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Drug pricing in Ireland

Sustained pressure on healthcare spending, combined with the continued impact of patent expiries, could thwart the pharma industry in Ireland


In late October, the Irish government completed a deal that aims to save the ROI health service around €400m on the cost of drugs over the next three years. The agreement between the Department of Health (DH), the Health Service Executive (HSE) and the Irish Pharmaceutical Healthcare Association (IPHA) will lead to significant reductions in the prices of both patent-protected and off-patent medicines – and is designed to ease the financial pressure on the country's overspent health budget.

Its introduction comes as new legislation to reduce the cost of generic drugs passes through the Oireachtas. The Health (Pricing and Supply of Medical Goods) Bill 2012 is likely to be enacted by the end of the year.

Like most of Europe, cost containment is the order of the day in Ireland. However, despite increased consumption, state expenditure on drugs has been falling since 2010 – largely, says the IPHA, due to savings delivered by the industry. Currently, only around 11.7 per cent of the health budget is spent on medicines – the fifth lowest in the EU.

“The pharmaceutical industry has recognised that the State faces particularly tough challenges in funding healthcare and has agreed robust, cost-effective arrangements for the supply of medicines to the health service,” said the IPHA.

“These arrangements have resulted in savings of €600m in the State medicines bill since 2006, savings which provided the State with monies to fund new therapies which offer hope to patients of longer, healthier and more active lives.”

In 2011, the market shrank, in pricing terms, by 11 per cent. At the same time, a clear move towards the greater use of generics means that patent-protected products now account for only 42 per cent of the market in Ireland. This is placing renewed pressure on pharmaceutical companies' pricing and reimbursement strategies as the industry battles to ensure that patients gain access to high-value medicines. It is a battle that the industry – and worse still, patients – has appeared to be losing in recent times.

Access to medicines for patients
In March, the previous HSE/IPHA pricing arrangement expired after five years. But attempts to negotiate a new deal had already collapsed a month earlier due to IPHA concerns that patients were being denied access to innovative medicines.

In April, Ireland's doctors' union, the Irish Medical Organisation, called on the Minister for Health to ensure that new medicines that had completed satisfactory pharmaceutical and economic evaluation were immediately reimbursed by State drug schemes. David Gallagher, Pfizer's country manager in Ireland and the outgoing IPHA president, backed the stance, saying the HSE was violating its agreement and failing patients.

“The research-based pharmaceutical industry is constantly developing new and innovative medicines which offer great hope for the management of chronic illnesses,” he said. “As well as being in breach of the current agreement with the IPHA regarding the supply of medicines, the failure on the part of the HSE to fund new products that have successfully completed the HTA process, is denying Irish patients access to a growing range of treatments that are routinely available in other countries.”

The IPHA argued that no new innovative drugs had been added to the country's drug reimbursement scheme since September 2011. It said that up to 10 new medicines that had proved cost effective through HTA – including Brilique, Gileyna, Sycrest, Incivo and Victrelis – were still not being reimbursed. As such, patients with coronary syndromes, multiple sclerosis, bipolar disorder and Hepatitis C were being denied access to effective treatments, while treatments for other diseases were also subject to restrictions.

In June, the DH accepted an IPHA proposal that would deliver short-term cost savings, but would also allow for the full and proper implementation of the existing supply agreement by ensuring that new medicines would be reimbursed. The interim agreement promised savings of €20m in a full year and provided for new medicines to be available within 40 days of a positive reimbursement decision.

The three-year pricing agreement
The latest full agreement between the DH, HSE and the IPHA was reached in October, following protracted and difficult discussions. It includes an attempt to resolve the issue of patient access to new innovations. “As well as offering substantial price reductions, the industry agreed a process to ensure that Irish patients will have timely access to new products over the period of the Agreement, and will not be disadvantaged by current fiscal difficulties,” the IPHA said. “This is extremely good news for the State, patients and taxpayers, as the price of hundreds of medicines will fall significantly.”

The deal was announced by Ireland's beleaguered Minister for Health, Dr James Reilly, who said it was vital, “given the scale of the financial challenges in health over the next few years”. Dr Reilly, who survived a recent no-confidence motion, continues to face sustained pressure to quit as he attempts to reform the country's health system while managing an HSE budget deficit that hit €374m at the September.

Alex White, who was only appointed as Ireland's Minister of State with responsibility for Primary Care at the end of September when his predecessor controversially resigned, said: “The current cost of drugs in our health system at over €2bn per year represents a major challenge to the State.

However, the value of life-saving life-enhancing drugs to patients is incalculable. The importance of this new deal to the State and to patients alike will be felt well into the future.”

Agreement in brief

The main elements of the HSE/IPHA agreement are:

  • It runs for three years
  • Irish patients will have timely access to new innovations
  • The price to the wholesaler will reduce to 70 per cent of the original price upon patent expiry
  • 12 months after patent expiry, the wholesale price will reduce to 50 per cent of original price
  • Prices for existing off-patent medicines reduced to 60 per cent of original price on November 1, 2012 and will fall to 50 per cent 12 months later 
  • A one-off downward price realignment will apply to the currency-adjusted average price to the wholesaler in nominated EU Member States on all patented medicines and off-patent unique drugs.

The agreement has been hailed as a significant step in reducing the cost base of the health system. It aims to deliver in excess of €400m by 2015. Half of this will come through reductions in the cost of patent and off-patent drugs, while the other half is related to the State securing the provisions of new and innovative drugs for the duration of the agreement.

It is anticipated that around €16m in savings will be made this year, and an estimated €116m will be saved in 2013. Under the terms of the agreement, up to 400 patent protected products that have been available on the HSE Community Drug Schemes prior to 2006 will be subject to a price review. Price reductions averaging up to 16 per cent are expected from this review process.

Stark warning from the IPHA
As the new arrangement was unveiled, the IPHA warned of the real costs of any failure to implement it fully. “It is important to remember that the alternative to the use of innovative medicines is not cost free; it may involve longer hospital stays, longer less effective treatments, invalidity, sick pay and a poorer quality of life,” it said.

Dr Reilly said the deal would not undermine the pharmaceutical industry, but would benefit patients 'in a major way'. He said that since 60 per cent of the population paid for medicines over the counter, the new agreement would make them more affordable and accessible. With the prices of generic drugs unaffected by the deal, its impact on consumers is not likely to be significant.

The DH and the HSE are currently finalising discussions with the Association of Pharmaceutical Manufacturers in Ireland, which represents the generic drugs industry, to deliver further savings in the cost of generic drugs. In addition, new legislation through the Health (Pricing and Medical Goods) Bill 2012 will introduce a system of reference pricing and generic substitution. It is expected to save a further €100m a year.

The pharma industry has historically been one of the biggest engines for growth in Ireland. Eight of the top 10 multinationals have production operations in the country and they have been responsible for much of its export success. But a steady wave of patent expiries is expected to hit the Irish economy hard. Seven of the 10 biggestselling global drugs that are losing patent protection are produced in Ireland. Some, like Lipitor and Plavix, have already come off patent – with damaging fiscal repercussions for both the country and the companies alike.

These are testing times for the pharmaceutical industry in Ireland. And the combination of healthcare austerity and patent expiry means that the situation is unlikely to improve any time soon.

The Author
Chris Ross is an independent pharmaceutical and healthcare journalist

26th November 2012

26th November 2012

From: Sales, Marketing, Regulatory, Healthcare



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