I thank the Chairman and members for the opportunity to present to the committee.
The Irish Pharmaceutical Healthcare Association, IPHA, represents international research-based pharmaceutical companies which are responsible for developing, manufacturing and bringing innovative medicines to the Irish market. Our presentation this morning will focus on the role and contribution of our industry to the Irish economy and on the issues of concern to us at this time.
Ireland is one of the leading locations for the pharmaceutical industry in Europe. In 2008 two out of every five pharmaceutical jobs created in Europe were in Ireland. The industry has been one of the principal contributors to the growth of the Irish economy in recent years. In 1973 as the country joined the then Common Market the sector employed fewer than 2,000 people and exports amounted to less than €100 million per annum. The sector now employs 24,500 directly with an equivalent number employed in other businesses which provide goods and services to it. In 2008, pharmaceutical net exports exceeded €16.7 billion making Ireland the largest net exporter of pharmaceuticals in the world. Using the broader pharmachem measure, exports exceeded €44 billion, or nearly 50% of all exports from the country.
One hundred and twenty major companies have manufacturing operations in Ireland, including 13 of the top 15 worldwide, and the total replacement value of the investment by the sector in the Irish economy exceeded €40 billion. Almost €7 billion has been invested in the past nine years in a period when job growth in the sector has averaged 1,000 annually.
The industry is the largest contributor to corporation tax, and total tax receipts from it amount to approximately €3 billion annually. The industry in Ireland comprises a mix of European, American and Japanese companies. Originally the industry was largely involved in producing active ingredients in bulk for export to other countries to be processed into finished products such as tablets, capsules and so on. Subsequently, plants were set up to produce the finished products here and in recent years several companies have established significant biotech operations. Companies have also set up research centres and become involved in joint research projects with Irish universities.
In the late 1960s the Irish State identified the pharmaceutical sector as one that it wanted to attract to Ireland. It sought through its education, taxation, labour and health policies to ensure Ireland's attractiveness as a location for the industry. A crucial element in that success story was the State's willingness to engage in dialogue with the pharmaceutical sector, to seek mutually beneficial solutions to any difficulties which arose and to negotiate with a keen focus on the consequences of any decisions. The State has negotiated a series of agreements with the pharmaceutical industry on the supply of medicines to the health services. These agreements have ensured that patients can access medicines in a timely manner, that the State receives good value for money and that the industry has a stable framework within which it has been able to dramatically increase its contribution to the economy.
Continuation of the agreement system in the supply of medicines plays an important role in ensuring that Ireland continues to be seen as a State which takes a balanced view and one which the industry should seriously consider as a location for further investment. However, we live in challenging times, old certainties have been swept away on a tide of economic turbulence and, now more than ever, it is essential that we adopt a calm, rational approach. Our focus must remain on the achievement of long-term objectives. We must not let immediate concerns, no matter how pressing, lead to the adoption of initiatives which seem attractive but which could undermine our chances of achieving our long-term objectives. It has been the willingness of successive Governments to take the long-term view and to work creatively with the pharmaceutical industry that has delivered so much for Irish patients and the economy in the past 40 years.
The central mission of the pharmaceutical industry is the development of innovative therapies which help people live longer, healthier and more productive lives. Since 1990, more than 300 completely new medicines have been developed by our industry to address 150 conditions ranging from those which affect millions to those affecting just one in a million. Many of those medicines are manufactured in Ireland.
The pharmaceutical industry can only source the large sums needed to invest in such work if it can be reasonably certain that where it achieves success it will ultimately be rewarded for its endeavours. Notwithstanding that, we recognise that new therapies put pressure on State budgets, particularly in these strained financial times, and we understand the need for optimal efficiency and cost effectiveness in the State's expenditure on medicines. To that end, IPHA entered into negotiations with the HSE in 2006 the upshot of which was a four year agreement which will deliver, through a series of price cuts by companies from our sector, savings in the order of €300 million in the medicines bill. As the committee will appreciate, these concessions were onerous for the industry but they were offered on the basis that the agreement would provide a stable framework for the following four years, and it was made clear by the Government at the time that it was "the first in a series of negotiations agreed by the Cabinet Committee on Health to examine all aspects of the drug delivery system, from the manufacturer to the patient, in order to achieve greater value for money from the operation of the drugs schemes, consistent with patient safety and continuity of supply."
It has been noted by independent experts that the agreement is likely to deliver more in savings than alternative strategies proposed back in 2006 such as generic substitution. Under a system of generic substitution pharmacists would be able to change a doctor's script without his or her express permission. Such a development would not be in the interests of patient care nor would it result in a more efficient or cost effective health care system. Enhanced patient involvement in the choice of medicines for a particular condition is an explicit objective of our agreement with the HSE. It recognises that it is best for this to be exercised in consultation with the doctor who has no commercial interest in the medicine which the patient receives rather than with the pharmacist who clearly has.
The Pharmacy Review Group concluded in 2003, "[T]hat there should be no beneficial ownership or business interest of any kind between dispensing and prescribing". As recognised by groups such as the Irish Medical Organisation, which also opposes the proposal, it would end the separation between the role of prescribing and that of dispensing which has served health professionals and patients so well for many years. There is already a serious problem of patients not complying with their medication. This problem, which has been estimated to occur in as many as 50% of patients, could be exacerbated by a situation where a patient is presented with medicines of a different shape or colour, or in different packaging from that which they know. We saw late last year, in the controversy over medical care eligibility, the extent to which elderly patients in particular can become very concerned about any changes in respect of the arrangements for the supply of their medicines.
The association understands the need for the State to achieve further savings in the medicines bill and believes that the introduction of European pricing norms throughout the supply chain, as has already happened in the case of the ex-manufacturer price, could yield significant savings for the taxpayer. Currently Irish wholesalers and pharmacists enjoy some of the highest margins in Europe but they have utterly failed to produce a single euro of savings over and above those achieved under the IPHA agreement.
A greater emphasis on self-care and on the appropriate use of self-medication could also yield savings. Any suggestion or expectation that there are further savings to be gleaned at this time from IPHA members or any ambiguity on this point would send a very negative signal to those in our corporate boardrooms who make decisions about investments in Ireland.
Medical innovation has been vastly important in the past in delivering better health outcomes. There is every sign that it will be at least as important in the future. New technologies hold out the possibility of a major improvement in the efficiency of pharmaceutical research over the next few years. That, in turn, could deliver significant reductions in the cost of developing new drug treatments. This would be a major benefit to health care delivery systems, facilitating the development of more new therapies or lower costs. Such benefit will, however, only be obtained if research and development is appropriately rewarded in the marketplace through adequate patent protection and fair selling prices.
There is a risk that the full benefits of this opportunity will be missed because of short-term concerns to reduce health care costs. It is therefore vital that any reforms that are undertaken in the Irish health services should both foster innovation and speed its application in all areas where there will be benefits to health outcomes. An important aspect in the development of the pharmaceutical sector, which has helped significantly to boost its contribution to the economy, has been the success of the sector in diversifying the nature of its investment in Ireland from the original bulk active plants to higher value work. The maintenance of a culture of support for innovation is crucial to the success of such a move up the value chain.
The 21st century has brought about the dawn of the knowledge-based economy. To compete successfully in this changing world, Ireland needs to focus on areas where it can provide a world-class service. Clinical research is one such area. Clinical trials are an essential part of the development of new medicines. Clinical research programmes are international in nature — just like any other inward investment, Ireland has to compete with other countries for its share of international research funding. In particular, Irish subsidiaries of pharmaceutical companies have to compete with sister subsidiaries in other countries, increasingly with those in central and eastern Europe for clinical trials.
For Ireland to achieve world leader status in clinical research, a number of key initiatives need to be undertaken. In particular, we need a clinical research supremo in the Department of Health and Children, along the lines of the UK's director of NHS research and development, who has the power to remove the roadblocks and create and deliver a research strategy for health in Ireland.
If these steps are not taken, not only will Ireland fail to attract significant new trials but it will also see existing levels of trials put in jeopardy. Innovation and research and development activities will become the key drivers in bringing Ireland's pharmaceutical industry to its next level of competitiveness in what is truly a global industry. Ireland has the potential to be a world class hub for the conduct of internationally recognised clinical research that not just benefits the economy but patients all over the world by providing new and better treatments.
By building on Ireland's success as a pharmaceutical manufacturing base, by building on our technical capabilities and our skilled labour force, we can move beyond a manufacturing-led economy and reinvent ourselves as a truly knowledge-based economy. It is crucial that State funds be spent efficiently, never more so than at a time when such funds are limited. The health services — a major recipient of State funds — are a good example of the need to encourage greater efficiency. Expensive secondary care is overburdened and there is a need to develop primary care and health promotion initiatives to ensure that illness can be prevented or dealt with at the lowest appropriate level. For example, there is a need for a major investment in primary care, enabling an upgrading and expansion of the range of services offered through doctors' surgeries and primary care teams. This would require additional resourcing in terms of staffing and equipment. The development of such a network would give patients access to more services locally and free up hospitals to treat more serious cases.
Another initiative which would be worth pursuing would be an enhanced role for community pharmacy. As noted by the Pharmaceutical Society of Ireland, most jurisdictions, including the UK, are utilising evidence-based approaches in the reform of their services, with pharmacy being seen to have increasing potential to support home care, self-care and effective care at the lowest levels of cost and complexity. This would help to remove some of the pressure from a busy surgery. The Association of the European Self-Medication Industry, AESGP, has estimated that savings of over €75 million could be achieved in Ireland every year if self-care was more widely adopted and patients encouraged to take greater responsibility for their everyday aches and pains themselves, seeking the advice of their local pharmacist where appropriate. The savings could be put to better effect elsewhere in the health care system.
Ireland can successfully compete in the years ahead but to do so it needs to ensure, as policy makers did in the 1960s, that it does so within a clear policy framework. The IPHA strongly believes that the "Innovation Island" envisaged in the document Building Ireland’s Smart Economy, published late last year, can be created here in Ireland. To do so it is essential that an industry-State partnership, focused on the long term, be maintained. Words about wanting to foster innovation must be matched to a system which continues to reward innovation.
At a time when the international pharmaceutical industry has become increasingly disillusioned by the attitudes of many European governments to the sector, it has increasingly looked to Ireland as a country which particularly welcomes our industry, which truly understands its needs and which is willing to work in real partnership with it. At a time of economic turmoil, the maintenance of a constructive relationship between the industry and the Irish State can help secure further investments for the country and help significantly in the achievement of the recovery for which we all so fervently hope.
