Incentives or quotas could curb rise in drug spending – review

Department of Public Expenditure paper says €2bn being spent on drugs each year

Pharmaceutical spend accounts for 15 per cent of overall expenditure in the public healthcare system. Photograph: iStock

Pharmaceutical spend accounts for 15 per cent of overall expenditure in the public healthcare system. Photograph: iStock


The Government should consider radical reforms to contain the future cost of pharmaceuticals including financial incentives to influence doctors’ prescribing or budget targets or quotas, a new spending review has suggested.

The paper drawn up by the Department of Public Expenditure and Reform argues that the ability to introduce new drugs that come on the market in future will remain a considerable challenge for the Government in the years ahead.

It says the health service is operating in an era of “super drugs”, which are innovative and have potentially great benefits but come with large price tags.

The paper states the exchequer already pays out €2 billion per year on pharmaceuticals, which accounts for 15 per cent of overall expenditure in the public healthcare system.

The review says that although a deal reached with the pharmaceutical industry last year provides for a significant improvement in price, “the savings only deliver headroom to fund a limited level of growth in the existing stock of medicines from 2018 onwards.”

“Pharmaceutical spend in Ireland is expected to continue to increase over the coming years due to the pressures outlined above, the rapid growth in hospital expenditure and the pipeline of new high-cost drugs. The average annual increase in drug spend is estimated at 3 per cent out to 2020. This does not include the introduction of new drugs beyond those already introduced in the system as at May 2017.”

Sustained savings

The report says that apart from the deal with the pharmaceutical industry, there are a number of other mechanisms available that have the potential to provide significant and sustained savings. It says many of these require consideration now in order to be fully implemented and incur benefits in the medium term.

The paper says that among potential reforms are the introduction of a new prescribing policy that could include prioritising access to certain medicines based on clinical need or the use of physician incentives.

“Incentives to control prescribing behaviour may be financial or nonfinancial, such as the use of budget targets or physician quotas.”

It suggests that the current system of reference pricing – the setting of a common reimbursement price, or reference price, for a group of interchangeable medicines – could be enhanced by, for example, shortening the re-reference periods and the time span for initial reference pricing.


The report also points to potential savings from greater use of drugs known as biosimilars.

“Biosimilars are replicates of biologic drug. Typically, biologic drugs are more expensive than chemical medicines. Similar to generic drugs, biosimilars can only be sold after the patent of the original biologic drug has expired and therefore offer a cheaper alternative to the parent product. However, in contrast to generics, biosimilars are not exact chemical duplicates of the original as they are produced from organic material. This is the primary reason for the slow movement towards the use of biosimilars. Biosimilars provide the opportunity to increase patient access as they deliver additional savings and allow resources to be directed toward new innovative medicines.

“The EU is the most advanced adopter of biosimilars and in 2011 the EU accounted for 80 per cent of global spend on biosimilar drugs. In terms of Ireland’s position, Ireland has one of the lowest biosimilar penetration levels across Europe. ”

The review also suggests that a separate scheme for diabetes may provide opportunities to utilise better tendering of diabetes medicines and medicinal products.