Irish Economy
Ireland spends 50% above the EU average per capita on drugs
By Finfacts Team
Jun 27, 2013 - 4:42 AM

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Click here to enlarge. The use of GDP for Ireland in the right-hand chart, understates the real ratio.

The ESRI (Economic and Social Research Institute) today published a report on the prices of drugs/ pharmaceuticals. Last year, the Organisation for Economic Cooperation and Development (OECD) reported that in 2010, at €528, Ireland spent more on pharmaceuticals than any other European country on a per capita basis. This is 50% above the average across EU member states of €349.

Other countries with relatively high pharmaceutical expenditure include Germany (€492), Belgium (€479) and France (€468). At the other end of the scale, Romania spent only €164 per capita. Denmark, Estonia, Latvia and Poland are also among the countries that have relatively low pharmaceutical spending per capita, at less than 70% of the EU average.

Pharmaceutical expenditure accounted for almost a fifth (19%) of all health expenditure on average in EU member states and the total pharmaceutical bill across the European Union reached more than €190bn in 2010.

Today's ESRI report says the cost of in-patent and generic drugs in Ireland remains high despite some efforts by the Government to tackle the problem.

The report was commissioned by the Department of Health and the HSE, following a request from the bailout Troika.

Ireland's  prices are the highest in Europe for 9 out of 13 commonly used generic medicines and for in-patent drugs, Ireland is among the three most expensive European countries surveyed for 10 leading products.

The researchers compared factory gate prices and in 2008, the State's drugs bill of €1.6bn had an estimated factory gate value of €1bn.

Pharmacy margins have been cut since but they are likelier to be higher than in other European countries.

The use of generic drugs in Ireland have increased but because of payments/ inducements to generic manufacturers, they tend to be similar to that of the original branded drugs.

Not only is the State being gouged but individuals without a medical card are also caught.

In a decision earlier this month that is a setback for the pharmaceutical industry, the US Supreme Court ruled that antitrust regulators should be able to challenge the arrangements that allow drug makers to delay the sale of a generic drug. In deals known as “reverse payments” or “pay for delay,” brand-name drug makers facing a patent challenge from generic competitors pay them to temporarily stay out of the market. Last year, there were 40 patent-dispute settlements between brand-name and generic drug makers involving a payment to the generic firm and restricted sale of a generic medicine, according to the US Federal Trade Commission (FTC.) The agreements related to 31 brand name drugs with yearly US sales of more than $8.3bn, the agency said.

The ESRI report, Ireland: Pharmaceutical Prices, Prescribing Practices and Usage of Generics in a Comparative Context, [pdf] is authored by Aoife Brick, Paul K. Gorecki and Anne Nolan (ESRI).

The report assesses the level of pharmaceutical prices, the usage of generics and the prescribing practices of medical practitioners in Ireland in comparison with other EU member states and OECD countries.

It is based on the latest HSE data for Ireland and comparable data from other countries.

The key findings of the research are:

Pharmaceutical Prices
  • Relative to other EU Member States:
    • originator in-patent pharmaceutical prices are higher in Ireland;
    • originator off-patent pharmaceutical prices are lower in Ireland; and
    • generic pharmaceutical prices are higher in Ireland.
  • Comparisons were based on March 2013 prices of leading pharmaceuticals.

Generic Usage

  • The market share of generics for the leading pharmaceuticals in the GMS Scheme doubled between 2010 and 2012, to reach 50 per cent.
  • Increased generic penetration has not led, up until now, to substantial savings for the State or the cash-paying patient.
  • This reflects the fact that, in contrast to much of the EU, generic prices tend to be similar to those of the brand name manufacturer.

Prescribing Practices

  • Where prescribers in Ireland have a choice between different pharmaceuticals within the same therapeutic sub-group – statins, ACE inhibitors, and proton pump inhibitors, they tend to select the most expensive pharmaceutical product.
  • In contrast, prescribers In the UK tend to prescribe the least expensive pharmaceutical product within each of the three therapeutic sub-groups.
  • These three therapeutic sub groups accounted for nearly one fifth of spending by the State under the GMS Scheme in 2012.

Restructuring the Price Setting Mechanism

  • The Health (Pricing and Medical Goods) Act 2013, which was signed into law on 28 May 2013, holds out the possibility of radically changing the way in which pharmaceutical prices are set in Ireland.
  • Pharmacists will be able to select a lower-priced pharmaceutical product than that prescribed for the patient by a medical practitioner for interchangeable pharmaceutical products.
  • Lack of clarity and precision as to how prices will be set under the Health (Pricing and Medical Goods) Act 2013 means that it is not possible to predict with any certainty that originator and generic pharmaceutical prices in Ireland will fall vis-à-vis other countries.
  • The Act builds on a series of reforms that the State has introduced since the mid-2000s to reduce pharmaceutical prices and expenditure.

Patient Access Agreements

  • The research also highlights the increasing use of 'patient access agreements' (in Ireland and in other countries) as an alternative mechanism for setting pharmaceutical prices.
  • Under 'patient access agreements', prices are negotiated between the State and manufactures but kept confidential.
  • The increasing use of this mechanism should prompt a wider discussion about:
    • transparency; and
    • how the benefits of new pharmaceutical products should be evaluated.

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