Drug firms offer State €775m price cut in cost of medicines

Talks on reducing the State’s €1.2 billion drugs bill remain deadlocked despite a fresh offer by pharmaceutical companies for across-the- board price cuts.

The industry has tabled an offer to reduce the amount the State pays for medicines by €775 million over four years, according to sources close to the negotiations.

The proposal was made at talks between the Department of Health and the Irish Pharmaceutical Healthcare Association this week and represents a slight improvement on the €700 million previously offered by the industry.

Unless there is a breakthrough in the negotiations, drug companies are facing the prospect of price cuts being imposed by the Health Service Executive using powers it acquired under recent legislation.

The HSE has already written to companies saying it will reduce the price it pays for specific medicines by up to 30 per cent. The first of these letters is due to take effect from Friday.

The IPHA proposal, which is being considered by the department, would take effect from this summer and cover all of the drugs made by its member companies.

The department and the HSE urgently need to make savings on current drug spending in order to meet the cost of rising demand as well as highly expensive new treatments that are coming on stream.

The price cuts proposed by the sector are based on a re-alignment of Irish drug prices with those in other, comparable countries.

However, Irish prices would remain near the average of prices in the basket of countries with which Ireland is compared.

The Department believes Irish prices should be pitched at the lower end of the basket of prices relative to comparable countries.

This could have serious knock-on effect for pharmaceutical multinationals by sparking price cuts in other countries in the basket, with far larger markets.

The industry claims low prices could lead to supply problems as medicines in the Irish market are parallel-exported to countries where wholesalers can procure higher prices.

The industry has also argued that an across-the-board price cut as it has proposed is administratively easier for the HSE to implement compared to the complexity of enforcing drug-by-drug cuts.

Under legislative changes introduced in 2013, the HSE has powers to set the price of drugs when negotiations do not achieve adequate savings for the taxpayer.

The European Commission, which says Ireland’s drug prices are too high, has been critical of the failure to use these powers until now.

The last price deal with the industry ended in September and was extended by both sides to allow talks on a successor agreement.