Pharmaceutical manufacturers offer to reduce State’s drugs bill by €700m

Pharmaceutical manufacturers have offered to reduce the State's drugs bill by €700 million in a last-ditch effort to avoid price cuts being imposed by the HSE. The offer by the Irish Pharmaceutical Healthcare Association in talks last week is a significant improvement on the €500 million cut which was rejected by the Department of Health last month.

After the earlier proposal was rejected, the HSE began writing to companies to unilaterally impose price cuts of up to 30 per cent on individual drugs. This prompted the industry to make the improved offer but it is not clear if it will be accepted by the department later this week.

The price cuts proposed by the sector are based on a realignment of Irish drugs prices with those in comparable countries. However, Irish prices would remain at the average of prices in the basket of countries with which Ireland is compared.

The department, which needs to make significant cost savings on the State’s drugs bill to meet rising demand and to fund expensive new treatments, believes Irish prices should be pitched at the lower end of the basket.

This could have serious knock-on effect for pharmaceutical multinationals by sparking price cuts in other countries in the basket, with far larger markets.The industry claims low prices could lead to supply problems as medicines in the Irish market are parallel-exported to countries where wholesalers can procure higher prices.

The industry has also argued that an across-the-board price cut as it has proposed is administratively easier for the HSE to implement compared to the complexity of enforcing drug-by-drug cuts.

Under legislative changes introduced in 2013, the HSE has powers to set the price of drugs when negotiations do not achieve adequate savings for the taxpayer. The European Commission, which says Ireland's drug prices are too high, has been critical of the failure to use these powers until now.

The last price deal with the industry ended in September and was extended by both sides to allow talks on a successor agreement.