Last week, pharmacy chain Boots announced a new pricing model that it claims will save consumers 25 per cent on certain drugs. But who are the real winners in the new paradigm, asks CONOR POPE
LAST WEEK THE biggest pharmacy chain in the country, Boots, announced that it was dramatically overhauling its pricing structures. It promised the changes would bring about huge benefits to consumers.
From last Friday it abandoned the traditional 50 per cent mark-up that pharmacists add to the cost price of a drug on top of a €5 dispensing fee, in favour of a single €7 “professional services fee”.
It claimed that its 10 most expensive prescription drugs would fall in price by an average of 25 per cent and that the move would save people on medications for conditions such as asthma and heart disease up to €300 a year. Other pharmacy chains followed suit and the move sparked talk of a drug price war which would benefit consumers across the board.
The Competition Authority, the National Consumer Agency and the Minister for Health James Reilly practically fell over themselves in their haste to welcome the announcement, while the Irish Pharmacy Union said it was an indication of how competitive Ireland had now become.
It is about time. For nearly 10 years now, Pricewatch readers have been contacting us to complain about the price of prescription and over-the-counter drugs in Ireland, and it is not hard to see why. Everyday drugs routinely cost more than 75 per cent less in Spain and the US than they do here.
You can buy 500 low-dose aspirin – used as a blood thinner and prescribed as a heart medication – over the counter in the US for $17 (€12.50). In this country a month’s supply of the same drug – which is available only on prescription – costs about €10, while the two GP visits each year to get the prescription updated will cost another €120. All told, a year’s supply of the drug in the Republic will set a patient back by €240, compared with about €10 in New York.
There are even more remarkable price differences elsewhere. Omeprazole is a chemical used to relieve the symptoms of reflux. One of the most popular brands of it in the Republic is Losec, which costs about €45 for a month’s supply, or €540 annually. Add two GP visits and the price of this fairly basic treatment rises to €660. In Spain, where omeprazole sells under the brand name Pensa, a month’s supply costs €3.50, or a year’s supply €42.
One of the drugs which Boots claimed would fall significantly in price was Lipitor. A month’s supply of the drug – used to lower cholesterol – currently costs around €53.50, while the generic equivalent is closer to €50. Under Boots’ new pricing structure, the price of Lipitor will fall to €41.28, and the generic version to €39.36. In Portugal however the same amount of the generic drug costs €16.50; in Spain it can be bought for €9.30.
So, who is to blame for the huge price differentials? The manufacturers claim to be doing all they can to make sure consumers get a fair deal and blame the high prices on those who dispense and distribute the drugs. The pharmacists rubbish all suggestions that they are responsible for people paying over the odds for medicines: they blame the manufacturers and the Government for restrictive regulations. The Competition Authority can find no one to blame, while the Irish Medicines Board, which regulates the pharmaceutical sector, says it has nothing to do with pricing.
Another element of the changes in pricing which has been somewhat overlooked is the impact it will have on cheaper, widely used drugs. Boots Ireland pharmacy director Mary Rose Burke told The Irish Times last week that the changes would see “marginal increases at the lower end” of the prescription drug market. This is because the cost price of some older drugs is low. She added, however, that such drugs tended to be for occasional use and that the price shifts would be insignificant.
Insignificant? Really? Amoxicillin is one of the most frequently dispensed drugs for children with infections. It is by any measure cheap: a week’s supply will set you back a fiver. Under the new pricing structure in Boots, the drug will cost €8. Then there is low-dose aspirin – the price, including mark-up, is €2.24 to which pharmacies add their dispensing fee, taking the monthly cost to just over €6. Under the Boots system, it will cost closer to €9.
One pharmacist, who spoke to Pricewatch on condition of anonymity, said that after Boots had announced its new pricing model he went back over the last month’s worth of drugs he had dispensed and applied both his current pricing model and the Boots one.
“Using the current system, I made an average of €6.16 on each script I filled. If I implement the new model I will make €7 on each script. I am trying to work out how I can do this – make more money and still call it a price reduction,” he said.
Boots will do well out of this for a number of reasons. It will pick up a lot of new trade as people on long-term high-price drugs use the store where previously they may have used local pharmacies. It will also make money in another area. It, more than any other chemist in the State, operates on a retail model – the money it makes is not from the drugs but the other stuff it sells. By generating more footfall in the prescription drug market, it will make a lot more from its other stock.
That is not to say the news is not positive. For someone saving close to €300 a year on the cost of their long-term prescription medication, it is not to be sneezed at.
“I am absolutely amazed no one picked up on the fact that their fee has been increased by 50 per cent to €7 per item, thereby rendering many low-cost drugs dearer,” says Gort pharmacist Brendan Quinn. He says Boots has “pulled off an amazing coup”.
“And they have, cynically, not passed on the reductions in price recommended over 12 months ago by the Department of Health, where they recommended mark-ups be reduced to 20 per cent from 50 per cent – something I myself did almost immediately, but I don’t have a PR machine . . . I let consumers choose.”
What are needed, he argues, are realistic generic drug prices. “The companies will not budge, and wield the ‘jobs’ stick at every negotiation. How is it all generics are priced the same, or as good as, as the lead products? I’ve started marking those down now too, and it’s time the companies were forced to do the same.”
