I propose to take Questions Nos. 697 and 698 together.
The prices of drugs vary between countries for a number of reasons, including different prices set by manufacturers, different wholesale and pharmacy mark-ups, different dispensing fees and different rates of VAT. In recent years, a number of changes to the pricing and reimbursement system have been successfully introduced in Ireland. These have resulted in reductions in the prices of thousands of medicines.
Following intensive negotiations involving the Irish Pharmaceutical Healthcare Association (IPHA), the HSE and the Department of Health, a major new deal on the cost of drugs in the State was concluded in October last. It will deliver a number of important benefits, including
- significant reductions for patients in the cost of drugs,
- a lowering of the drugs bill to the State,
- timely access for patients to new cutting-edge drugs for certain conditions, and
- reducing the cost base of the health system into the future.
The IPHA agreement provides that prices are referenced to the currency adjusted average price to wholesaler in the nominated EU member states in which the medicine is then available. The prices of a range of medicines were reduced on 1 November 2012 and further price reductions were implemented on 1 January 2013 in accordance with the agreement.
The gross savings arising from this deal will be in excess of €400m over 3 years. €210 million from the gross savings will make available new drugs to patients over 3 years. Thus, the deal will result in a net reduction in the HSE expenditure on drugs of about €190m.
The Department and the HSE have successfully finalised discussions with the Association of Pharmaceutical Manufacturers in Ireland (APMI), which represents the generic industry, on a new agreement to deliver further savings in the cost of generic drugs. Under this Agreement, from 1 November 2012, the HSE will only reimburse generic products which have been priced at 50% or less of the initial price of an originator medicine. In the event that an originator medicine is priced at less than 50% of its initial price the HSE will require a generic price to be priced below the originator price. This represents a significant structural change in generic drug pricing and should lead to an increase in the generic prescribing rate.
It is estimated that the combined gross savings from the IPHA and APMI deals will be in excess of €120 million in 2013.
The Health (Pricing and Supply of Medical Goods) Act 2013, which was commenced on the 24th of June, provides for the introduction of a system of generic substitution and reference pricing. The key aim of the legislation is to ensure value for money in the supply of medicines; therefore, the medicines that will be reviewed first are most costly to patients and the Exchequer. The consultation process for the first List of Interchangeable Medicines, containing groups of atorvastatin products, started on the 26th of June. It is expected that this list will be published in mid-August at which time generic prices will fall by 20%.
It is important to balance achieving best value for money for the taxpayer with assuring continuity of supply for critical medical products, particularly in a small market like Ireland. Consequently, the Act aims to achieve value for money while avoiding disruption in the availability of medicines on the Irish market. This legislation will promote price competition among suppliers and ensure that lower prices are paid for these medicines resulting in further savings for both taxpayers and patients.
It is not possible, at this juncture, to provide accurate figures regarding potential savings resulting from the introduction of generic substitution and reference pricing, as these depend on various factors including prevailing prices, number of competitors, availability of substitute products, and market dynamics.
The Department is committed to establishing high-level annual targets by the end of September for the share of generic penetration over the medium-term. These targets will be informed by the ESRI report Pharmaceutical Prices, Prescribing Practices and Usage of Generics in a Comparative Context, which was published on the 27th of June.