ms Sandra Gannon

I will try to deal with some of the points that have not yet been covered. There was a question about the reception to our proposals for savings, which we issued in September last year. All of the stakeholders are very keen to garner more savings and it will be interesting to see how our proposals are acted upon in terms of the required legislative changes, changes to the industry agreements which are up for negotiation this year, and in terms of negotiations with the Irish Medical Organisation, IMO. The proposals were positively received.

We must be very careful when comparing generic medicine prices in Ireland with those in other EU countries. The legislation has really only been running its course for a year. If we look at how the Health Service Executive is setting reference prices for generic medicines, it is not looking at the basket of nine countries. Instead, it is looking at the generic prices across all EU states. What we are seeing is that reference prices in Ireland are not being set at the median. In fact, in some cases they are being set in comparison not with countries of similar GDP and population but relative to prices in the big five countries. In the case of Atorvastatin, for instance, one of the most commonly prescribed medicines in this country and, in the past, one of the highest-cost medicines, we are seeing comparable prices with France, Germany, the United Kingdom and Spain. Most Irish patients presenting at a pharmacy these days realise there is no longer much to be gained in getting their prescription medications dispensed in Spain, because Irish prices are very comparable.

Reference was made to product shortages. One of the issues we see here, particularly in regard to Eltroxin, for example, a drug that is well over 20 years old, is that we have no mechanism in the Irish market currently to increase price. I cannot think of any other product on the market that has not seen a price increase in the past 20 years. Teva does have a generic licence for levothyroxine, which is the generic molecule of Eltroxin, but we have not been able to agree a price with the HSE which would allow us to bring that product to market. The price being paid for Eltroxin right now does not represent the current costs of bringing a medicine, even a generic medicine, to the Irish market.

A question was asked about the volume and value of generic products within the market. Again, we only have HSE data going back to 2013, but we do have industry data. On the basis of those data, we estimate that the volume of generics within the market has increased to 40% since the HSE gave its estimate of 34%, and they account for some 17% of the total spend. To clarify, the data show that generics accounts for 40% of the volume of medicines dispensed and approximately 17% of the total spend.

Thank you, Ms Gannon. I will take another three speakers now, beginning with Deputy Peter Fitzpatrick.

I welcome the witnesses. Living in Dundalk, I am very aware that there has been a significant difference in the price of prescribed drugs in the Republic versus the price payable for the same medicines in the North. Many constituents have contacted me to say the price of their prescribed drugs is much lower across the Border and, in some cases, four to seven times lower. Coming from a business background, I would like to see the pharmaceutical industry producing a recommended price list for all generic drugs which would be available to all relevant parties, including doctors and patients. That would lead to a more open and transparent system for everybody.

As a Dundalk person, I am very much aware that Teva employs more than 500 people in Ireland, some of them in my own town. It must be doing something right when it is on top of the market. Ms Gannon referred to potential savings of €130 million in four specific areas, which is nothing to be sniffed at. The first of these areas, in which a saving of €60 million could be made, would involve opening up competition in the low-volume medicine market, which Ms Gannon tells us costs taxpayers in the region of €200 million per year. Will she explain what she means by low-volume medicines? She referred to a saving of €25 million that could be made by instructing hospitals to switch from expensive biological medicines to more affordable options. What has her company done to encourage that? Ms Gannon identified a further saving of €15 million to be made by allowing pharmacists to dispense more affordable generic medicines to patients who present for the first time. She indicated that generic drugs dispensing has jumped from 34% to 40% of the total market.

How do the witnesses find the quality of generic drugs? People fear a change from a known drug to a generic one. What confidence can the witnesses give them that generic drugs do what they claim on the label?

Mention was made of inhaler devices, with one in every eight people having some form of asthma. Ms Gannon stated that a saving of €18 million could be made in that regard. Will she elaborate further on the figure of €113 million? I am a firm believer in the saying "Your health is your wealth", but many people cannot afford to buy drugs.

I thank the witnesses for their presentations. Last Saturday morning, someone whose husband had had two heart attacks attended my clinic in Cork. He is on medication. He takes the train from Cork to Dublin and then the train from Dublin to Newry every two months to buy medication because he can get two months' supply cheaper there than he can get even one month's supply in Cork. He takes that much trouble because of the price variation.

The witnesses referred to cost savings, but let us be realistic. The cost of medication went from €570 million in 2000 to more than €2 billion in 2009. There was a significant increase in prices over a short period. The State pays more than €2 billion of a €13 billion health care budget on medicines. It is a major challenge. While progress has been made, there is much more to do and we cannot step back from trying to reduce the cost of medications.

We have examined the figures on generic drugs. In the UK, up to 80% of medication is generic. We are discussing a 40% figure for Ireland. Does Ms Gannon envisage that figure increasing further during the next three years and what percentage should we target?

In terms of what manufacturers charge pharmacies and pharmacies charge customers, what is the pharmacies' margin on generic medications and how does it vary between Ireland and elsewhere?

Mr. O'Loughlin referred to drugs in Brussels. I worked there for two years. The medication I was on at the time cost me €11.25 in Cork, but €3.25 in Brussels. The ESRI published a report in 2013. An issue arises with the cost of medication in Ireland, in that drugs are released here at an early stage. While that is welcome, the ESRI asked whether the State was likely to be disadvantaged if products tended to be launched relatively early in Ireland and, thus, the comparative average pricing mechanism in the basket of European countries did not apply as widely as it should. Essentially, we could compare prices with a wider group of countries if we entered the market later, as our current basket comprises a small group. Will the witnesses comment on this point? Should the HSE and the Department be entitled to a mid-term review of a medicine's pricing after, for example, two years in light of what it is being sold for in other countries? This would be important. If the State works with the pharmaceutical industry as well as pharmacies, we can all benefit from having new medicines available in the market at competitive prices.

I hope to be brief. I thank Ms Maher for her presentation and compliment the local pharmacies. In every community, the local pharmacist is as important to customers as the general practitioner, GP.

Many of the questions on generic drugs have been answered, but how does the Irish Pharmacy Union, IPU, explain generic drugs to customers? Whenever people, even family members, speak with me, they believe that a generic drug is the yellow pack drug and that they should be getting the "proper" one. I encountered an incident in the past week. A member of my family was on generic drugs. It was only when she was prescribed the "proper" drug that she made some progress with her illness.

We are discussing quality of life. For me, that is still being able to comb my hair, wash myself and do all of the other things that are important to me in life when I reach 81 years of age or older. This is why I have an issue with people having so many prescriptions just to keep them alive. It is wrong. There has been a 73% increase in prescribed drugs and a longer life expectancy because of medication, but the ESRI has shown that a longer life does not mean a healthier one. This is an issue. I read the bleak figures from the HSE - 40% with chronic disease, 31% with heart disease and 30,000 new cancer patients. Have the witnesses statistics on how many people who live longer end up in nursing homes? It is what happens. We extend people's lives, but do they have quality of life? In my local area, the majority end up in nursing homes, including people who live close to me. We should instead be helping people to plan healthier lives. For example, how should we deal with young women who smoke during pregnancy? We send them to counselling, but it makes not one bit of difference. For the past couple of months, the committee has discussed alcohol and how to treat people who abuse it, particularly young people. Drug abuse is also an issue, be the drugs legal or illegal. If we start considering these questions instead of filling people up with prescription drugs, we might be doing more to sustain healthier lives. This is just my personal opinion. I am not a medical professional, unlike my esteemed colleague, Senator Crown, who knows much more about this issue.

I have a quick question for the community pharmacists. In terms of substituting generic or low-cost drugs, how effective have the changes in prescribing been? Can other changes in that regard be made to reduce the cost further?

I will ask two questions of Ms Maher or Mr. O'Loughlin. What is the witnesses' opinion on the delivery of drugs to patients via alternative means, for example, the Internet and mail order pharmacies? Will they comment on the issue of overprescribing?

Deputy Byrne made a good point. It would be remiss of us not to compliment the local pharmacists in our communities who provide a sterling service in their relationships with many of the people who walk through their doors. We should acknowledge that the pharmacist and the pharmacy play a key role in the community.

Ms Kathy Maher

I will take the questions from Deputies Fitzpatrick, Byrne and Healy on North, South and Border prices. I thank Deputy Healy and the Chairman for their kind words about the community pharmacist. They are right, in that the community pharmacy is the heart and hub of every town and village. Running a Border pharmacy and being from Northern Ireland originally, I am very aware of the price differences, but we must bear in mind that the price of drugs is set by an agreement between the Department of Health, the HSE and the manufacturers.

The ESRI report has shown that the price is falling and continues to fall. It fell by 30% between 2009 and 2013 and that was before generic substitution and generic pricing took hold. We have seen huge drops in the past 12 months alone since reference pricing came in, as Ms Gannon has pointed out. Pharmacists have campaigned since 2003 to be allowed to substitute generics, so we could have made years of savings. We welcomed generic substitution because there is much change we can bring about.

Deputy Catherine Byrne asked whether patients are confused. It can be very confusing for patients. Some of the drug companies ran campaigns to help patients to understand, but pharmacists spend many hours at the counter telling patients that the little white tablet that is round and flat is the same as the little blue tablet that may be oblong. This does take time, because the change from a short popular name to a long chemical name is difficult to comprehend and a person needs to have faith in the product they are going to take to improve their health. The PCRS and the HSE have acknowledged the difference pharmacists have made in the past 12 months in respect of the success of reference pricing and generic substitution in bringing down the State's bill.

Community pharmacists deliver medicines to elderly patients, young mothers and patients who are bed-bound or housebound across the country. They make a huge contribution to their patients' lives in respect of the delivery of medicines. Mail order pharmacy is currently illegal.

What would be Ms Maher's view of Internet pharmacies, which can in some cases offer lower-cost distribution? What is the view of the Irish Pharmacy Union on that?

Ms Kathy Maher

As an organisational representative and as a health care professional, I believe nothing can take the place of a face-to-face consultation with a patient. The patient benefits greatly from face-to-face interaction with the pharmacist.

Mr. Darragh O'Loughlin

I will respond to some of the questions Deputy Fitzpatrick asked. He alluded to a published recommended retail price list of some sort. That kind of retail price maintenance is illegal in Ireland under competition law, so although the Irish Pharmacy Union represents 1,700-odd community pharmacies, we do not gather or transmit any data around private pricing. Every one of those transactions must occur separately. Pharmacists are legally obliged to make up their own minds about what they charge. From an economic perspective as opposed to a professional one, we have one of the least regulated pharmacy markets in Europe, as has been acknowledged by the European Commission in its publications. Pharmacies in every locale and market are competing with each other. Competition is not just about price; it is about the quality of service, advice and location, and the convenience and service one provides to one's customers and patients.

Senator Colm Burke asked about the margins in the Irish pharmacy sector and how they compare with those in other countries. Our research shows that in the past five years since the financial crisis took hold, the average turnover in an Irish pharmacy has dropped quite considerably. This means that the margins in pharmacy are also dropping very considerably. In percentage terms, our margins would be roughly the same as those in the UK. Our turnover is falling to approximately UK levels or lower because the market is so competitive. We have an overall market that is shrinking in value, but more and more pharmacists who graduate from college are establishing their own businesses and competing for ever smaller slices of a shrinking pie. This is borne out by ESRI and CSO data. The overall value of the pharmacy is shrinking even as the number of prescriptions is increasing.

I am not sure whether Mr. O'Loughlin saw the article in The Sunday Business Post a couple of weeks ago regarding a pharmacy whose representatives will be appearing before us, where prices are as cheap as those in Northern Ireland.

Mr. Darragh O'Loughlin

It would probably be unfair of us to start commenting on an individual pharmacy.

It relates to the remarks made by Senator Colm Burke about pricing and margins. The article showed that the prices were cheaper there than in other pharmacies.

Mr. Darragh O'Loughlin

There is a pharmacy that has attracted a great deal of publicity for the prices it offers on generic medicines. The owner has a particular business model, which is a subscription model. I will not describe it because I know he is coming before the committee later. Many of the other pharmacies that do not have that business model have established costs, so the businesses have been in existence since before the financial crisis in what we thought at the time was a boom. With upward-only rent reviews and high rates, rents and wage costs, it is not possible to reduce the cost base of any business, as the members know from their constituencies, and pharmacies are no different. Pharmacies have to charge a price that covers the costs of delivering the service and operating the business. In a competitive market, pharmacies have maintained a high quality of service and have seen prices drop considerably, so pharmacists are passing on price reductions as they come in to the fullest extent they can.

The Chairman asked about the steps that are being taken to address over-prescribing. Some of the increase in the number of items dispensed on the State schemes is due to the increasing number of people who are eligible for the State schemes. Senator Colm Burke spoke about the jump in expenditure from 2001 to 2009, when there was a very considerable rise. There were many reasons for that. One was a huge increase in the number of medical cards in circulation - from 1.2 million to approximately 1.8 million - because the unemployment rate suddenly shot up. We were dispensing prescriptions for 50% more people. During that time, more therapies were coming on line. If we go back 15 years, more of the products that are generic today and that are becoming cheap today were new, novel and exciting medicines. Examples include the cholesterol and ulcer medicines I spoke about and many of the asthma and respiratory medicines that we are so used to now. Perhaps Dr. Daly will speak about this. There was a wave of new medicines that were then very expensive but that have dropped in price since then.

In fairness, the price increase was 260% before the unemployment figures started to increase. It happened between 2000 and 2008. That was when the big jump occurred - before the unemployment figures and the number of medical cards started to increase. It appears that it was a case of who was prepared to sign the blank cheque. There seems to have been very little control by the HSE and the Department, which was a concern I had. Once prices are increased, it is very difficult to try to go back because people who own pharmacies have spent money - they were able to spend based on their turnover - and are now running into difficulties trying to service that expenditure, which is a huge challenge.

I remind members that we must conclude this session by 11.30 a.m. to accommodate the second session.

Mr. Darragh O'Loughlin

I remind Senator Burke that pharmacists did not set the price of medicines at that time either. We just received the price. Medicines were expensive, but the ESRI has shown that Irish doctors like to prescribe innovative therapies. The Senator mentioned that the downside of being an early adopter of new medicines is that it can push up the price - the price paid on medicines, not the price for the individual medicines. Historically, we have used more innovative and newer medicines here, whereas the UK has incentivised prescribers to stay with the older, cheaper medicines.

Dr. Leisha Daly

I will address Senator Burke's question and Mr. O'Connor will address the other questions. The Senator spoke about the drugs bill increasing. It is important to mention again that there are 835,000 more patients in the system than there were in the past. This has resulted in a 73% increase in the number of items being prescribed over the past ten years. Life expectancy has gone up by an additional four years over those ten years. The bill has gone up but the benefits are there in increased life expectancy. Obviously, there are more patients in the system as well.

The Senator referred to the ESRI report. There have been some comments on that report in that it only captured two out of the nine countries we are referenced against, so we would challenge the validity of some of the data in that report. The Senator commented on Ireland getting early access to new medicines. This is not the case any more. It would have been like that five or six years ago when Ireland was one of the first countries to make new medicines available to patients. The process is taking much longer now. The period from when a drug is approved by the regulatory authority to getting reimbursement in Ireland takes two years or more, so we are not one of those early countries any more in terms of getting new medicines onto the market.

My final point relates to the mid-term review. In each of the agreements there have been realignments at intervals. We had a realignment of medicine prices at the end of November 2012 and November 2013. It is not the case that we have agreements which run indefinitely; there have been realignments in between. That is actually happening and prices are reduced at that point.

Mr. Oliver O'Connor

Deputy Catherine Byrne inquired about life expectancy and the fact that individuals were living longer and that some could become quite ill in their later years. Obviously, everyone agrees that people living longer is good. Individuals will become ill in older age as a result of chronic diseases, some of which relate to lifestyle issues, while others are contracted simply on the basis of misfortune. Our medicines help them to avoid the worst effects of such diseases. Medicines are necessary to deal with chronic illnesses. For these reasons, many of the companies in the IPHA support the proper use of medication by patients with particular conditions and diseases.

On the generality of nursing home usage, in a previous life I worked as a special adviser in the then Department of Health and Children and had a particular interest in long-term care.

I should have welcomed back Mr. O'Connor.

Mr. Oliver O'Connor

It is wonderful to be back. The prevalence of the need for nursing home care among those in the over 65 year age group should never be more than one in 20. It should, in fact, be less than 5%. It is important to emphasise that it is not the case that one will end up in nursing home care once one reaches 65 years. Such care should only be necessary for those in the high-dependency category. I am sure that one of the great campaigners in this area, Professor Des O'Neill, a geriatrician, still reminds everyone involved in it that, regardless of the age one reaches, one never has more than a 50% chance of suffering from dementia. Again, there is no inevitability in this regard. Obviously, we must manage conditions and chronic diseases that come with ageing, but people should not be of the view that once they reach 90 years of age, they will develop dementia almost immediately. That is not the case. The job of those in the pharmaceutical industry is to support the management of chronic diseases, acute illnesses and ageing in order to ensure the period of suffering experienced by those unfortunate enough to be severely disabled as a result of these conditions will be kept to a minimum.

Ms Sandra Gannon

My colleague, Ms Kenny, will address the enablers in respect of the €113 million in savings we have proposed.

Ms Aideen Kenny

On Deputy Peter Fitzpatrick's questions about the proposed savings, wearing one of the many hats I wear within Teva Pharmaceuticals Ireland, I am involved in setting the opportunity to bring products - predominantly of a generic nature - to the Irish market. Prices continue to fall to levels which are extremely low. For example, Ms Gannon referred to atorvastatin, the price of which stands at €2.52 for a 28-pack of 10 mg tablets. The price of a 28-pack of 5 mg amlodipine tablets, a widely prescribed therapy for cardiovascular disease, is €2.16. For a pack of 28 simvastatin 10 mg tablets, which are used in the treatment of high cholesterol, the cost is €1.96. I could continue to list other products. More frequently, we are unfortunately being obliged to make decisions on the basis that economic circumstances dictate that it makes no sense for us to launch particular generic products in the Irish market.

The first €60 million of the proposed savings of €113 million relates to products which are on the market at below the target price of €1.5 million to €2 million. At that price and allowing for the competition provided by five or six players in the generics market, it certainly makes no sense for us to bring a product to the market. We are of the view, however, that if certain enablers were facilitated by the Government, it would improve the competitiveness of the sector. I will return to these enablers.

The next €25 million in savings relates to expanding the level of uptake of biosimilar products. Teva Pharmaceuticals Ireland has experience in this area because it launched three such products in the market, with mixed results. It has been a hard slog to try to convince prescribers to recommend them. This has predominantly been as a result of a perceived lack of safety in respect of these products and doubts as to whether they constitute effective therapies. Ms Gannon will expand further on this issue.

Savings would also result from allowing pharmacists to dispense more affordable products which would not normally be substituted for patients' prescribed medicines. This is a very interesting subject and would require patients who are perhaps not eligible to switch by virtue of the fact that the products they take are not included in the interchangeable list to start from scratch on these newer therapies. We are of the view that considerable savings could be made in this regard.

The final area in which savings could be made is respiratory devices. Again, the products would not be those included in the interchangeable list. Therefore, potentially, savings would be more difficult to achieve in the absence of enablers.

The enablers we are proposing would involve straightforward amendments to existing legislation; making them agenda items as part of the negotiations with the IMO later in the year; taking these enablers into account when the current industry agreements were being amended in order to change the price entry points; and ensuring prescribers and procurers took a more proactive approach to cost savings in their prescribing and procurement.

Ms Sandra Gannon

We need to address the issue of the quality of generics. As stated, Teva Pharmaceuticals Ireland spent a considerable amount of money in trying to disseminate information on generic medicines because this was a new area for Irish patients. However, generic medicines are used right across Europe as a mechanism to save money. For example, some 80% of the volume of medicines dispensed in Britain and Northern Ireland are generic. In the context of the level of take-up, generic medicines are frequently used in other European countries. Generics are licensed through the HPRA in exactly the same way as originator medicines. All of the regulations required in terms of good distribution and manufacturing practice are all applied to generic companies in the same way as they are applied to originator companies. We are also subject to the same requirements in the context of monitoring our products on the market. We monitor our products all the way through from the point at which we place them on the market. Adverse events in respect of all medicines are reported to generics companies and, just like originator medicines companies, we report them to the HPRA.

Has the "Understand Generics" campaign been concluded? Have questions arisen about it continuing?

On the point made by Senator Colm Burke, people who visit my clinic and my office in Cork which is a very small place use the term "mockya drugs". I have come across individuals who will refuse to purchase an alternative drug because it is not what they are used to taking. Perhaps there is a need for everyone involved to consider how the campaign to which I refer might be pursued to an even greater degree.

Ms Sandra Gannon

Absolutely. We continue to invest in the "Understand Generics" campaign and support pharmacies in helping patients to understand the active ingredient in generic and branded medicines is equivalent and works in the same way. The colour of the tablet might change or the packaging might look different, but, ultimately, the medication involved works in exactly the same way and the drugs are licensed and approved by the HPRA. We continue to invest in this area and have a website. In addition, we continue to supply pharmacies with material for patients.

Will Ms Gannon elaborate on her remark to the effect that we are ill-equipped to deal with future demands in respect of medicines? Some of our other guests may also wish to comment.

Ms Sandra Gannon

As all of us on this side of the room have mentioned, my remark was in the context of the increased volumes and the fact that patients were living longer and consuming more medicines. Speaking from the perspective of Teva Pharmaceuticals Ireland and in the context of innovation, the State must realise patients demand that we have access to the most innovative treatments and therapies. In one sense, generics afford the State some room for budgetary manoeuvre in paying for such treatments and therapies. However, it must be remembered that the population is continually ageing, living longer and developing increasing numbers of chronic diseases.

It is certain that the State will need to pay more for medicine usage in the future if patients are to be allowed to access all of the new, targeted therapies that are coming down the line and the consumption of medicine remains at its current level.

Dr. Leisha Daly

I agree with Ms Gannon's last point. As has been noted, with the population ageing and new medicines emerging, it will not be enough to assume that the savings being generated from older medicines will be sufficient to fund new medicines. It must be acknowledged that more funding needs to be ring-fenced for new, innovative medicines coming to the market.

While the Irish Pharmaceutical Healthcare Association acknowledges the role of biosimilar products in providing value, these are not generic products as they are different molecules. The decision on when and where to use them should not be based on financial considerations. Safety considerations must also be taken into account and the IPHA is working with the Health Products Regulatory Authority on this matter.

Mr. Darragh O'Loughlin

From the pharmacists' point of view, the issue is not only the cost of medicines as we do not set prices. Deputy Catherine Byrne and Senator Colm Burke spoke today and on previous occasions about pharmacists engaging with patients to support them in making healthier lifestyle choices and taking medicines correctly. Some of the savings generated in securing lower prices for medicines should be expended on supporting patients to take medicines to ensure they benefit from them. Patients need to take the right medicine at the right dose at the right time and to do so consistently.

The pharmacy profession does more than supply medicines. Our role is also to support and assist patients. Deputy Catherine Byrne is anxious that more be done to support people in making healthier lifestyle choices. If people are to live longer, which would be good, it is preferable that they also live healthier lives. Members are probably too busy to watch television. In January the Irish Pharmacy Union worked with the "Operation Transformation" programme across the country, with the result that thousands of people visited their local pharmacy to have their body mass index, weight, height and waste circumference checked. Pharmacists were making a statement that we needed to start addressing the fact that, as Senator John Crown stated, 61% of the population were overweight or obese. Failure to address this issue will result in the system being bankrupted by cardiovascular disease and diabetes. Pharmacists have a major role to play in controlling illness before it reaches the point where it requires medication.

I asked a question about the margin between manufacturers and the prices set by the Health Service Executive.

On the letter from Alexion, a company that was invited to attend this meeting-----

The letter may be published.

The letter states: "Given Alexion would be highly restricted in terms of what we could discuss with regard to pricing negotiations in Ireland as well as our global experience and position, we must respectfully and regretfully decline your invitation at this time." The company clearly does not wish to discuss pricing and the cost of the medication it provides. Is greater transparency needed in this area? We had hoped to discuss the cost of a specific drug, as we still do not know what price is being paid for it.

In fairness to the Irish Pharmaceutical Healthcare Association, Alexion is not one of its members.

Senator John Crown has made a good argument on what is perceived to be the high cost of high-tech drugs. Notwithstanding the different composition of these drugs, the costs seem particularly high from a layperson's perspective. The Health Service Executive was forced to backtrack on decisions it took not to reimburse the cost of certain medicines through the primary care reimbursement scheme.

Dr. Leisha Daly

As I stated, the molecules are much more complex and a much more significant investment is made in the development of such medicines. Many members will be familiar with pharmaceutical plants in Carlow, Cork and Grangecastle which are developing some of these new medicines. It takes between three and five years to get a manufacturing plant up and running and costs up to €500 million before it starts to manufacture a medicine. The development and production of these medicines is a highly complex process. Moreover, not all of them are as expensive as some of the headline drugs about which we hear. Nevertheless, I note the Chairman's point.

Mr. Oliver O'Connor

To be helpful to Senator Colm Burke, we provided an analysis of the composition of medicines. The additional information we have submitted features prices in the HSE community drug schemes. The total cost of prescription medicines in the HSE community drug schemes is approximately €2 billion. The ingredient cost accounts for approximately three quarters of this figure, while other factors, including wholesale, distribution and pharmacy, account for the remaining one quarter of the total cost.

I thank the delegates for coming before us. It should be noted that the Irish Pharmaceutical Healthcare Association represents a group of companies which provide significant employment and play a major role in health innovation. It is important to acknowledge their contribution to the economy and investment in communities.

Sitting suspended at 11.35 a.m. and resumed at 11.45 a.m.

This is our second session on the cost of prescription drugs in Ireland. I welcome Mr. Shane O'Sullivan, chief executive of Healthwave; Mr. Martin Gallagher, chair, and Mr. Michael Cullen, vice chair, of the Association of Pharmaceutical Manufacturers in Ireland; Mr. Jim Hannon, CEO of Clonmel Healthcare; and Professor Colum Dunne, foundation chair and director of research of the graduate entry medical school at the University of Limerick. They are all welcome and I thank them for being here. We appreciate them taking the time to be with us.

I remind the witnesses that they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

I invite Mr. O'Sullivan to make his opening remarks.

Mr. Shane O'Sullivan

I thank the Chairman and the members of the joint Oireachtas committee for this opportunity to discuss Healthwave and our experience of innovating in the pharmacy industry in Ireland. Healthwave was founded in 2013 with a simple goal, namely to provide universal access to the best value in medication and care. Healthwave is a retail pharmacy business that caters for all State drug schemes as well as private patients who pay in full for their medication. Since our launch in 2013, we already have 10,000 customers from all over Ireland who regularly travel the length and breadth of the country to benefit from our service.

The pharmacy sector in Ireland has traditionally been extremely opaque, with pricing information near impossible to come by. The most basic change we made when launching Healthwave in 2013 was to publish our prescription prices for everyone to see. The fact that complaints were made by pharmacy owners to the regulator on foot of this action is testament to the reluctance of the industry to inform patients about price. Thankfully, the pharmacy regulator moved to support this transparency, and in 2014 published guidance encouraging other pharmacies to follow suit. Last week I received a receipt from an elderly gentleman who had been charged €100.29 by another pharmacy for olanzapine, a drug for mood disorder. Our price is €19.08. He will save 80%, or almost €1,000 per year. We know people do not have this kind of money to throw around.

Working as a community pharmacist in various stores throughout the country, I witnessed at first hand patients ceasing medication due to cost. It was these stories that led me to launch Healthwave, and with it a new model of pharmacy with universal access to transparent pricing and an unrivalled level of care and convenience. In our first year, we saved our patients well over €1 million. Not only did we save the consumer hundreds of thousands of euro, but we have also saved the State significant expenditure on medication as a result. It is worth recognising that the State plays no role in the prices pharmacies charge private patients. However, I hope to demonstrate that by reducing costs and improving adherence in private patients, the State ultimately benefits with substantial savings.

As I stated, within 18 months more than 10,000 customers from all over Ireland subscribed to our HealthPass service, which is a new business model in Ireland. We operate this business model to provide the best care and value to the consumer. For a small annual subscription fee of €25 customers become members and enjoy a number of benefits, which include access to an average of 50% savings on prescriptions, free home delivery and free house calls from our mobile pharmacist team.

Our retail prices for medicines are substantially lower than other Irish pharmacies and are closer to those seen in Northern Ireland. How do we do this? Very simply, we take a lower margin and dispense a high proportion of generic medication. Healthwave sources its drugs from the same Irish wholesalers as other Irish pharmacies. Generic medications are identical versions of a branded medicine that are released once the branded medicines' patent expires. Generic medicines are cheaper to source and to supply. According to the most recent ESRI report, generic usage in Ireland is low relative to other member states, at approximately 50%. Healthwave’s generic usage currently stands at 90%.

The Health (Pricing and Supply of Medical Goods) Act 2013 introduced the concept of interchangeable medicines, which was a huge leap forward in enabling pharmacists to reduce the cost of their patients' prescriptions. I will give some customer examples. A patient on cardiovascular medications attending a pharmacy in Ranelagh and paying the maximum €144 per month reduced the bill to €49.78 with Healthwave. A breast cancer patient was paying €94.55 in a large pharmacy chain for anastrozole and a calcium supplement. Her bill reduced to €19.08. Receipts supporting these examples are included for the committee’s information.

I will now speak about innovation at Healthwave and two services in particular, which are our mobile pharmacist and home delivery. Patient safety is at the heart of everything we do. Legislation requires face to face consultation between a pharmacist and a patient. While this makes sense from a patient safety point of view, a trip to the pharmacy is not a simple task for everyone. In February, we introduced a mobile pharmacist for our members free of charge. Using our software systems, our team of pharmacists can conduct their consultations in the comfort of the patient's home, with remote access to any clinical information they may require. Anyone anywhere can now access affordable medication.

In 2014 we also launched Ireland’s first home delivery service. Again, safety is our priority with this service. Our technology enables us to track medicines from the moment they leave our store to the moment the patient signs for their delivery. We have delivered medication to every county in Ireland. We place a large focus on technology and have invested heavily in software development which allows us to streamline and improve many outdated and legacy processes, from inventory management to remotely accessible patient records by our mobile pharmacists. Technology is at the core of our business. We will continue to invest heavily in both products and job creation.

Ireland operates a State-subsidised drug scheme, the drugs payment scheme, whereby the maximum any individual or household will pay for medicines in any calendar month is capped. The current cap is €144. Once the cap is reached, the State funds the excess. By reducing the cost of prescriptions Healthwave has brought many patients below the drugs payment scheme threshold. The most recent primary care reimbursement service report shows that 25% of persons eligible for the drugs payments scheme reached the monthly threshold, resulting in a claim to the HSE. In our first year only 1% of our members hit the €144 limit. One patient had been paying the maximum €144 per month for the pain medication Lyrica in a national pharmacy chain. Healthwave reduced her bill to €64.85, a saving for both her and the State.

Non-adherence costs the State. Medication adherence is a measure of whether patients take their prescribed drugs as per the doctor's instructions. The World Health Organization estimates that medication adherence rates for chronic conditions in developed countries are at 50%. In other words, half of prescribed medications are not taken. Non-adherence leads to increased costs in the health care system. Problems with patient adherence to medication were shown to be responsible for approximately 33.3% of preventable drug-related hospital admissions. In patients with chronic disease, such as hypertension and high cholesterol, non-adherence can increase the risk of stroke four-fold and the risk of death three-fold. In the UK it is estimated these admissions alone cost the NHS up to £200 million per year.

Two key factors affecting adherence are cost and convenience. It is estimated that the cost of drugs can reduce adherence by between 10% and 20%. Healthwave has addressed this by lowering the cost of medications by an average of 50%. Our customers travel from as far as Donegal and Dingle to access medication they otherwise could not afford. The ease of access to a pharmacy can also negatively impact adherence, with studies estimating that patients living in highly rural areas were 64% less likely to visit a pharmacy than those in close proximity to one. Recently, a lady from Artane in Dublin travelled by bus across the city to personally thank our team. The week before she read about our service she had decided to stop taking her blood pressure and cholesterol tablets in order to pay her ESB bills. However, with Healthwave’s prices she can now afford both. With our mobile pharmacist and home delivery service, we will ensure this lady, and all of our other members, have an uninterrupted supply of vital medicines.

The pharmacy industry is one which has seen little innovation in 30 years.

Healthwave is demonstrating that the cost of medicines can be dramatically reduced and adherence improved through business model innovation and technology .

I thank the committee for its time. I will be happy to answer members' questions on these and other issues, in greater detail, during the course of the meeting.

I thank Mr. O' Sullivan for his presentation. I welcome Mr. Martin Gallagher, chairman of the Association of Pharmaceutical Manufacturers in Ireland.

Mr. Martin Gallagher

I thank the Chairman and members of the committee for the invitation to appear before the committee. As stated my name is Martin Gallagher, chairman of the Association of Pharmaceutical Manufacturers in Ireland, APMI. I am accompanied by my colleagues, Mr. Michael Cullen vice chairman, APMI, and Mr. Jim Hanlon, chief executive officer, Clonmel Healthcare Limited.

The Association of Pharmaceutical Manufactures in Ireland is the trade representative body for the generic industry in Ireland. Its members include suppliers of prescription and non-prescription medicines both to the domestic and international markets. The primary purpose of the APMI is to promote and support the common interests of the generic industry in Ireland and to be to the forefront of offering quality affordable medicines to the Irish population.

On behalf of its membership, the APMI is charged with forming appropriate relationships with the Department of Health, the corporate pharmaceutical unit of the HSE, CPU, and the HPRA to ensure the introduction and continuous supply of affordable medicines. The APMI is the recognised negotiating body for all agreements regarding supply and pricing of generic medicines in Ireland. Its regulatory representation encompasses the expertise and the regulatory departments of the membership. It is involved with the appropriate bodies such as the HPRA, and has specific responsibility for ensuring that all members comply with general statutory instruments including the code of practice on advertising of medicinal products.

The APMI has a long history of co-operation with the Department of Health and relevant bodies in respect of pricing. In more recent years due to the difficulties encountered regarding the supply and pricing of affordable medicines, the APMI entered into a three-year agreement for the supply and pricing of generic medicines from November 2012. This three-year agreement paved the way for the introduction of interchangeability and reference pricing of pharmaceutical products in the off-patent space.

Within 16 months of our current agreement the APMI was approached and an addendum was agreed to offer additional price reductions prior to the formal introduction of reference pricing. Included in this addendum it was agreed that there would not be any further revisions before the ending of the original agreement in 2015. The reference price mechanism has been successfully implemented and substantial additional price reductions and State savings have occurred. It is important to recognise that the APMI has delivered on the cost savings as per the agreement. It is estimated that these savings amounted to €120 million in 2013 and about €140 million to €150 million in 2014 giving a total saving across the two years of €268 million. Generic companies employ more than 3,000 people in Ireland.

I have circulated a chart from which it can be clearly demonstrated that generic penetration has increased from 18.5% in 2010 to 42.4% by the end of 2014. Information we have received from the IMS in the past 24 hours states that penetration is now at 48%. Between 2013 and 2014 the volume use of generics grew by 23% while the value has only increased by 0.2%. In actual terms if we were to look at the products that are in the off-patent space, as opposed to the total, market penetration of generics is significantly higher. This percentage level of penetration is at least equal to similar molecules in other EU jurisdictions. I cite here atorvastatin, esomeprazole, rosuvastatin, omeprazole, lansoprazole and pantoprazole all of which fall between 80% and 90% generic penetration at this time.

There are future issues facing the current reference price and interchangeability model. In relative terms Ireland is a very small country with a population of only 4.6 million. As a direct result reference pricing does not work for low volume off-patent molecules, and to generic companies it is uneconomic and a total disincentive to the launch of lower value molecules. Excessive lowering of reference prices for the size of the market has and will lead further to generic houses exiting particular molecules thus causing shortages of supply and will lead to reduced or no competition in those particular molecules, which will give rise to the possibility of price increases in the long term.

Clearly there are major costs saving opportunities in addition to the molecule savings to date, with generic high-tech products now available and the launch of a number of biosimilar products against higher cost originators. There are currently no systems, mechanisms or incentives for physicians to prescribe alternatives to the high cost originator, or incentives for pharmacists to initiate change. The implementation of changes to the reimbursement system, new incentives as well as mechanisms and guidelines, would need to be introduced to help deliver further significant savings to the health system.

A biosimilar is defined as a biological product that is "highly similar" to a licensed biological product, without regard to minor differences in clinically inactive components. There must also be no clinically significant difference in terms of safety, purity and potency between the "biosimilar" and the original, already approved biological product. The point being made here is that biological products throughout Europe are not seen as generics and, therefore, they will require a different type of legislation for interchangeability. Increased prescribing of biosimilars would result in more patients being treated with the same budget and would allow for the introduction and access to new more expensive medicines, in addition to reducing health care costs.

Arrangements are in place for the supply and dispensing of high-tech medicines through community pharmacies. Such medicines are generally only prescribed or initiated in hospital and would include items such as anti-rejection drugs for transplant patients or medicines used in conjunction with chemotherapy or growth hormones. The medicines are purchased by the Health Service Executive and supplied through community pharmacies for which pharmacists are paid a patient care fee; the cost of the medicines and patient care fees are paid by the PCRS.

As there are no incentives or guidelines for the retail pharmacist to substitute a cheaper generic molecule for the originator, the State continues to pay a higher reimbursement price for such products despite the significant savings that can be made. Like biosmilars, if systems, incentives and guidelines were put in place for the inclusion of such generics on the high-tech scheme, it would result in more patients being treated with the same budget and would allow for the introduction and access to new more expensive medicines.

The key messages we wish to deliver to the committee are as follows. The membership of the APMI wants to see more transparency in the setting of reference prices; we must agree a new entry level, currently the entry level is 60% of the original price which is far too low for new entities, a less cumbersome method of modulating prices and the introduction of concessionary pricing; the membership wants a viable generic market with some degree of pricing flexibility; and legislation to be enacted so that biosimilar and high-tech molecules can be used to further reduce the cost of pharmaceutical products in Ireland.

The APMI and generic manufacturers of Ireland have saved the State significant millions of euro in the past two years, and are committed to delivering similar significant additional savings in the years ahead. The provision of mechanisms that incentivise the introduction of biosimilars and high-tech scheme products would offer significant savings to the State and give more patients in the State access to higher cost treatments.

The current reference price model has been effective in delivering savings to date on high volume small molecule products and the APMI has worked with the State bodies to deliver these savings.

The threshold that makes this viable has already been crossed on a range of these molecules and medicines which has made them non-viable to supply without the introduction of concessionary pricing. Further cuts would have a detrimental effect to the supply of medicines in Ireland.

As a trade representative body, we are keen to work with all parties to help assure the delivery of savings to the State, while assuring continuity of supply and increased access to treatments for Irish patients.

I thank Mr. Gallagher and ask Professor Dunne, foundation chair and director of research, graduate entry medical school, University of Limerick to make his presentation.

Professor Colum Dunne

I thank the Oireachtas Joint Committee on Health and Children for providing this opportunity to make a contribution to the discussion regarding the price of prescription drugs in Ireland. I am currently the director of research at the graduate entry medical school, and founding director of the centre for interventions in infection, inflammation, and immunity at the University of Limerick. I am also a member of the university's governing authority. My contribution to this committee is based on work completed, especially by Dr. Suzanne Dunne, and by a broader team comprised of researchers who have extensive experience of health care studies. The work has led to the completion of a PhD and, for the most part, has been published in high quality peer-reviewed international journals.

This morning as I sat in the Visitors Gallery I heard discussions on reference pricing and pharmacoeconomics. My focus here today will be on people who are at the coalface regarding generic medicines and especially the knowledge, attitudes and awareness of those people which are the influences of their behaviour. Prior to implementation of the Act in 2013, we initiated a programme of work that allowed us to investigate the perceptions and attitudes of patients, community pharmacists and GPs towards generic medicines. As Senator Crown will know, the relationship between hospital consultants and hospital-based pharmacists is quite different so we did not engage in any survey of those people.

Our work was designed to explore the topic by generating insights using interviews that were initially recorded, then transcribed and analysed using well recognised methods. This research is different to survey-based research where we know there can be confusion or even an overestimation of the understanding of generic medicines, for example, a misunderstanding of genetic versus generic in terms of the medicine.

We believed that the outcomes from this work would complement research done elsewhere, for example, in the National Centre for Pharmacoeconomics. Also, that the data would be evaluated in the context of there being previous international reports and published papers but relatively little directly focused on the Irish setting. We were unable to find published investigations, that had been completed, on the consumer or pharmacist cohorts in Ireland. We found only one study on the GP cohort which was published in 1997.

Our work has been peer-reviewed. Our review of the differences between generic drugs and their originator counterparts, using Ireland as a case study, has been especially well received as a comprehensive exploration of this topic. It has been accessed more then 20,000 times online which places it in the top 5% of publications, as measured by level of attention, which is indicative of importance of this work and the generalisation of it in an international context.

We further believed that the outcomes would be unique in allowing us an accurate picture of the situation in Ireland prior to the Act and, as such, it would position us well to revisit and compare these attitudes and perceptions following the introduction of the Act. In other words, it would allow for an evaluation of the impact of the Act.

I shall summarise some of the take home messages generated by this work. There is a hierarchy of understanding and acceptance of generic medicines in Ireland. Let us bear in mind that my explanation here involves generalisations. While health care professionals tend to have a positive view of generic products we found that pharmacists had the greatest understanding and acceptance, followed by GPs and, to a much lesser extent, the patient-consumer group.

Notably, the GPs had less confidence in generics than pharmacists. In fact, 15% of GPs involved in our studies, though a small number, would prefer not to use a generic medicine in preference to the originator. That said, since 1997, there has been a general and significant shift in favour of generic medicines. Nonetheless, this disparity is problematic. While pharmacists believed that although they are spending an increasing amount of time with their customers explaining aspects of generic medicines, patients are placing greater credence and trust in the opinions of their GPs.

In contrast with reports from other countries where foreign produced products were believed to be superior, Irish prescribers did not lack confidence in products that are produced in Ireland. In fact, they recognised the employment and impact that manufacturers contribute to the Irish economy.

Pharmacists believed that their jobs were becoming more complex due to the stock control requirements related to the sale of branded generics. Patients expressed the lowest level of confidence. Almost a quarter stated a preference for the branded medication in addition to a belief that generics were of poorer quality than originator medicines. However, 25% of pharmacists and over 20% of GPs reported situations where patients complained that an originator medication did not work as well as a generic. The implication of this is that its the change of medicine per se, rather than the introduction or use of a generic product, that is at the root of their disquiet.

A consistent message emerged from each of the cohorts that we worked with. It was that the provision of information and relevant education is required on this topic. In response, and in addition to assessing GPs, patients and pharmacists, we recognised that the information available on the Internet may influence the understanding of generic medicines. Therefore, we evaluated the quality and understandability of relevant information available internationally and to those in Ireland. Very similar to other jurisdictions, in Ireland none of the websites most likely to be seen by a searcher demonstrated the desired combination of providing high quality information in a readily understandable fashion. To provide a potential approach to enhancing the provision of understandable health care information we developed a new tool. We subsequently validated it using generic medicine information available in the UK, North America, Canada and Australia.

In conclusion, this research addressed a knowledge gap. It also represents a baseline for the future study of these views post-implementation of the changes. In the context of modern information provision, clear deficiencies in quality of information and accessibility of text were observed. A health care and medical information website tool is now available for use in the development of something for the Irish market.

I wish to add some practical recommendations, insights and some points of note. Approximately 88% of GPs prescribe generic medicines actively. However, 94% of GPs and over 88% of pharmacists report receiving complaints from patients about generics. Only 26% of GPs and 21% of pharmacists stated that they actually attempt to educate their patients or customers.

In regard to the "mockya medicines" comment - I wish to state that I am from Cork - we noted that over 30% of GPs and 64% of pharmacists expressed the opinion that at least some of the negative experiences reported by patients are due to the nocebo effect which is the opposite of the placebo effect. In other words, if somebody believes they are getting a cheaper product then they do not have confidence in it and, therefore, do not perceive a benefit. Some 77% of the pharmacists surveyed and nearly 90% of GPs stated they would accede to their patient's preference for a branded product. In other words, because of the pressures of work, the need to deal with a large number of patients and customers, and the complexities of their jobs, these professionals are unable to spend time trying to persuade patients to take a generic product.

Finally, patients exhibited a high level of trust in their physicians and 90% of patients stated they would be happy to take a generic medicine if it is prescribed by their GP.

Lest I be accused of a lack of confidence, and in case my earlier comments were misconstrued, I would like to say I have confidence in generic medicines. I thank the witnesses for their presentations. We will move to questions and answers.

I thank the witnesses for their presentations. I apologise on behalf of my colleague, Deputy Ó Caoláin, who cannot be here. I will start with Healthwave and ask Mr . O'Sullivan a few questions. I found his presentation very interesting. Healthwave is a retail pharmacy business that caters for all State drugs schemes as well as for private patients who pay in full for their medication. It was launched in 2013 and it has 10,000 customers. Mr. O'Sullivan said that there is, on average, 50% savings on monthly prescriptions, free home delivery nationwide and free house calls from its mobile pharmacist team. Where is Healthwave based? Is it based in Dublin?

Mr. Shane O'Sullivan

Yes. We have one store in Dundrum in Dublin.

In regard to free home delivery nationwide, how do people place an order? Is it on the Internet? In regard to free house calls from its mobile pharmacist team, will Mr. O'Sullivan tell us a little bit more about this? He stated in his presentation that using its software systems, its team of pharmacists can conduct consultations in patients' homes with remote access to any clinical information required. I presume that is on the Internet. I presume also that many customers would be elderly and would not have that type of access. I found the savings to be made and the examples given very real and very interesting. If Healthwave can do this, why can others not do the same?

I got an e-mail during this meeting stating that the reason the cost of medicine is so high is because of failed competition law, enforcement regime and competition policy. Does Mr. O'Sullivan have any views on that?

An earlier presentation stated that some medications were said to be in low supply in Ireland. I made the point that other European countries, such as Spain, many medicines are available at a fraction of the cost. I know of a number of people who travel from Cork to Newry monthly or bimonthly to fill prescriptions. I had a case where a man said he filled prescriptions for six members of his family in Newry each month at a fraction of the cost. If other countries can sell at these low prices, why can we not?

These are very important hearings and I thank the participants. I raised an issue in the earlier session in regard to the possibility that companies had been lobbying our Government, alleging that domestic purchasing policies for the tiny, infinitesimally small by international standards, Irish market in some way influences the siting of manufacturing plants in Ireland. I said I believed this was nonsense. It took me a few minutes to find the reference but it was reported by Martin Wall in The Irish Times in December 2012 that high level representations had been made by Mr. Lechleiter from Lilly and Mr. Weldon from Johnson & Johnson, among others, to An Taoiseach, suggesting that if we did not get our act together and prescribe expensive branded products, they may think about where they put their investment for jobs, which is nonsense. We all know that investment for jobs is based almost entirely on corporation tax and almost nothing else, except a good workforce.

The reasons the market fails here are complex and Professor Dunne's contribution has been very helpful. We have a big cultural job to do on people, patients, pharmacists, doctors and purchasers in terms of being quite willing to move to generic drugs, if generic drugs have passed their analysis and have been approved. If at that stage anybody has any reason to believe one of them is less effective, they should then report it to the authorities and ask for repeat testing. It is surprising how rare that is. One never hears of that happening. The products, in general, are quite good.

I prescribe some horrendously expensive cancer drugs and I made the decision a few years ago to try to save money wherever possible by prescribing generic cancer drugs but one encounters a lot of opposition from patients who repeatedly ask why they cannot have the particular anti-breast cancer tablet they have been taking for years. I tell them they can have it but that they should know the generic one works just as well and it is a lot cheaper. We have a job on our hands and our profession has failed a little bit in that regard.

Another part of the problem is that I do not believe the HSE is very good at purchasing. It does not run the organisation like a business but rather like a bureaucracy. One of the ways a bureaucracy deals with budget overruns is to try to delay spending and that is why we have waiting lists for beds, for operations and for clinics. It is also one of the reasons we have delayed approval of products. If one can put extra hurdles in the way of the approval of a product and get it into next year's budget as opposed to this year's one, it helps one, at a time of great constraints in a health service, to meet that panic-stricken budgetary deadline that one has to meet the next time.

Gardasil, the cervical cancer vaccine, was originally unearthed before the financial meltdown and a correct decision was made to approve it. A decision was then made, when we really got into the real horrors of constraint in 2008, that it would not be purchased. However, a year or two years later, it was purchased, following what was alleged by the authorities to have been a robust negotiating process. I happen to know that no tender was ever asked for either of those drugs at the time of the original rejection. The decision was made on the list price that one could get on MIMS for a vial of the drug which was never going to be the price a whole country, which might be vaccinating 30,000 to 40,000 young girls per annum, would be charged.

I have a question for Mr. Gallagher. We hear a lot about the need for indigenous industry. It was my impression that we had a number of Irish entrepreneur-driven generic houses in this country, which were quite big leaders in the field of generic medicines. I may have my eye off this particular radar screen but I get the sense that is no longer the case and that most of what we have now is an increasing concentration of generic manufacturing in the hands of an ever smaller number of increasingly massive organisations. Would this be a mischaracterisation? Is there something we could do at a public policy level to foster and encourage the redevelopment of an indigenous generic manufacturing sector?

I thank the guests for the presentations. In regard to Professor Dunne's presentation, one of the key issues is general practitioners and doctors. They have to be leaders in the field of prescribing generic medication, informing patients and changing the whole culture. It would appear from the presentation that approximately 15% of GPs have less confidence in generic medication. This is linked to a question I asked earlier. I understand there have been developments in recent years in that area but can something further be done to ensure the maximum level of prescribing generic medication and that all doctors prescribe the generic form, unless in some exceptional circumstances?

I wonder how Mr. O'Sullivan would react to a suggestion that something which looks too good to be true is too good to be true.

I am not making a judgment but I would like to hear his reaction to that question.

Is there limited availability of home delivery throughout the country? Is there a restriction on the number of deliveries per annum?

Is there a limit to the membership fee or does it increase every year? What is the set-up of the organisation? Is it targeted at a niche market in major urban centres? Is the service available throughout the country in practice?

The level of generic penetration has increased to 48% of the market, according to the most recent figures available. I am aware of this issue from my former life as a hospital manager.

I am not particularly familiar with biosimilars. Will Mr. O'Sullivan provide information on them?

I thank all of the delegates for their presentations. Mr. O'Sullivan said Healthwave had been set up in 2013. The advantage in setting up then was he knew the market he was going after and he probably set it up cost effectively. I understand there are 1,700 pharmacies in the State, whereas there are only 350 in Denmark. Does he think pharmacies are facing a major challenge, given that a large number of them expanded between 2002 and 2008 and spent significantly in extending and modernising premises? Does he think each pharmacy that invested in trying to improve what it offered to its customers has been caught in the downturn, given the fact that medications are reducing in price and that cost competitiveness is the order of the day? How will this pan out in the next five years?

Mr. Gallagher made a comprehensive presentation. One of his key messages is that there must be an agreed entry level for reference pricing and that 60% is too low. What would be a more acceptable approach? He referred to greater transparency in reference pricing. Will he elaborate on this? Where does he think there is a lack of transparency and where can it be improved? He also referred to the high tech scheme. Does it require comprehensive legislation or could a minor amendment to existing legislation address the issue? His strong view is that this is necessary. Will he outline where the restrictions are under current legislation?

Mr. Shane O'Sullivan

I will address Deputy Sandra McLellan's questions first. She asked how patients ordered their medicines. The majority of our patients still telephone us to order prescriptions. This all happens after they have met our pharmacists in person, but most repeat orders are made over the telephone. They can use e-mail also if they want to do so, but it is not an Internet or a mail order pharmacy.

I will elaborate on our mobile pharmacist service. We send a pharmacist to patients' houses to review their medication. This is great for those who are housebound, including the elderly or someone with a new child. This service was only launched three weeks ago and the uptake has been great. It means that if someone is struggling to pay for medication and he or she wants to switch to us, he or she does not have to travel to Dundrum which is the only store we have currently. We will send a pharmacist to him or her for the consultation.

Is that included in the membership fee of €25?

Mr. Shane O'Sullivan

Yes. House visits are free of charge as part of the membership.

Is it a one-off membership fee or is there an annual fee?

Mr. Shane O'Sullivan

It is a recurring annual charge. The fee is €25 every year.

Deputy Sandra McLellan asked about the software and the system pharmacists used when making house calls. She also raised the issue of elderly patients having access to the Internet. I am not sure if she is referring to Internet access in the home, but our pharmacists have their own Internet access. We do not expect people to have Internet access and our pharmacists have access through a mobile dongle.

The Deputy then asked why others could not do this. As Mr. O'Loughlin and Ms Maher alluded to in the earlier session, many pharmacies were set up in more expensive times and locked into high costs, including rents, and engaged in expensive fit-outs. As Senator Colm Burke said, we set up at a good time. Despite having much lower margins, we have a responsibility as a business to generate a profit and operate responsibly and we intend to do so.

Deputy Sandra McLellan's final question was related to medication shortages. She said she had heard of a large number of people travelling to Newry or Spain. They do not need to do this as they can come to Healthwave.

In his presentation Mr. O'Sullivan referred a number of drugs for breast cancer and other illnesses. Are the savings made on generic drugs or branded drugs?

Mr. Shane O'Sullivan

If a generic is available and on the interchangeable list, that is what we will dispense. The legislation enables us to do this, which is great for our model. Most of the prices quoted in the presentation are for generic drugs.

Deputy Seamus Healy asked whether it was too good to be true. It is not too good to be true. People are voting with their feet. We signed up 10,000 people in one year. We have taken great time to develop the model and examined the prices of drugs in other countries. The membership fee allows us to add services and give value to our customers. The fee will not increase, but it allows us to innovate and introduce services such as house calls and home deliveries. There are restrictions to home deliveries. We offer four free deliveries a year as part of the membership fee. After that, it is €5 per delivery. Customers pay it every month and it does not seem to be a problem.

Is the charge the same, irrespective of location?

Mr. Shane O'Sullivan

Yes. We deliver to anywhere in Ireland. The delivery has to be signed for; therefore, we deliver to workplaces and households, depending on where the patient is, but we insist on someone signing for it.

What happens to the drugs if the delivery man arrives at Mrs. Murphy's house and she is not there?

Mr. Shane O'Sullivan

The medication is taken to the nearest depot and the patient notified that he or she needs to collect it. If the package is not collected that day, it is returned. It is fairly rigid. We put a great deal of time into developing the courier service to make it as secure as possible. We are dealing with medicines and cannot have a situation where they are put through a letterbox and a dog or, even worse, a child could gain access to them.

Where are Healthwave's 10,000 customers predominantly based?

Mr. Shane O'Sullivan

Approximately 70% are in Dublin. While we are a Dublin pharmacy and our customers are predominantly in Leinster, we also have high concentrations in some of the bigger cities such as Cork, Galway and Limerick. In the Deputy's question on whether the service will be available in practice, I think he is asking if we are trying to service the country from one shop. We are not; we have expansion plans for more stores in the next few months. The mobile pharmacy service will always continue given that, no matter where we have a store, there will be people in the community who cannot get to the pharmacy. It is a very important part of the business.

Senator Colm Burke asked whether the pharmacy sector was under challenge and how I saw it playing out over the next five years. Ireland has many more pharmacies per capita than other countries, including the UK. However, given that Ireland is a rural country with the population spread out, one could argue that we need more pharmacies. There are many unviable pharmacies in Ireland and it stems from the cost base when they were established. We will see some pharmacy closures during the next five years.

Mr. O'Sullivan's presentation is remarkable in the way it demonstrates how people can save money. I do not agree that innovation in the pharmacy industry has been limited. There have been major changes in the pharmacy industry, including what Mr. O'Sullivan is doing. Is there a catch? Are we missing something? It seems remarkable.

Mr. Shane O'Sullivan

There is no catch. We are focused on the private sector and cash-paying patients.

If I walk into a Healthwave shop and I have not paid the membership fee, do I get the same discount?

Mr. Shane O'Sullivan

No, we have a pricing model similar to the one Boots introduced in 2010, which is still widely known as the cheapest pricing model in Ireland. A non-member who walks in still pays a fair price but does not receive the other benefits. There is no catch. We are committed to our model and we believe if we reach a certain number of customers, which we have, we will have a sustainable business long into the future.

Mr. Martin Gallagher

Senator Colm Burke asked me to expand on the 60% introductory level. The issue is one we have raised several times in various presentations. As a generics industry, we need some sort of incentive to introduce the lower valued molecules into the market. The current 60% entry level on a price is insufficient for us to consider these molecules at the early stage when we start to investigate them, which occurs some years before they come to market. We would like a tiered approach in order that we can enter the market at a considerably lower price than the originator, but somewhere between that and where these prices are being pitched, for example, a year at 20% or 30%. We would like some sort of mechanism to achieve it. Our member companies are turning away generic products with a market value of up to €5 million or €6 million because when we consider them and take into account the pricing and costing, they are not viable in this jurisdiction. Part of this is due to the size.

Does the association have a term of reference for the tiered model?

Mr. Martin Gallagher

We would suggest 12 to 24 months to get the product moving into the market.

Has the association made these remarks to the Department of Health or the HSE?

Mr. Martin Gallagher

We have made the remarks to the HSE corporate pharmaceutical unit, CPU.

Has the CPU done anything about it?

Mr. Martin Gallagher

It was just in the course of conversation. The concept became stronger while we were putting together today's submissions and talking to the membership about what was required.

When HSE representatives come before the committee next week, we will put it to them.

Mr. Martin Gallagher

Regarding transparency of pricing, another rash of price reductions was sent to us at approximately 4.30 p.m. on Friday. Again, there were significant price reductions accompanied by a series of pan-European charts comparing prices across other EU member states and not across the nine countries that were originally covered by the agreement. We would like to see more precisely what they are comparing with when they arrive at a price for the Irish market. When we refer to transparency, we mean more information.

Mr. Michael Cullen

With the economies of scale in the Irish market, there are products for which pricing is going the other way. Mr. Gallagher alluded to this and Mr. Darragh O'Loughlin, secretary general of the Irish Pharmacy Union, mentioned it earlier. Over the past year, there have been massive price reductions and we encourage competition and generic prescribing because it delivers the big savings that have been delivered over the past year or two, which we have highlighted. The reference price of an ordinary pack of penicillin in the Irish market is €1.57 compared to £16.06 in the UK market. Prices have totally changed. A standard bottle of Flucloxacillin is priced at €6.43 in the Irish market compared to £26.04 in the UK. These are standard antibiotics that are used by adults and children.

Senator Crown commented on expanding employment in generics manufacturing. There is a new facility at Athlone Laboratories, which employs 150 people and manufactures penicillin. Athlone Laboratories has told us selling penicillin in the Irish market does not cover its costs. Our members are supplying such products on compassionate grounds, given that it is a loss-maker in the Irish market. We need concessionary pricing on such day-to-day products. In the UK, there are concessionary prices for products that reach a certain threshold above which they are unsustainable. We have seen this in recent weeks with the antibiotic trimethoprim, which is priced in the Irish market at €13.48 for 100 compared with £51 in the UK market. There are massive differences which result in practices such as parallel export, which we are trying to deal with.

In response to Deputy Healy's question, a biosimilar is slightly different in that it is not made from a chemical composition or is not manufactured in that way. It is made by natural sources or biotechnology methods. For example, expenditure on anti-TNF drugs, which I was looking at yesterday and which are used for auto-immune diseases like rheumatoid arthritis, rose by 12.5% over the past 12 months to a value of about €190 million. There are biosimilars for those products now and massive savings could be delivered by making the substitution.

Senator Burke asked a question about the high-tech scheme. It is less immediately about legislation. At the moment, if products are prescribed in the hospital setting, the patient takes the prescription to the retail pharmacist, who gives the product to the patient although the pharmacy does not buy the product. The product is given it by the State free of charge. There is no incentive for the retail pharmacy to substitute that with a generic. We can supply generic versions of products on the high-tech scheme, many of which are now off patent. There is currently no mechanism or incentive for the pharmacists to do that. We ask for that to be provided.

I apologise to Professor Dunne but we are caught for time in terms of the vote in the Dáil. Could he keep his remarks to two and a half minutes?

Professor Colum Dunne

I will aim for that. I will answer a number of the questions simultaneously, particularly those of Senator Crown and Deputy Healy. It reflects the complexity of the interactions between patients, physicians and pharmacists. It is especially interesting that while the pharmacist probably has the greatest expertise in and knowledge of the drug development process and its regulation, the patient probably has greater trust and credence in the physician. Coming to Deputy Healy's point, that means the personal attitudes of physicians play a role. Some physicians will remember things like the indicative drug budgeting scheme from 1993, which, like a similar scheme in the UK, failed to bring about the savings that were expected, and they may have a certain antipathy to this kind of activity. That being said, the greatest swing in attitudes that has occurred has been in favour of generics. All the health care providers are on the same page in terms of being able to give the best value to their patients in a safe way.

My last point concerns a question that was put to the GPs and pharmacists when we looked at their perception of safety. While the pharmacists would be aware that the Health Products Regulatory Authority, HPRA, plays a very significant role in ensuring that products available on the Irish market are safe and of high quality, the physicians may not recognise that.

If I may stop Professor Dunne there, we will suspend until after the vote.

If may ask your indulgence, I had to step away for an emergency. Would it be inappropriate to ask if my other questions in this regard-----

I will suspend until after the Dáil vote.

Sitting suspended at 12.55 p.m. and resumed at 1 p.m.

I apologise to our witnesses, Members of the Seanad and those in the Public Gallery. Sometimes in this business, parliamentary democracy interferes with the real democracy.

We staged a coup in the Chairman's absence.

I have no doubt that the Senator won the coup; he emerged victorious. Professor Dunne was in possession.

Professor Colum Dunne

The last point I was going to make was a response to Deputy Healy, who asked whether GPs could be encouraged to prescribe generic medicines. This really relates to my point that GPs no longer really choose what medicine to prescribe, particularly in the community practice setting. They make use of formularies and automated practice management systems. Unlike the old days when one consulted a certain book, one is now given a list of the suggested products to prescribe for the condition of the patient. The challenge is that many GPs are acceding to the patients' wishes because they do not have time to try to educate and persuade them that they should take a generic medicine.

Is that the only reason?

Professor Colum Dunne

Largely, yes. One should bear in mind, however, that our work is based on a qualitative study so a very large number of GPs have not been surveyed. If one were to carry out a larger study throughout the country using a body such as the ICGP, one would get very valuable information on GPs' prescribing patterns. "Rational prescribing", as it is termed, is an area of significant research, but it is not included in the work that we did.

Would prescribing not be done by hospital consultants to a large extent as well?

Professor Colum Dunne

I stated that we did not examine specifically the relationship between prescribing hospital consultants and pharmacists based in the hospital setting. That would be a very different interaction. It all comes down to the product, be it for acutely ill patients, emergency patients or those in the community setting. Having regard to generics, we are considering medicines that are commonly prescribed in the community setting.

Let me make my final point, and perhaps a recommendation. Both the pharmacists and GPs involved in our studies referred to confusion caused by branded generics and the generic products, especially among the elderly they are dealing with. The colour, shape and packaging of the products are problematic. If the original product has "Monday, Tuesday, Wednesday, Thursday" written on its packaging, it would be particularly helpful if the generic packaging also had it written on it.

Could that be done?

Professor Colum Dunne

That is a logistical issue for the manufacturers. It is not a licensing issue but something that could be done at a practical level. Addressing colour, shape and packaging would be tremendously helpful.

We heard about Gay Byrne's involvement in the campaign. Is there not a need to educate people? I am sure the duty falls on a combination of people and organisations. This relates to my earlier comment that there is a sense of fear and trepidation. This is borne out in the survey. If doctors did not accede to their patients' requests and decided, as Senator Crown suggested, to prescribe specific drugs, could it be done? An issue arises with regard to the patient's confidence and trust in the doctor but, as Senator Crown stated, there is probably no appreciable difference in the medication other than the cost.

Professor Colum Dunne

The Health Products Regulatory Authority does a very good job. It is recognised as being exceptionally professional and competent in respect of the regulation of the introduction and the safety of the products available in Ireland. This takes into account the associated parallel importing challenges.

The dissemination of information on generic products is problematic in that many people use the Internet as their primary source of information. When we assessed the information available in Ireland, the UK, Canada, the USA and Australia, we found that Wikipedia is far and away the primary source. The accuracy of information available from that source is questionable. When we go further down the list and evaluate the quality and understandability of the information available on various sites, we did not find any site - or certainly no site in Ireland - providing both high-quality and understandable information for the general public which ranked highly in any search. As members will be aware, people tend not to proceed beyond the first or second page of search results.

The Internet is laden with health warnings and caveats in terms of reliability. Wikipedia has become a tool for self-diagnosis. If people get a pain in their head they will go online to investigate the cause. That should be done with a big health warning.

Professor Colum Dunne

These are the challenges associated with what is called the democratisation of health care. Professional health care providers undergo considerable training to be able to recognise and deal with conditions, and the advice they give is very considered. The work we carried out in the latter stages of our programme involved the development of a tool that could be used in an Irish setting to deliver accurate and understandable information in a culturally sensitive and language-sensitive way.

Did Professor Dunne mention a figure of 21% of pharmacists in regard to educating patients? I did not quite hear what he said. I am surprised that the figure for pharmacists would be that low, because in my experience pharmacists engage closely with people.

Professor Colum Dunne

It was a question of whether they had time to inform patients or educate them in a systematic way. It comes down to the challenges of running a busy practice.

The pharmacist in my community and his assistant will take the time to provide an explanation of medicines to their patients. Last year, when my father was ill, the two pharmacists took care to explain that something was for A, B and C and that my father needed to do X, Y and Z. I was impressed by the quality of care they provided. I was just the messenger but I was told in detail what needed to be done. This is why I was surprised at the figures outlined by Professor Dunne.

Professor Colum Dunne

Approximately 27% of GPs and 21% of pharmacists stated that they had attempted to educate patients as to the equivalence of medicines. That is different from saying something is safe.

Mr. Martin Gallagher

Senator Crown asked about manufacturing sites in Ireland. There are at least five strong generic companies employing approximately 3,000 people in Ireland. My colleague Mr. Michael Cullen alluded to certain companies which are not to the forefront, such as Athlone. There are also other generic manufacturers outside of the membership of the APMI. However, the development of generics is done on a pan-European basis. Most of the products are developed through central processing and licensing, with the result that many companies are part-manufacturing products or are campaigning products. One of the issues for my own company in the past was that we had 28% downtime because of the number of products we were manufacturing. That is primarily why many of the traditional companies, some of which were family firms, have been absorbed into larger organisations.

In regard to the marking of pharma products, there is no difficulty with including similar packaging to that of the originator, but it should be borne in mind that often there are patents on tablet shape and colour. This is why one is more likely to see white tablets.

Does the APMI have a budget for educating people on the types and uses of tablets?

Mr. Martin Gallagher

That is an issue we are currently considering as an organisation. I am sure members are aware that my company, Clonmel Healthcare, has been running the "I Trust" campaign through radio and other media. My colleagues in Teva also alluded to running education campaigns. As individual companies, we have worked closely with doctors and, in particular, pharmacists. It is at the face-to-face point where medication is handed over that the discussion appears to take place. We are trying to build a campaign around the idea of trust. Putting my Clonmel hat on for a moment, we have been very mindful of this issue. The APMI is also in the process of addressing it, because certain changes are coming down the line for us.

I presume generic products manufactured in Ireland are overwhelmingly for export. Can Mr. Gallagher give us a back-of-an-envelope figure for the value of generics exports? We have heard the figure of €40 billion to €50 billion for pharmaceutical exports.

Mr. Martin Gallagher

I do not have the answer to that question, but I am prepared to research it and provide the answer.

I thank the witnesses for meeting us. It has been a very informative meeting and I was impressed by the contributions from all four witnesses. They have helped us in considering how we can improve the implementation of reference pricing and generic substitution to benefit patients and reduce the cost of drugs. We appreciate their investment and the jobs they have created but, wearing our public health hat, we also want to reduce the cost of pharmacy bills to the State.

The joint committee went into private session at 1.18 p.m. and adjourned at 1.25 p.m. until 4.45 p.m. on Tuesday, 10 March 2015.