independent

Saturday 19 April 2014

Terence Cosgrave: Deal on drug prices is no magic pill for the patient

The arrangement on 'new' drugs means the pharmaceutical industry is still in the money.

DEPENDING on how you look at it, a few weeks ago the Department of Health reached a deal with the pharmaceutical industry which either reduced the cost of drugs or reduced (slightly) the subsidy it had been paying to the industry for many years.

Whether it will be enough to satisfy the troika in terms of cutting costs in the health sector is another matter.

The deal essentially allows for a measure of generic substitution, but the rub is that it also allows 'greater access' to new drugs coming on the market. That concession should make this deal palatable for the pharma industry.

But if one examines how drug policy in this country has worked in the past, one would have to conclude that rather than trying to get drug prices down, the Government was doing its best to facilitate high drug prices – particularly branded drug prices.

Now to suggest such a proposition is to invite ridicule – a government wouldn't deliberately make life harder and more expensive for sick people, would it?

Well, perhaps, but it wouldn't view it like that. But it would, of course, have other priorities than just the cost of drugs to patients.

You have to remember one fact that is relevant in the issue of high Irish drug prices – the pharmaceutical industry in Ireland is proportionately massive. According to the representative body for the industry, 120 overseas companies have operations in Ireland.

Depending on how you measure exports, pharmaceutical exports can account for as much as 50 per cent of all Irish exports and the industry employs 25,000 people. Having that relative size in an economy gives you a powerful voice.

It takes a lot of research to develop a new drug – some estimates put development costs for just one drug at about €1bn. However, when a company develops a successful drug, it stands to make billions from it. But when the patent on the drug runs out, the cost of actually producing the drug – without having to pay for all that research – is relatively small, so the cost drops dramatically.

But if the price of the generic drug is almost as much as the branded product, then the branded product can continue to be hugely profitable, as the substitution makes little difference, and therefore, from the point of view of a pharmaceutical company, the high cost of generics is a huge profit-booster because it removes the cheap competitor which would drive down prices.

Take one particular drug for example. Let us call it drug X, marketed as brand Y. It costs the NHS €3 for a batch of the generic drug equivalent but in Ireland the HSE pays €37 for the same batch. The reason for this is that the HSE has agreed to pay up to 98 per cent of the price of the branded product to generic drug suppliers.

Generic drug suppliers say this enormous divergence in price is because Ireland is a smaller market and 'packaging' costs more.

So how does the branded product keep its sales figures if there is a cheaper alternative available – even if it is only marginally cheaper?

The answer is to provide incentives right through the system to ensure that the branded product is still sold and the cheaper alternative isn't used that much.

People don't choose their own drugs in most cases, doctors do. A couple of years back, a scheme was introduced whereby doctors would be incentivised to prescribe generics instead of branded products – with half the money they saved being returned to them. However, this scheme was abandoned, and again, one would have to ask why that happened. It's true that it was a generous scheme from the point of view of doctors but it did save some money, and had the potential to save a lot more. Now, when a doctor prescribes a generic, he or she only does it out of some altruistic wish to save the State some money.

On the other hand, doctors are subject to pressure from the other side to not prescribe

generics and prescribe branded products instead.

There are many ways in which a drug company can influence a doctor to prescribe a branded drug. Almost every medical education event in Ireland is sponsored by a drug company. There is a whole industry of medical newspapers and magazines which are sent to doctors and which survive on advertising from branded drug products. And almost every conference, junket and medical gathering will have some drug company involvement and/or sponsorship thereby necessitating some spiel on the branded drug as opposed to alternatives. Aside from that, there is an army of sales representatives visiting doctors to push their product on a daily basis. Pharmacists will tell you that they will see a change in prescribing patterns when there has been a local sweep by drug company representatives.

A cardiologist, for example, might mention a drug in a lecture (sponsored by a drug company) and suddenly GPs will be prescribing it and it becomes a part of the pool of drugs – even if there was an already existing drug doing the same job.

At the next stage of the process, there is equally little incentive to provide the cheaper alternative. A pharmacist cannot provide a cheaper alternative to the branded product prescribed unless the doctor prescribing specifically states that they can.

That is set to change, but if the generic products are almost the same price as the branded products, the savings will be relatively modest.

The new legislation will allow pharmacists to save the State money, but not a huge amount, given the €2.2bn annual drugs bill. And why that has happened is a matter we can all speculate on.

So why did the pharma companies agree to this new deal? The answer is the deal on new drugs and their entry into the Irish market. Various studies, including a breakthrough one from British Columbia, showed that up to 60 per cent of new drugs are not actually 'new' in the sense of providing a new cure or treatment, but are, in fact, 'me too' drugs – drugs that do the same job as others already available but with perhaps slightly different side-effects.

These drugs can now be introduced in Ireland if they are 'cost-effective' but the definition of cost-effective isn't that they will be cheaper or better than existing drugs, only that they are cost-effective against placebo, or, if you like, better than nothing.

Dr Garrett Igoe, a Cavan GP who has studied the interaction between the drug industry and the medical profession, made the point that a more rigorous test was needed – 'Comparative Evaluation' – which would require the drug companies to prove that their new drug was at least as good or as effective as existing drugs before the State would start paying for it, and if this standard was applied, 50 per cent of new drugs would fail such a test.

Getting these drugs into the system will be a huge boon to drug companies, and will allow them to make back some of the money lost by the new legislation.

The latest deal may look good for the consumer, but the reality may be somewhat different. It will undoubtedly be a big winner for the pharmaceutical industry. But if there is no obvious loser, well then, it's likely to be you.

Sunday Independent

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