Pharma sector leveraged role in economy to get deal

ANALYSIS: New drugs and medicines coming on the market can prove hugely beneficial and even life-changing for patients. However, they can come at a very high price, a not-insignificant consideration at a time of shrinking health budgets.

On the other hand restricting access to medication of potentially great promise can be highly controversial politically. And in a country where 25,000 people work in the pharmaceutical sector and their exports are crucial, the industry’s views are important.

All of these factors came together earlier this year when the pharmaceutical industry expressed concern that the Health Service Executive (HSE) had begun to stop reimbursing (approving payment for) some drugs and medicines which had met the regulatory requirements and were coming on stream.

The industry considered this in breach of agreements in place with the Irish health authorities. It felt particularly aggrieved, as since 2006 it had implemented a number of cost-saving deals with the HSE and the Department of Health which had generated nearly €600 million in savings.

Additional savings

Several months earlier, the Government had indicated that it wanted to secure a further agreement and had pencilled in additional savings of over €120 million for this year. The industry believed the start of such talks had to be conditional on the existing supply agreements being implemented.

However the HSE maintained it had not been provided with a budget to pay for new drugs and medicines.

The issue came to prominence last spring when a number of patients went public to try to get a new drug for melanoma called Ipilimumab. The Government eventually agreed to reimburse it.

Minister for Health James Reilly in June reached an interim deal with the pharmaceutical industry which he said would lead to savings of €20 million in a full year as a result of reductions in the price of certain off-patent medication. As a condition of the agreement, the HSE was obliged to add to its reimbursement list “drugs which in the normal course of events would have been approved under its schemes”.

However, the Government had been lobbied by the highest levels of the industry. About 20 multinationals wrote to Taoiseach Enda Kenny and other Ministers in February and March, setting out concerns at the HSE’s stance.

Many of the letters were signed by senior executives at global level in the organisations although some contained the same themes and even the same words, indicating a degree of orchestration. Their concern was very clear.

In his letter to the Taoiseach, the chairman and chief executive of Abbott, Miles D White, said: “International price referencing results in pricing in Ireland having a knock-on effect on the pricing of medicines in 11 other European countries and up to an additional 37 countries worldwide.”

“Driving down the prices of medicines across such a large number of export markets for the Irish-based pharmaceutical industry could directly jeopardise jobs in Ireland as it will create substantial pressure to cut manufacturing costs.”

Swiss company Novartis told the Taoiseach that innovation was the key growth driver both for Ireland and the industry.

“Governmental measures that penalise innovation will therefore penalise the two of us. We have fewer incentives to invent and less money to invest. Ireland might damage its reputation as a country which welcomes investments of innovation-led business and move thus away from its aim to be the most attractive business location by 2016.”

The chairman of Amgen Kevin Sharer said that, as his company had decided to make a substantial investment in Ireland, he was disappointed there appeared to be “risk of a new policy sending an adverse signal to our company and the other firms currently employing 25,000 people and accounting for around 50 per cent of the country’s exports”.

October deal

In mid-October the Government and the organisation representing the manufacturers of branded pharmaceuticals came to an agreement. The deal was expected to generate savings of up to €400 million over three years.

The pharmaceutical companies won acceptance of the principle that new medicines would be approved under the HSE’s drug schemes once proven to be cost-effective.

The industry’s representative body said the deal represented “extremely good news for the State, patients and taxpayers, as the price of hundreds of medicines will fall significantly as a direct result of the agreement”.

“As well as offering substantial price reductions, the industry agreed a process to ensure that Irish patients will have timely access to new products over the period of the agreement and will not be disadvantaged by current fiscal difficulties.”