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Driving change - the Health (Pricing and Supply of Medical Goods) Act 2013

AUTHOR(S): Michael Finn
PRACTICE AREA GROUP: Healthcare, Life Sciences
DATE: 11.07.2013

Introduction

In recent years, there has been extensive review and scrutiny of the State’s healthcare budget, not least its expenditure on medicines. On 28 May 2013, the President signed the Health (Pricing and Supply of Medical Goods) Act 2013 (the “Act”) into law. Though it has been stated that this Act is not a “charter for cheap drugs”, it is widely recognised as the latest in a series of initiatives aimed at controlling the State’s overall expenditure on medicines.

Traditionally, generics penetration has not been high in Ireland. Generics currently account for approximately 18% of all medicines prescribed. The Department of Health has indicated that this rate is particularly low when compared to the current UK rate of approximately 83%. To bring Ireland more into line with our European counterparts, the Act introduces a system of generic substitution and reference pricing.

Substitution of 'interchangeable' medicines

Generic substitution enables pharmacists to substitute a cheaper generic medicine when a more expensive branded medicine has been prescribed. The Irish Medicines Board (IMB) has been given the task of deciding what medicines are interchangeable and compiling an online list of interchangeable medicines. The Act sets out the criteria to be considered by the IMB. Medicines may be considered interchangeable if the IMB is satisfied that the products have the same active ingredients in terms of qualitative and quantitative composition, the same (or appropriately substitutable) pharmaceutical form and the same route of administration.

Importantly, the Act also sets out the circumstances where medicines are not interchangeable. This includes, for example, where there is a difference in bioavailability between products which may lead to significant differences in efficacy; where the product contains more than two active substances; where the device for administering the product has significantly different instructions; where the product is a biological entity; or, when the product cannot be safely substituted.

The Act puts in place the building blocks for substitution, but will not have an effect in the marketplace until the IMB has published its list of interchangeable medicines. The IMB had already started work on identifying classes of interchangeable medicines before the Act was passed. It is prioritising the most expensive classes of products, including statins, proton pump inhibitors, ACE inhibitors, and angiotensin II receptor blockers. The IMB has published a “Guide to Interchangeable Medicines” detailing its responsibilities under the Act and the process of collating the list of interchangeable medicines.

Reference pricing

The Act also establishes a reference pricing system, which gives the Health Service Executive (the “HSE”) the power to set a common price that it will pay for interchangeable medicines. The system does not affect a manufacturer’s ability to fix the retail price of a particular medicine. However, where an interchangeable medicine is dispensed under any of the State-sponsored Community Drug Schemes, the State will only reimburse the reference price for the group of interchangeable medicines to which that medicine belongs.

The HSE must review the reference price set for a group of interchangeable medicines at least once a year. The HSE has a wide discretion in setting the reference price, and it is widely anticipated that the reference price will be the price of the cheapest medicine in the particular group of interchangeable medicines.

How substitution works in practice – changes to the duties of pharmacists

Under the Act, where a pharmacist is presented with a prescription for a branded product that is interchangeable, the pharmacist must offer the patient the opportunity to substitute. If the product is being dispensed under a Community Drugs Scheme and the patient does not choose the substitute product, the patient must pay the difference between the reference price and the price of the product supplied.

Substitution is not mandatory in all cases. The Act provides for a clinical exemption to substitution, where a prescriber is satisfied that a branded product should not be substituted for clinical reasons. In such cases, the prescriber must write “Do Not Substitute” on the prescription. Secondary regulations may be introduced that require the prescriber to set out the reasons for their decision. A failure to comply with such regulations may trigger disciplinary action against the prescriber.

Establishment and maintenance of the reimbursement list

The Act imposes an obligation upon the HSE to formally establish and maintain an online list of medicines and appliances reimbursable under the Community Drugs Schemes. This is not a new development, as details of products currently reimbursable in Ireland are already maintained by the HSE on the reimbursement list. All products currently on the HSE’s list will be automatically deemed to be on the reimbursement list established under the Act at the same price (but the HSE must review the price within three to five years).

The Act sets out a formal procedure for suppliers to apply to the HSE to add their products to the reimbursement list. The HSE has 180 days to make a decision, unless it requests further information from the supplier which suspends the running of the 180 day period. The HSE must also observe a minimum notice period of 28 days before items can be removed from the reimbursement list. This is to allow the supply chain time to adapt to a decision to de-list a product.

The Act gives the HSE broad powers when setting or reviewing the price of listed items. The criteria to be taken into account by the HSE when considering the proposed price of an item include: the equivalent price in other Member States of the EU; the price of therapeutically similar listed items; the potential therapeutic benefits for patients; the budget impact of the item; the ability to meet supply demand; the HSE’s resources; and the terms of agreements between the HSE and representative industry bodies (such as the IPHA and APMI agreements). The HSE may also use a competitive process to determine prices, and can impose conditions, such as quantitative and seasonal restrictions, on the supply or reimbursement of any listed item.

Conclusion

The Act was commenced by statutory instrument on June 24 2013. It remains to be seen how decisions on interchangeability and pricing will be received by industry, now that the Act is operational. Where a party is aggrieved by a decision of the IMB or the HSE under the Act, it may appeal to the High Court within 30 days. This short timeframe emphasises the need to take advice at an early stage and act quickly regarding any anticipated decisions under the Act that could affect your business.

For further information please contact Michael Finn or Paul Clifford.

This article appeared in the ILO Healthcare and Life Sciences newsletter on 19 June 2013 and in the Irish Medical News on 8 July 2013.

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