Warning: contains profits

What's the story with prescriptions?

If the PriceWatch mail box is anything to go by, nothing angers readers more than the high price of prescription drugs in Ireland. They are constantly amazed at how pharmacies across the EU can sell exactly the same drugs at a fraction of the price they cost here.

There was some rare good news for them at the beginning of this month when the price of some 800 prescription drugs fell by as much as 20 per cent under the terms of an agreement between the Health Service Executive (HSE) and the pharmaceutical industry. Another 15 per cent will be lopped off the prices in 2009.

So far, however, the prices of only the most expensive drugs seems to be falling. The generic equivalents of many of these drugs have not followed suit, which has brought about a ridiculous situation where the price of some well-known brand-name drugs and their supposedly low-cost alternatives are now virtually identical.

Before the HSE agreement came into effect on March 1st, the cost price of a 30-day supply of Prozac was €27.19, while a generic equivalent called Affex had a price tag of just €21.75. Now, according to the figures on the HSE website, the cost price of Prozac is €21.75 and the price of Affex is €21.74.

At the beginning of the year, Lipostat - commonly used to treat high cholesterol - was selling for €22.60 in February while a generic equivalent called Pravat cost just €18.15. Now Lipostat has a price of €18.08 while the supposedly significantly cheaper option costs just 13 cent less.

NO ONE WOULD suggest that Bristol-Myers Squibb, the manufacturers of Lipostat, are not entitled to charge a premium for their drug. There is a clear need for manufacturers to offset the research and development (R&D) costs associated with bringing the drug to market. If no such financial incentive existed, there would be little reason for major pharmaceutical companies to develop new products. It is harder for a generic company, however, to stand over similarly high prices as they have no R&D costs to recoup and can manufacture pills for buttons.

The Department of Health accepts that many generic products have not reduced in price. The pricing of generic medicines "is a commercial decision and it is a matter for each supplier to decide where to position its products against competitors". All that is legally required is that generic substitutes must cost less than the reduced proprietary price.

"It is difficult to see how, without price adjustment, some generic products will maintain market share," a spokesperson told PriceWatch. "Many generic suppliers have informally indicated that they will review their pricing decisions on examination of competitors' prices, following publication of the [ HSE] list."

The director of one pharmaceutical company PriceWatch spoke to last week is convinced that while some prices may now be falling, the market here is being wilfully inflated by some manufacturers with the tacit support of pharmacists. He said that the fact that there is now just a ew cent between many generic brands and the original products suggested that there was "a cartel in operation, with the generic manufacturers keeping prices high to facilitate the 50 per cent mark-up [ one-third of the total retail price] and 70 per cent discounts that retail pharmacists demand".

He pointed out that the top 10 prescription drugs on the Irish market could all be sourced in India and imported into Ireland fully packaged and with full approval from the Irish Medicines Board for less than €1 a packet. If this happened, then a healthy profit margin could be attached to drugs and the retail price for a drug such as Prozac would still be less than €10. Instead, most of the drugs in the top 10 cost well over €20 because pharmacists are, he said, disinclined to stock very cheap generic drugs because it would negatively impact on their 50 per cent mark-up.

The suggestion the pharmacists are opposed to making cheaper generic drugs available or bear any responsibility for high prices in their pharmacies is rubbished by the Irish Pharmaceutical Union (IPU). "It is simply not the case that we would block the availability of cheaper generic drugs," a spokeswoman says.

"In fact, for many years we have campaigned to be allowed to substitute cheaper generic drugs for more expensive propriety medications that have been prescribed by GPs. It is absolutely not the case that there is a cartel in operation which is keeping prices artificially high," she said.

THE IPU POINTS towards a recent survey carried out on its behalf by PricewaterhouseCoopers as proof pharmacists are not making excessive profits on the back of Irish consumers. While the study showed that pharmacies in Ireland had average sales of more than €1.5 million, the net average profit has dropped to €84,000 from €90,000 in 2004. Critically, this figure does not include the remuneration of pharmacy owners which are conveniently hidden in the overhead costs, which average €454,000 per pharmacy.

While drug prices in Ireland are still high, the new agreement should bring about a "gradual reduction in prices," believes Dr Michael Barry of the National Centre of Pharmoeconomics in Dublin. He says that the pharmacists' 50 per cent mark-up on the wholesale price of drugs - one of the highest such mark-ups in Europe - does increase prices here.

He says that very low generic prices, were they available, may act as a disincentive to pharmacists but he said there was no evidence of a price-controlling cartel in operation.

"I would assume that the price of these generic drugs will fall but it is only an assumption," says Dr Barry. He says that the new agreement, which he describes as a "significant improvement", should put pressure on all manufacturers to lower their prices.