Avert your eyes, if you can, from the ploughing and consider Hillary Clinton’s plan to cut drug costs in the United States.

The Democratic presidential candidate rocked shares in some pharma groups this week when she signalled a drive to confront drug “price gouging”. The catalyst was the decision of a start-up biotech outfit, Turing Pharmaceutical, to charge $750 per tablet for a newly acquired – but 62-year-old – drug to treat a dangerous parasitic infection. Previously, the tablets cost $13.50. This brazen act, decried by the wider drug industry, presented a political open goal to Clinton. It’s hardly a coincidence, however, that her Democratic rival Bernie Sanders has also been agitating to reduce drug costs.

The American debate has no little resonance in Ireland, where annual public expenditure on drugs is in the region of €2 billion. There is no doubt that the health budget will be constrained for years to come. Ahead of another round of talks with the pharma industry on supply terms, the Government is under pressure to achieve further savings on the drugs Bill and get more from the considerable sums it already spends. Note also the high price of new drugs, which open the prospect of hope for people suffering from serious conditions.

This is a familiar story. In 2009, even as Ireland endured the full force of crisis, per- capita expenditure on pharmaceuticals ranked among the very highest in the OECD. Only in the US, Canada and Greece was spending higher.

The crash left the State with no choice but to curtail drug spending. Recent research by the Irish Fiscal Advisory Council (IFAC) cites annual drug savings of around €400 million when new drugs are excluded. Yet the same paper notes higher than expected average drugs costs, mainly relating to new drugs. It went on to say that targeted net savings in relation to drugs costs might not have fully materialised.

IFAC is not alone. High drug costs were a constant source of complaint within the troika during the EU-IMF bailout and such concerns persist. In February the European Commission found Irish public spending on pharmaceuticals remained well above the EU average, an assessment which angered the drug industry because it called for lower spending on patented medicines.

Budgeted savings

“The commission has, to our knowledge, offered no basis for singling out expenditure on patented medicines in Ireland and has not stated what it believes is the actual level of this expenditure,” the Irish Pharmaceutical Healthcare Association, (IPHA) the drug industry body, responded.

A further commission study in July noted that €40 million budgeted savings on patented medicines will not materialise this year, no small sum. This was attributed to deadlock in a mi-term review of the State’s deal with the IPHA, which set supply terms for patented medicines between 2012 and October 2015. This agreement falls to be renewed imminently.

“Achieving price reductions in the on-patent group is key to generate overall savings, as on-patent medicines represent around 76 per cent of the total in price terms, though only 46 per cent in volume terms,” the July paper said.

The very next line of this paper appeared to reveal the State’s negotiating strategy in the looming talks: “The Government is seeking to review the basket of countries used for reference prices, use minimum prices instead of average prices, have more frequent price realignments, gain additional rebates and review the quality-of-life ratios.”

In the backdrop is the enactment of a long-awaited 2013 law which was cast to boost the substitution of cheaper generics for branded off-patent drugs. Although commission inspectors cited “good progress” under this legislation, IFAC’s research saw scope to further reduce costs through changed prescription practices.

Into this complex milieu comes a new industry group, the Healthcare Enterprise Alliance, which is campaigning to have the law changed to facilitate interchangeability between the new wave of biological drugs and “biosimilar” products. Such products are not exactly the same as the drugs they would replace but the manufacturers argue they are cheaper and can be just as effective.

Big money is in play in all of this. So too are the sectoral interests of an industry which is prominent in the Irish economy and provides employment, investment and tax revenue for the very State with which it negotiates. However, the imperative remains to cut the cost of drugs. US politics shows this is not a uniquely Irish thing.