Drug prices to fall as State agrees €400m deal

A landmark deal has been reached with Ireland’s pharmaceutical industry that will save the State more than €400m on what it pays for medicines over the next three years.

The cost to the health service of off-patent drugs will be halved from the start of next month under an agreement between the Department of Health, the HSE, and the Irish Pharmaceutical Healthcare Association.

Substantial savings on the cost of medication will also be enjoyed by patients who pay for drugs, under the deal reached with the 50-member group of companies responsible for the research, development, and manufacture of medicines in Ireland.

Combined with an agreement with the IPHA reached in February, it means that €16m in drug savings will be made this year, with greater savings to be achieved up to 2015. It is estimated that the deal will generate savings of up to €116m in 2013 alone.

Health Minister James Reilly described the deal as an important step in reducing the cost base of the health system.

The deal, described in a departmental press release as having a “value” in excess of €400m — later clarified as a “saving” by the minister — will mean:

* Significant reductions for patients in the cost of drugs;

* A lowering of the drugs bill to the State;

* Greater access to new cutting-edge drugs for certain conditions;

* An easing of financial pressure on the health services into the future.

Half the savings will come from reductions in the current cost of patent and off-patent drugs. The other half relates to an agreement on the provision of new drugs in future years.

Under the agreement, when a patent expires on a medicine in future, the price to the wholesaler will be reduced to 70% of the original price and a year later, it will be cut to 50%.

For existing expired medicines, the price to the wholesaler will be cut to 60% of the original price from Nov 1 and a year later it will be further cut to 50%.

Dr Reilly congratulated all parties to the protracted negotiations for concluding a deal of such benefit to patients and the health services and he said “given the scale of the financial challenges in health over the next few years, this agreement is vital progress after much hard work”.

IPHA president Dave Gallagher said the agreement was a good deal for patients and taxpayers, but that it would be “a very painful deal” for the industry.

The agreement comes as legislation aimed at reducing the cost of generic drugs makes its way through the Oireachtas. The Health (Pricing and Supply of Medical Goods) Bill 2012 will introduce a system of reference pricing and generic substitution.

The new law will allow a pharmacist to dispense a generic version of a medicine when a specific brand has been prescribed. If the patient wants a more expensive branded version, they will pay the difference. This new rule will apply equally to those who get their drugs free and those who pay for them.