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Driving down the cost of medicine

PRACTICE AREA GROUP: Life Sciences, Healthcare
DATE: 30.11.2012

Ireland, in common with many other jurisdictions, has experienced a significant level of debate and controversy regarding the prices of drugs supplied under state-sponsored community drugs schemes. Ireland's expenditure on medicines has reportedly been falling since 2009, despite an increasing level of medicine usage. This update discusses some recent initiatives that aim to drive down the state's medicines bill.

New pricing agreements with industry bodies

October 2012 saw the Irish Pharmaceutical Healthcare Association agree a new medicines supply agreement with the Department of Health and Children and the Health Service Executive (HSE). The three-year agreement, which took effect from November 1 2012, is said to provide €400 million in savings. Under the agreement, when a patent on a medicine expires, its price to wholesalers will be reduced to 70% of the original price. After 12 months, the price will be further reduced to 50% of the original price. For existing patent-expired medicines, the price was reduced to 60% of the original price on November 1, to be followed by a further reduction to 50% of the original price in November 2013. These reductions are in addition to a reported €600 million in savings provided by pharmaceutical companies since 2006.

Recently, negotiations were also finalised with the Association of Pharmaceutical Manufacturers in Ireland, which represents generic manufacturers, which heralds further significant savings.

National Taskforce on Prescribing and Dispensing

A National Taskforce on Prescribing and Dispensing has been established to deliver additional cost savings by achieving more cost-conscious prescribing. Due to become operational before the end of 2012, it will:
• address prescribing and dispensing of medicines from the perspective of quality and patient safety; and
• assess the suitability of maintaining supply of certain items with limited efficacy, where more appropriate items are available.

Health (Pricing and Supply of Medical Goods) Bill 2012

In parallel with these changes, the Health (Pricing and Supply of Medical Goods) Bill 2012, published in July 2012, is making its way through the legislative process. The government envisages that, once enacted, this new legislation will further reduce expenditure by increasing the rate of generic prescribing, which currently stands at approximately 18%.

Against this backdrop, the key objectives of the bill are discussed below.

List of interchangeable medicinal products
It is proposed that a system of generic substitution and reference pricing be established. This system will allow pharmacists to substitute a cheaper equivalent medicine when a more expensive product has been prescribed by a practitioner. Under the proposed 'reference pricing' system, where two or more medicines are interchangeable, the state will reimburse only the reference price for this group of medicines. It is reported that the reference price will be the price of the cheapest medicine in the group.

The bill also provides for the regular review of the reference price for a group of interchangeable medicines and outlines the criteria to be considered by the HSE when setting or reviewing a reference price.

Duties of pharmacists
Under the bill, where a pharmacy stocks the branded product named in a prescription and also the substitute medicinal products of lower cost, the pharmacist must offer the patient the opportunity to substitute the lowest-cost interchangeable product. If the item is being dispensed under a community drugs scheme and the patient does not choose the lower-cost product, the patient must pay the difference between the reference price and the price of the product supplied. Medical practitioners will be entitled to indicate on a prescription whether there are any particular clinical reasons why a branded interchangeable medicinal product should not be substituted.

Establishment and maintenance of reimbursement list
The bill proposes that the HSE will formally establish a list of medicines and appliances reimbursable under 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. However, all products currently on the existing list will be automatically deemed to be on the reimbursement list established under the bill.

What is new is the power that the HSE will have to set or review the price of listed items. The bill sets out the criteria to be taken into account by the HSE when considering the proposed price of an item. It allows the HSE to review and alter the price of a listed item and to use a competitive process to determine prices. The bill also allows the HSE to attach conditions to the supply or reimbursement of listed items in the interests of ensuring patient safety, improving cost effectiveness, maximising appropriate use of the items concerned or appropriately applying the resources available to the HSE.


The most recent debate on the bill in the Oireachtas (Parliament) was adjourned on October 18 2012. Overall, it has been reported that the industry would like to see more clarification on the bill and how it will operate. It is expected that the bill will be finalised and enacted this year. It will be interesting to see the interplay and integration of the proposed reference pricing system under the bill, the recent pricing agreements agreed with industry bodies and the work of the National Taskforce on Prescribing and Dispensing.

For further information please contact Michael Finn or Paul Clifford at Matheson by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email Michael Finn or Paul Clifford

An earlier version of this update first appeared in Irish Medical News.



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