Press Release

New Drug Pricing and Supply Agreement to deliver major savings

35% price reduction on off-patent drugs

The Tánaiste and Minister for Health and Children, Mary Harney TD, today (Thursday, July 6, 2006), announced the conclusion of negotiations between the Irish Pharmaceutical Healthcare Association (IPHA) and the Health Service Executive on an important new agreement setting out the pricing and supply of medicines for the Irish health service.

This Agreement will provide increased value for money for the State and the consumer through a reduction in the price of existing drugs and medicines coming off patent, and through the use of a wider basket of countries for pricing new drugs coming on the market. Over the period of the Agreement, which runs to 2010, it is expected to achieve savings of the order of €300 million across the GMS and community drugs schemes, and in the cost of drugs to hospitals, thorough off-patent price cuts of 35% for drugs with substitutable alternatives.

There will also be savings through the use of a wider basket of EU countries for the pricing of new medicines coming onto the Irish market along with two price reviews for new medicines over the lifetime of the Agreement. The new basket will include some traditionally lower priced countries, including Spain, which will benefit the consumer over the medium term. Finally, for the first time, reimbursement of new drugs coming onto the Irish market can now be informed by pharmacoeconomic assessment, in line with other EU countries.

Announcing the agreement the Tánaiste said: “I want to be able to afford the best treatment for patients and this is an important step in that direction. This Agreement will have a major longer term benefit through putting in place more rigorous and cost effective processes for evaluating drugs prices. The savings achieved as a result of this agreement will be used to improve the overall level and quality of health services provided to patients.”

“This Agreement is the first in a series of negotiations agreed by the Cabinet Committee on Health to examine all aspects of the drug delivery system, from the manufacturer to the patient, in order to achieve greater value for money from the operation of the Drugs schemes, consistent with patient safety and continuity of supply.”

“Talks will begin shortly with the pharmaceutical wholesalers (PDF) and domestic manufacturers (APMI), and then with the community pharmacy contractors (retail pharmacists). In addition to the savings quantified there will be further savings as generic manufacturers respond to the lower price of branded drugs. There is nothing in this agreement that precludes the vigorous promotion of generic prescribing and we will be pursuing this in the future.”

The Tánaiste acknowledged the work of the joint Department of Health/HSE team who negotiated the agreement.

The State drugs bill has increased rapidly in the past decade, as elsewhere in Europe. Pharmaceutical goods and services now account for some 15% of total public health care spend and approximately 25% of total procurement-related spend for the Health sector. Medicine supply and pricing has been examined in several reports, including that of the Commission on Financial Management and Control Systems in the Health Service (Brennan). Considerable consultation has also taken place in recent years between the Government and the Health sector on reform of the Drugs schemes, and on Health sector procurement issues. This Agreement is therefore just the first in a series of negotiations which are aimed at achieving better value for money for the State, taxpayers and patients to enable the State to meet the needs of patients in the future.

The key features of the new agreement are:

  • The agreement is now with the HSE as the purchasing and reimbursement authority.
  • The pricing mechanism (the price basket) for new medicines will be extended from five to nine member states, including Spain and Austria.
  • Relevant State agencies will be able to purchase medicines under the agreement, where such purchasing is part of their normal functions.
  • There will be a price reduction of 35 % for substitutable off-patent medicines.
  • There will be two price reviews for new medicines approved under the agreement – after two and four years respectively.
  • A single price will apply across hospital and community supply.
  • Reimbursement approval decisions can be informed by pharmacoeconomic assessment.
  • There will be more stringent requirements for continuity of supply, including sanctions for non-compliance.
  • Wholesale suppliers will be subject to a separate agreement.

Estimated full year savings from the agreed price cuts when fully implemented will be in the order of €100 million per annum.

Main Points of Agreement

Duration

  • The agreement will last for four years, with notice of negotiation available to either party from three years.

Coverage

  • Relevant State agencies may use the provisions of the agreement when purchasing medicines.
  • All suppliers must comply with the terms of the agreement as a condition of reimbursement of a medicine.

Patient Choice

This provision emphasises two points:

  • (1) the importance of the patient’s role in deciding on an appropriate therapy in consultation with the prescriber, and
  • (2) the State’s obligations to allow the patient to make as informed a choice as possible on choice of treatment.

Reimbursement and Pharmacoeconomic Assessment

  • Reimbursement may be refused or have conditions placed on it following a pharmacoeconomic assessment. Currently, reimbursement may not be refused following a PEA.
  • The intention of this clause is to allow the State to clearly target particular patient groups and to address the issue of under-treatment of certain sectors, thus maximizing patient benefit from the use of State resources.

Pricing

  • The countries in the price basket are extended from five to nine.
  • Included are several lower priced countries, such as Spain, Austria and Belgium
  • There will be two reviews of prices given under this agreement: at two and four years from the start of the agreement.
  • This allows for price review on a full basket (Ireland is usually early in the introduction of a new drug and there may only be one or two basket prices available at that point) and a second review to further realign prices within the EU market.

Post-patent Price Cuts

  • The State requires the release of resources to allow it to pay for new and innovative therapies. Post-patent price cuts provide for this.
  • There will be a 35% reduction in the price of existing and future post-patent medicines where a substitute is available. This will take place in two steps: the first of 20% and the second of 15%. It will also apply to hospital purchases and hospital-only products.

Hospitals

  • As the HSE will be the single purchaser; there will be one price for all hospital supplies, although the HSE may seek to reduce that price.
  • There will be a service payment for all hospital supplies, to be determined in the separate wholesaler agreement.
  • Currently, there is a 15% discount for orders above €630. Because of disaggregation of purchasing, over half of hospital ordering is below the threshold.

GMS Rebate

  • The rebate has remained at the same level but will not apply to price-reduced off-patent products.
  • The HSE will, at some stage, spread the rebate across all the schemes.

Continuity of Supply

  • The procedures for notification of shortages and withdrawals have been elaborated and clarified.
  • In addition, sanctions are available for non-compliance. These apply to all suppliers, and are intended to protect the State and patients against unauthorised or preventable unavailability of a particular medicine.

Short Shelf Life Products

  • This measure will help to protect hospitals in particular against the problem of wastage resulting from stock going out of date.

Administration – Exceptional Circumstances

  • Allows for the use of innovative pricing structures, such as flat structure across a dosage range, to keep older or unviable products for which there is no alternative, on the market without excessive risk for the Exchequer.