Ireland: Price Cuts And A New Route to Market?
This article was originally published in The Pink Sheet Daily
Executive Summary
Companies in Ireland will likely tread a difficult and unchartered path to market if the government goes ahead with threats to abandon talks for a new medicines supply agreement and instead uses legislation to cut drug prices.
Ireland's government has said it plans to use legislation to impose unilateral price cuts on medicines rather than continue with talks for a new pharmaceutical supply agreement with the IPHA, the R&D-based pharmaceutical industry association in Ireland.
Such a move would take companies into "unchartered territory", involving not only cuts for all prescription medicines but cumbersome company-by-company negotiations, according to an IPHA spokesperson.
The IPHA, which represents 42 companies, was in the process of agreeing a new supply agreement with the Health Service Executive, the Departments of Health and of Public Expenditure and Reform and the Office of Government Procurement. The previous agreement was struck in 2012 and lapsed in November 2015, but negotiations for the successor did not begin until March 2016. This was because the relatively new department of expenditure and reform, created after the economic collapse to make financial savings, was new to the negotiation table.
According to the health department, the state had hoped a new agreement would significantly cut drug prices, reduce the growth in the drugs bill and put the HSE in a position to continue buying innovative new medicines.
However, talks ceased this week as the government was unhappy with the direction of travel. "The Minister for Health and the Minister for Public Expenditure and Reform informed Government [on May 17] that it has not been possible to reach an acceptable agreement with IPHA. It will now be a matter for the HSE to determine the reimbursement prices paid to pharmaceutical companies for medicines, using its powers under the Health (Pricing and Supply of Medical Goods) Act 2013," said the Department of Health.
The IPHA said it was surprised by the announcement and emphasized that it had not withdrawn from talks. The spokesperson said the IPHA was immediately responding to the situation by seeking meetings with the ministers for health and for public expenditure and reform. Using the legislation to reduce pricing would be a very serious and unprecedented step for its members, he said. It would not only move away from working within a negotiated structure towards company by company negotiations, but would also cast uncertainty over other aspects covered under the supply agreements, including access to medicines and reimbursement timelines. The standoff between the government and the IPHA has already taken its toll: the association reports that its members are complaining of increasingly slow reimbursement for new medicines.
The association declined to say exactly what it had offered before the talks went sour, but said that it what it was offering would have "matched in and around" the €500m ($558m) savings the state was reportedly seeking.
The 2012 agreement based new medicine prices in Ireland on the average price in nine EU states (Belgium, Denmark, France, Germany, the Netherlands, Spain, the UK, Finland and Austria.) It was designed to save the state more than €400m in savings, with the caveat that the state would invest €210m of those savings into providing innovative new drugs over three years. Those savings were made, but spending on new drugs has increased. The Department of Health added that while drug prices have fallen in recent years, they are still too high in comparison to other European countries. The IPHA rejects this and claims that much analysis of pricing is out of date and fails to consider recent concessions.
The HSE's drug budget is €1.7bn, including pharmacy and wholesaler mark ups. "Drugs supplied by the IPHA members account for just under €1bn, but we often get lumped in with the whole €1.7bn," said the IPHA spokesperson. He added that prices for new medicines sold by IPHA companies are largely an average of what is charged in the nine reference countries. [Editor's note: This article is also published in Scrip. The Pink Sheet DAILY brings selected complementary coverage from affiliated publications to our subscribers.]