The State is poised to renegotiate deals with key health service providers to cut its drugs bills. Martin Wall examines the issues
The next 12 months are expected to see the most concerted attempt ever by the Government to renegotiate agreements with key health service sectors in a bid to scale back on the growth in the State's bill for drugs and medicines.
This year, the cost of drugs in the general medical service schemes will reach around €1.1 billion.
Drugs provided for patients in public hospitals will push this bill up by a further €300-€400 million.
Drugs costs now account for around 10 per cent of total Government spending on healthcare and the Department of Health is to use forthcoming negotiations on new agreements with GPs, pharmacists and the pharmaceutical industry to press for the introduction of new value-for-money measures.
The Government accepts that new drugs coming on the market can be expensive.
However, from a pure economic viewpoint, it also realises that such products can frequently reduce the requirement for costly hospital treatment and thus save money.
Government sources said this week that what it wanted to do in the forthcoming negotiations was to try save money, particularly by encouraging the prescription of generic products instead of brand-name proprietary drugs that have gone off-patent.
The Government wants to use the money saved by a move towards increased generic prescribing to meet the higher bills for the more expensive new drugs coming on stream.
A final strategy on how this could be achieved has not yet been signed off in the Department of Health.
However, among the proposals under consideration is the introduction of "reference pricing".
This, in essence, would mean compulsory generic prescribing, where feasible, for patients who come under the medical card scheme.
Under such a plan, the State would only pay for a generic product where one was available.
For private patients seeking reimbursement under the Drugs Payment Scheme, the State would also only pay up to the cost of the generic drug. Anyone who sought a proprietary product would have to pay the difference themselves.
These measures would be along the lines of recommendations set out in the Brennan Report on expenditure in the health services which was published in 2003.
Under a proposed reference pricing system, doctors would still have the right to insist that their patients received a proprietary drug if deemed necessary.
However, Government sources said that doctors would have to be accountable for their actions and would have to provide rational reasons for their decisions.
Government sources said that they understood that the introduction of such a scheme would be controversial and would generate arguments about medical card patients receiving different types of drugs - which would undoubtedly be described by critics as "yellow pack products" - from their fee-paying counterparts with the same illness.
However, Government sources maintained that it would have to press home the message that the ingredients of generic drugs were identical to those of more expensive brand-name products.
Government sources maintained that the current rise in the drugs bill was unsustainable and that efforts would have to be made to encourage more generic prescribing.
The Government in its negotiations is expected to point out that in cases where drugs have gone off patent and have generic equivalents, doctors in Ireland continue to prescribe the proprietary products in 80 per cent of cases while in the UK the figure is 20 per cent.
It is understood that one alternative to reference pricing which is under consideration by the Government is the introduction of a mechanism whereby the amount paid by the State for proprietary drugs would be reduced considerable once the product came off patent.
Government sources said that in some European countries prices paid by the State in such circumstances drop by 30-40 per cent.
In its negotiations with the pharmaceutical industry, which are expected to get under way before the end of the year, the Government is also expected to press for reform in relation to the assessment of new drugs coming on the market.
Under the existing agreement with the pharmaceutical industry, all drugs which have a licence in Ireland are covered by the State reimbursement schemes.
In the forthcoming talks the Government is expected to seek to make a distinction between what is allowed and what is paid for.
In essence, this would involve provision being made in a successor agreement for the introduction of assessment of the pharmo-economic effects of certain new drugs coming to the market.
Basically, this would look at whether particular products actually acted on the medical condition concerned in the manner claimed by the manufacturer and whether this offered value for money to the taxpayer.
In Britain, the government has faced huge controversy over patients being denied potentially life-saving or life-prolonging drugs - particularly in the field of cancer - because they had been rejected or had yet to be examined by its assessment body, NICE.
Sources said that they could not envisage the Government wanting to re-invent the wheel and introducing a new bureaucracy to assess every drug coming on the market.
Sources also said that what the Government was more likely to look for was the right to seek an independent assessment of the pharmo-economic effects of drugs in certain cases rather than the introduction of a system that forced all products to undergo such an examination.
In the weeks ahead in its negotiations with GPs on a new contract, the Government will also consider the replacement or amendment of the current indicative drug prescribing scheme which aims to encourage cost-effective prescribing.
Under this scheme, which has been running for a decade, savings GPs generate on their annual budget for drugs and medicines can be used for investment in their practices. Around €100 million has been released for practice investment under this scheme since 1993.
However, while this scheme did lead to a reduction in the growth of the State drugs bill for a period, the rate of increase has gone up again in recent years.
The third leg of the Government's attempt to tackle rising drug costs will come in the re-negotiation of the contract of pharmacists which will take place next year.
Sources said the Government was expected to re-examine the current 50 per cent mark-up which pharmacists were allowed on products dispensed to patients.
Sources said the Government believed that this, in effect, represented a "perverse incentive" in that the higher the price of the drug dispensed, the larger the mark-up for the pharmacist was.