Reference Pricing

The Health (Pricing and Supply of Medical Goods) Act 2013, which was commenced on 24 June 2013, provides for the introduction of a system of generic substitution and reference pricing. The key aim of the legislation is to ensure value for money in the supply of medicines; therefore, the medicines that will be reviewed first are most costly to patients and the Exchequer. This legislation will promote price competition among suppliers and ensure that lower prices are paid for these medicines resulting in further savings for both taxpayers and patients.

Previously, when a specific brand of medicine was prescribed for a patient, a pharmacist could only supply that particular brand, even when less expensive generic versions of the same medicine were available. The Act now permits pharmacists to substitute medicines prescribed, provided that they have been designated as safely interchangeable by the Irish Medicines Board (IMB).

Generic substitution coupled with reference pricing provides patients with an incentive to opt for the cheapest available product, but does not impose any unavoidable additional costs on patients.

Reference Pricing

The legislation provides that the HSE may set a reference price for each group of interchangeable products published on the List of Interchangeable Products. Reference pricing involves the setting of a common reimbursement price, or reference price, for a group of interchangeable medicines. It means that one reference price is set for each group or list of interchangeable medicines, and this is the price that the HSE will reimburse to pharmacies for all medicines in the group, regardless of the individual medicines’ prices.

Eligible patients using State drug schemes like the Medical Card or Drugs Payment Scheme will not face any additional costs for products priced at or below the reference price. If a patient would like to receive a particular brand that costs more than the reference price then the patient will have to pay the additional cost of that product. In cases where substitution is prohibited for clinical reasons, patients will not face any additional costs if the prescribed product costs more than the reference price. Patients will save on the cost of their medication and taxpayers will benefit from the reduced prices paid by the HSE.

The HSE sets reference prices for each group of interchangeable products in accordance with the criteria set out in section 24(3) of the legislation as follows:

(a)        the ability of suppliers of the relevant listed items to meet patient demand for the relevant listed items;

(b)        the value for money afforded by the relevant listed items;

(c)        the equivalent relevant prices (if practicably available) of the relevant listed items in all other Member States where one or more than one of the relevant listed items is marketed;

(d)       the relevant prices of therapeutically similar listed items;

(e)        the resource available to the Executive; and

(f)        the terms of any agreements in place (whether entered into before, on or after the commencement of this section) between the Executive and any representative body of the suppliers of drugs, medicines, or medical or surgical appliances where the agreement relates, whether directly or indirectly, to the price of one or more of those items.

It is the HSE’s policy to set reference prices that maximise the savings for the State and patients consistent with protecting continuity of supply for essential medicines in the Irish market. Consequently reference prices will not be set so low as to jeopardise the supply of the relevant medicines.

The first reference price for atorvastatin products was implemented on 1 November 2013. This represents a major step in ensuring lower prices are paid for these medicines. The new reference prices for atorvastatin products — which are used to control cholesterol — means the HSE now pays 70% less for these products compared to May 2013. The reference price is at 15% of the pre-patent expiry price i.e. the price is 85% lower than the patented price of the original brand (Lipitor).

The HSE is continuing the process of setting reference prices for the remaining groups of interchangeable medicinal products published by the IMB in accordance with the processes and timelines set down in the legislation. It is expected that 80% by value of the off-patent market for prescribed medicines will be subject to reference pricing by end Quarter 1 2015. Reference prices will ensure that generic prices in Ireland will fall towards European norms. Reference prices once set must be reviewed every 12 months but can be reviewed quarterly.

Reference pricing is expected to generate €50 million savings in 2014.  Further information on reference pricing can be found here.