Lack of clarity over drug price cuts, says ESRI
Published 31/01/2013 | 05:00
THE extent to which the price of drugs will fall for patients is still open to question – despite government promises to introduce a radical cost-saving scheme, a leading think tank has warned.
The ESRI said it is not possible to say how much less patients will be paying for their drugs under the Government's proposals to introduce reference pricing, but ESRI researcher Paul Gorecki said the Supply of Medical Goods Bill was a "radical move in the right direction".
The aim is to introduce a system whereby drugs to treat a particular condition are grouped, and patients will only be reimbursed for the most cost-effective version.
However, the ESRI Quarterly Economic Commentary said the mechanism for how reference pricing will be worked out has still not been decided on.
Therefore, it is not possible to say whether prices will fall any more than they otherwise would under recently negotiated agreements with the pharmaceutical industry. In previous ESRI research, it was suggested that for high volume old drugs where there was generic competition, a tendering process should be used to set the reference price, with the winner supplying the market.
"An alternative approach to setting the reference price is to request firms to quote prices to the HSE and then select the average or the lowest to set the reference price. However, the disadvantage with this process is that drug firms have an incentive to quote prices to the HSE that are too high and then discount off this price to the pharmacist so as to obtain market share," it said.
The ESRI said the reference price could also be capped at a certain percentage of the originator's price immediately prior to the loss of patent protection.
The price cap could be based on the price decline experienced in jurisdictions with well functioning markets that are able to take advantage of generic competition. In Greece and Portugal, as part of their EU-IMF bailout packages, price caps of 40 and 50pc have been set. Under recent agreements with the industry in Ireland, price caps have been set at 50pc, which is likely to lead to lower-priced generics.
It pointed out that new drugs are subject to patent protection while old drugs no longer have this, allowing for generic alternatives to be made.
"The ex-factory price of a new drug in Ireland is the average price charged in a basket of nine other member states, including some higher and some lower priced countries, in which the drug is available.
"Since Ireland tends to be an earlier adopter and any given new drug is often only available in a limited number of higher priced member states, the initial price for a new drug in Ireland is usually high," it adds.
Under the three-year agreement between the Department of Health/HSE and the representative body for firms selling new drugs, which came into effect last November, new drugs continue to be priced as the average of prices across nine member states – suggesting little change in the ex-factory price of new drugs.