Prescription for big savings

 

The new price cuts will save the State and consumers €100 million a year

THE PRICE of nearly 300 branded medicines – many of them commonly used by Irish patients – have been reduced this week by a whopping 40 per cent.

The price reductions announced by the manufacturers of the products will result in savings to the State and to consumers of at least €100 million a year.

As a result of the price cuts, which came into effect yesterday, a pack of 30 Prozac tablets for depression will now be sold for €9.02 at the factory gate, down from €15.03 while Lipostat (28 pack) for heart patients will come down from €24 to €14.40. A dispensing fee may be charged by pharmacists on top of this.

Many may wonder though how it is that manufacturers of branded drugs were able to knock so much off the price of their medicines almost overnight.

The truth is while the change wasn’t brought about overnight, it was negotiated quickly, in a matter of weeks during talks between Minister for Health Mary Harney and the Irish Pharmaceutical Healthcare Association (IPHA).

Ms Harney had announced in the Budget she planned to go further in tackling the State’s drugs bill, having already tackled wholesaler mark-ups and fees paid to pharmacists, something which provoked a bitter dispute last year.

She met the IPHA at least three times. It was made clear the state of the economy meant savings had to be achieved and that the Government had even passed emergency legislation, which stood up in the courts, to reduce fees paid to pharmacists by €133 million a year. And while a previous agreement on prices with the IPHA wasn’t due to expire until September 2010, if they were prepared to talk about cost reductions earlier than that it was also made clear there might be something in it for them.

Very quickly the IPHA – which represents all the major drug firms such as Pfizer, Roche, GlaxoSmithKline and Merck Sharp & Dohme – agreed to cut prices of its off patent drugs by 40 per cent if the State didn’t touch the cost of their proprietary or branded drugs for another 18 months. The new deal takes the IPHA up to March 2012, replacing the one due to expire this September.

But if prices could be reduced this much, were the manufacturers of 90 per cent of the drugs on the Irish market just ripping us off all along?

Brian Murphy, IPHA’s director of commercial affairs, rejects the notion that his members were overcharging for years. He says that even in a previous deal with the State in 2006, his members agreed to reduce the prices of drugs coming off patent by 35 per cent, at a time when other prices were still going up.

Now the drug companies, he said, recognised the difficult position of the Irish economy and wanted to play their part in helping to reduce costs further.

The latest price reductions, he claimed, would “be a major adjustment for the companies involved” which employ 25,000 people in Ireland.

However, put in context, the Irish market is worth about €1 billion a year to IPHA member companies and so the €100 million in price cuts announced now will just be a 10 per cent cut in their bottom line.

Asked what the benefits for IPHA were from the latest agreement with the State, Mr Murphy said they had been given “some degree of certainty over what the framework will be for the next year or two”. He insisted there were “no threats” made on either side before the cost reductions were agreed.

Interestingly, the price reductions will now mean many branded drugs will be significantly cheaper than their generic equivalents, which could result in the IPHA companies cornering a bigger market share.

The generic manufacturers – which have about 10 per cent of the drugs market here – told Ms Harney they would not agree price reductions at this stage. The current pricing agreement with them for drugs dispensed to medical card holders and under other State schemes expires in September so their current pricing arrangements will have to be tackled then. Ms Harney yesterday urged them to follow in the footsteps of the IPHA now.

A full list of the hundreds of drugs for which the IPHA has reduced prices, along with the cost reductions involved, can be viewed at www.checkthelist.ie There were some 30,000 page impressions on the website yesterday on its first day of operation.