State's drugs bill cut by €400m

A deal to cut the State’s drugs bill by up to €400 million over the next three years has been reached, the Department of Health has said.

The deal follows the conclusion of lengthy talks between the department, the HSE and the Irish Pharmaceutical Healthcare Association.

The agreement will result in significant reductions for patients in the cost of drugs and greater access to new cutting-edge drugs for certain conditions, the department said.

The development will come as a relief to Minister for Health James Reilly, who has been heavily criticised recently over health spending overruns. The deficit in the HSE stood at €374 million at the end of last month.

“The deal is an important step in reducing the cost base of the health system,” the department said in a statement.

The deal is expected to yield savings of some €16 million before the end of this year, considerably less than the projected €60 million to €70 million forecast by the Minister. It is estimated that the deal will generate gross savings of up to €116 million next year and considerable savings in both 2014 and 2015.

The department said half the financial value of the deal related to reductions in the cost of patent and off-patent drugs. The second half relates to the State securing the provision of new and innovative drugs for the duration of the agreement.

Dr Reilly said he believed the Government had shown just how strong a hand it had in the deal that had been achieved. He said he believed it was a "very good deal" for patients and for the taxpayer.

He said 60 per cent of the population paid for medicine over the counter and the deal would make them more affordable and accessible. In addition, where drugs were being accessed by patients on medical cards, the deal would free up funds in the health system for other patient services.

The deal would also guarantee access to new drugs as they became available.

Speaking on RTÉ's News at One programme, Dr Reilly said the health of the broader economy was at stake too. There were 25,000 people employed by the pharmaceutical industry and 100,000 related jobs, he said.

He said one company alone made a contribution of €880 million to the Exchequer in a year.

He acknowledged it had been a "difficult" deal to reach in negotiations between the industry, the Department of Health and the HSE. But he said it was worth waiting for because it would benefit patients and the health service "in a major way" without undermining the pharmaceutical industry.

Although today’s deal will save the HSE significant sums of money, its impact for consumers is likely be limited. This is because the prices of most generic drugs, which can range up to 94 per cent of those of their branded equivalents, are not affected.

The mark-up charged by pharmacists to private patients also remains unaffected. The prices Irish consumers pay for their medicines are among the highest in the world.

Talks between the department and drug companies collapsed last February after the industry walked out over disagreements about the inclusion of approved new drugs on the reimbursement list.

The cost of medicines in the health service was €1.9 billion in 2010 – almost 13 per cent of the total budget of €14.8 billion.

The department said the Health (Pricing and Supply of Medical Goods) Bill 2012, which aims to reduce the cost of generic drugs, would be enacted before the end of the year and could deliver further savings.

“The Department and the HSE will shortly finalise discussions with the Association of Pharmaceutical Manufacturers in Ireland, which represents the generic drugs industry, to deliver further savings in the cost of generic drugs.”