Medicine costs could become unsustainable, report warns

Drug companies' insistence on confidential pricing agreements is undermining efforts to curb costs in the health service, according to a spending review report on high-tech medicines.

It worries that the cost of cutting edge drugs could become unsustainable, leaving vulnerable patients in the lurch.

“While the drugs funded by the \[high-tech medicines\] arrangement constitute treatment options for various rare and impactful illnesses,” it says, “the large and continuing expenditure growth in the arrangement prompts concerns around the long-run sustainability of this spend.”

The report says that the trend towards “increasingly complex” pricing deals subject to non-disclosure agreements “compromises the ability to perform an accurate cross-country comparison” on prices.

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Conducted by officials in the departments of health and of public expenditure and reform, it says that while State spending on medicines has risen by an average of 4 per cent each year between 2012 and 2020 – less than the rise in overall health spending – the cost of high-tech medicines has jumped by an average of 11 per cent annually. The rate of increase has been falling however, coming in at 6 per cent in 2019 and 4 per cent in 2020.

Patient volumes

The review accepts that, while the rate of annual growth is “extreme”, it is partly explained by rising patient volumes.

According to the report, the largest single driver in increasing costs under the high cost drug programmes is an increase in the number of patients. This accounts for 49 per cent of the increase. The introduction of additional new drugs accounts for 36 per cent of the growth.

Treatments for rheumatoid arthritis and cancer account for 55 per cent of total expenditure on high tech drugs, followed by cystic fibrosis on the back of the introduction of Orkambi in 2017.

The review cites a 2018 OECD report stating that the high prices of medicines, especially for rare diseases with small numbers of patients, is not necessarily associated with a large increase in clinical benefits.

The study was prompted by the “large and consistent growth in expenditure in the high-tech drug arrangement”, well ahead of projected budgets. The State spent €2.3 billion on medicines last year, up from €1.3 billion in 2012. But the figure for high-tech drugs has more than doubled over the same period – from €379 million to €794 million, it says.

“While the drugs funded by the arrangement constitute treatment options for various rare and impactful illnesses,” it says, “the large and continuing expenditure growth in the arrangement prompts concerns around the long-run sustainability of this spend.”

Contain costs

Looking at ways to contain costs, the report raises the prospect of extending cooperation of drug purchasing across EU states, citing its effect in securing access to vaccines for Covid at lower rates than applied elsewhere.

It also urges tougher negotiating by the State on pricing agreements with the industry and better forecasting of multiyear spending commitments – noting “an apparent disconnect” currently between first year and longer-term costs for drugs.

Negotiations are under way between the Department of Health and the Irish Pharmaceutical Healthcare Association (Ipha) on a new pricing and supply agreement.

Referring to the €750 million in savings delivered by the existing agreement since 2016, the review says unpublished analysis carried out by the HSE’s Primary Care Reimbursement Service shows just over a third of that sum was derived from mechanisms rolled over from previous agreements.

It suggest policies to promote the use of generic and biosimilar medicines – where the Republic lags the OECD average and, in particular, countries such as the UK – should be considered, as should a hardening of the threshold new drugs have to meet in the cost-benefit analysis they undergo.

However, it notes that “some of the cost-containment measures considered in the paper may prove challenging to implement in practice, especially where patient accessibility could be impacted by a policy change”.