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Drugs and a New Scheme of Reference Pricing

DATE: 23.06.2011

 

In June of this year the Minister for Health introduced a Report on Reference Pricing and Generic Substitution of Drugs (the “Report”) which sets out a framework for forthcoming legislation on this subject. The proposed scheme will apply to both medical card holders and private payers.

 

It is anticipated that reference pricing will lead to a significant reduction in drug prescription costs for patients, pharmacists and the State. The Report estimates potential savings of €55.4 million under the GMS Scheme and €22.3 million under the Drugs Payment Scheme.

The proposed scheme is based on a model already in place in more than 18 European countries. Drugs are categorised into certain groups based on the fact that they share common characteristics, such as the same active ingredient or clinical effect. It is proposed that a ‘Committee on Interchangeable Medicines’ will be set up to establish criteria to determine the drugs that can be considered interchangeable. A common reimbursement price for the groups of drugs considered interchangeable, will then be decided on. This price will be based on the average or lowest price of all equivalents in the class.

The equivalents that cost the same or less than the set price will be refunded in full by the State to the pharmacist, in relation to medical card holders. Patients who want the more expensive equivalents will have to pay the difference between the cost of those medicines and the lower reimbursed price. Therefore, the State will pay only one price for drugs that are grouped within the same class. In relation to private payers, there will be an onus on the pharmacist to advise patients of cheaper alternative drugs.

The report states that certain drugs, such as drugs to treat cancer and epilepsy, will not be considered suitable for substitution for clinical reasons. It also provides for a system of control and oversight, involving a market review of all categorised groups of drugs, at least once a year.

To enable the reference pricing scheme to work effectively, it will be necessary to amend existing legislation, which presently requires that when a branded medicine is prescribed by a doctor, this must be the medicine that is dispensed by the pharmacy(1). The Report recommends allowing pharmacists to dispense a designated interchangeable medicine with the same quality and clinical efficacy, with the patient’s knowledge.

Government approval has been received for drafting the Heads of the Bill to introduce the above provisions, a process that will aim to involve consultation with clinicians, patient groups and other professionals. The aim is that work will begin on drafting legislation over the coming months. It is hoped that the legislative and administrative changes required to give effect to the initiative will be identified by 2011.

In the interim, the Department of Health and Children has entered into an agreement with the Association of Pharmaceutical Manufacturers in Ireland, which is expected to result in a prompt reduction in the price of drugs that are no longer protected by patent. The deal, which will ensure that the price of generic drugs does not exceed the cost of their branded equivalents, became effective on 1 October 2010. Savings in the region of 40 per cent on the State drugs bill have been anticipated, while even more significant reductions in the cost of drugs are expected following the formal introduction of reference pricing in 2011.

[1]. Article 5(1) of the Medicine Products (Prescription and Control of Supply) Regulations 2003 as substituted by Article 6 of the Medicinal Products (Prescription and Control of Supply) Regulations 2008.

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