James Reilly (Dublin North, Fine Gael) | Oireachtas source

Acknowledging the significant pressures facing the health sector, the Government approved an increase of €150 million to the expenditure ceiling for 2013 which was extremely welcome but does not take away from the fact that further significant cost extraction is required with €781 million in savings to be achieved in 2013. The primary aim in targeting savings is to cut the cost of services and not the services themselves. This will be achieved largely through efficiencies and reconfiguration under the existing Croke Park agreement, the new Haddington Road agreement, new charging arrangements for private patients in public hospitals and curtailing the growing cost of pharmaceuticals. The required savings have been incorporated in the HSE service plan which I approved on 9 January and are recognised in these Revised Estimates before the committee today.

Vote 38, which relates to the Department itself, provides for gross expenditure of €244 million. This comprises €16 million capital and €228 million for current expenditure. While this is a slight increase on the outturn position for 2012, it represents a 25% reduction on the 2012 budget. All health agencies funded by my Department were required to achieve further efficiency savings this year, with the Department's administrative budget being reduced in line with the moratorium on recruitment and the provision for legal costs and statutory inquiries also reduced. The provision for the National Treatment Purchase Fund was also significantly reduced pending consideration of its future role in the context of the structural reforms set out in Future Health. Part of the fund was surrendered to the Exchequer as part of the overall cash reductions required and part was transferred to the HSE.

In addition, a sum of €30 million has been provided under the drugs initiative. The majority of this expenditure is allocated to local and regional drugs task forces. Last December, a number of measures were set out following a review of drugs task forces with the aim of better equipping the drugs task forces to respond to the current pattern of substance misuse and provide for the extension of their remit to include alcohol addiction. As measures to address the abuse of alcohol remain under consideration by the Government, the final report on the review has not yet been agreed. I do, however, anticipate that the final report will include further measures to improve management, oversight and control of funding allocated by the drugs task forces.

Vote 39 is the Health Service Executive Vote. The gross provision for the HSE is €13.774 billion comprising an Exchequer contribution of €12.312 billion plus appropriations-in-aid of €1.461 billion. As in recent years, in setting the Estimate for the HSE, tough decisions were taken in the context of the need to take corrective action in respect of public spending. The health service must, of necessity, contribute to the expenditure reductions required in 2012 but the Government's objective has always been to ensure that these reductions are achieved in a way that secures the best possible outcomes for those in receipt of services, with a particular focus on protecting services for the most vulnerable. To protect services, we need to reduce costs and improve productivity.

As with last year, the significant cost of drugs and medicines has been targeted for comprehensive savings measures. In recent years, a number of changes to the pricing and reimbursement system have been successfully introduced, primarily through pricing and supply agreements with the pharmaceutical industry. However, further efforts are required to control drug expenditure. Last year, a new pricing agreement was concluded with both the Irish Pharmaceutical Healthcare Association, IPHA, which represents the research-based pharmaceutical sector, and the Association of Pharmaceutical Manufacturers in Ireland, APMI, which represents the generic industry. The IPHA agreement, with a value of in excess of €400 million over the next three years, will deliver a number of important benefits, including significant reductions in the cost of drugs both for patients and for the State, timely access for patients to new cutting-edge drugs for certain conditions and reducing the cost base of the health system into the future. The APMI agreement provides that from 1 November 2012, the HSE will only reimburse generic products which have been priced at 50% or less of the initial price of an originator medicine. This deal represents a significant structural change in generic drug pricing and should lead to an increase in the generic prescribing rate. The reason I say that is because at the moment, many generics are nearly the same price as the brand leader when it comes off patent and, therefore, there is no real incentive for GPs to engage in that. It is estimated that the combined gross savings from the IPHA and APMI deals will be in excess of €120 million in 2013.