Mr. Martin Gallagher:

I thank the Chairman and members of the committee for the invitation to appear before the committee. As stated my name is Martin Gallagher, chairman of the Association of Pharmaceutical Manufacturers in Ireland, APMI. I am accompanied by my colleagues, Mr. Michael Cullen vice chairman, APMI, and Mr. Jim Hanlon, chief executive officer, Clonmel Healthcare Limited.

The Association of Pharmaceutical Manufactures in Ireland is the trade representative body for the generic industry in Ireland. Its members include suppliers of prescription and non-prescription medicines both to the domestic and international markets. The primary purpose of the APMI is to promote and support the common interests of the generic industry in Ireland and to be to the forefront of offering quality affordable medicines to the Irish population.

On behalf of its membership, the APMI is charged with forming appropriate relationships with the Department of Health, the corporate pharmaceutical unit of the HSE, CPU, and the HPRA to ensure the introduction and continuous supply of affordable medicines. The APMI is the recognised negotiating body for all agreements regarding supply and pricing of generic medicines in Ireland. Its regulatory representation encompasses the expertise and the regulatory departments of the membership. It is involved with the appropriate bodies such as the HPRA, and has specific responsibility for ensuring that all members comply with general statutory instruments including the code of practice on advertising of medicinal products.

The APMI has a long history of co-operation with the Department of Health and relevant bodies in respect of pricing. In more recent years due to the difficulties encountered regarding the supply and pricing of affordable medicines, the APMI entered into a three-year agreement for the supply and pricing of generic medicines from November 2012. This three-year agreement paved the way for the introduction of interchangeability and reference pricing of pharmaceutical products in the off-patent space.

Within 16 months of our current agreement the APMI was approached and an addendum was agreed to offer additional price reductions prior to the formal introduction of reference pricing. Included in this addendum it was agreed that there would not be any further revisions before the ending of the original agreement in 2015. The reference price mechanism has been successfully implemented and substantial additional price reductions and State savings have occurred. It is important to recognise that the APMI has delivered on the cost savings as per the agreement. It is estimated that these savings amounted to €120 million in 2013 and about €140 million to €150 million in 2014 giving a total saving across the two years of €268 million. Generic companies employ more than 3,000 people in Ireland.

I have circulated a chart from which it can be clearly demonstrated that generic penetration has increased from 18.5% in 2010 to 42.4% by the end of 2014. Information we have received from the IMS in the past 24 hours states that penetration is now at 48%. Between 2013 and 2014 the volume use of generics grew by 23% while the value has only increased by 0.2%. In actual terms if we were to look at the products that are in the off-patent space, as opposed to the total, market penetration of generics is significantly higher. This percentage level of penetration is at least equal to similar molecules in other EU jurisdictions. I cite here atorvastatin, esomeprazole, rosuvastatin, omeprazole, lansoprazole and pantoprazole all of which fall between 80% and 90% generic penetration at this time.

There are future issues facing the current reference price and interchangeability model. In relative terms Ireland is a very small country with a population of only 4.6 million. As a direct result reference pricing does not work for low volume off-patent molecules, and to generic companies it is uneconomic and a total disincentive to the launch of lower value molecules. Excessive lowering of reference prices for the size of the market has and will lead further to generic houses exiting particular molecules thus causing shortages of supply and will lead to reduced or no competition in those particular molecules, which will give rise to the possibility of price increases in the long term.

Clearly there are major costs saving opportunities in addition to the molecule savings to date, with generic high-tech products now available and the launch of a number of biosimilar products against higher cost originators. There are currently no systems, mechanisms or incentives for physicians to prescribe alternatives to the high cost originator, or incentives for pharmacists to initiate change. The implementation of changes to the reimbursement system, new incentives as well as mechanisms and guidelines, would need to be introduced to help deliver further significant savings to the health system.

A biosimilar is defined as a biological product that is "highly similar" to a licensed biological product, without regard to minor differences in clinically inactive components. There must also be no clinically significant difference in terms of safety, purity and potency between the "biosimilar" and the original, already approved biological product. The point being made here is that biological products throughout Europe are not seen as generics and, therefore, they will require a different type of legislation for interchangeability. Increased prescribing of biosimilars would result in more patients being treated with the same budget and would allow for the introduction and access to new more expensive medicines, in addition to reducing health care costs.

Arrangements are in place for the supply and dispensing of high-tech medicines through community pharmacies. Such medicines are generally only prescribed or initiated in hospital and would include items such as anti-rejection drugs for transplant patients or medicines used in conjunction with chemotherapy or growth hormones. The medicines are purchased by the Health Service Executive and supplied through community pharmacies for which pharmacists are paid a patient care fee; the cost of the medicines and patient care fees are paid by the PCRS.

As there are no incentives or guidelines for the retail pharmacist to substitute a cheaper generic molecule for the originator, the State continues to pay a higher reimbursement price for such products despite the significant savings that can be made. Like biosmilars, if systems, incentives and guidelines were put in place for the inclusion of such generics on the high-tech scheme, it would result in more patients being treated with the same budget and would allow for the introduction and access to new more expensive medicines.

The key messages we wish to deliver to the committee are as follows. The membership of the APMI wants to see more transparency in the setting of reference prices; we must agree a new entry level, currently the entry level is 60% of the original price which is far too low for new entities, a less cumbersome method of modulating prices and the introduction of concessionary pricing; the membership wants a viable generic market with some degree of pricing flexibility; and legislation to be enacted so that biosimilar and high-tech molecules can be used to further reduce the cost of pharmaceutical products in Ireland.

The APMI and generic manufacturers of Ireland have saved the State significant millions of euro in the past two years, and are committed to delivering similar significant additional savings in the years ahead. The provision of mechanisms that incentivise the introduction of biosimilars and high-tech scheme products would offer significant savings to the State and give more patients in the State access to higher cost treatments.

The current reference price model has been effective in delivering savings to date on high volume small molecule products and the APMI has worked with the State bodies to deliver these savings.

The threshold that makes this viable has already been crossed on a range of these molecules and medicines which has made them non-viable to supply without the introduction of concessionary pricing. Further cuts would have a detrimental effect to the supply of medicines in Ireland.

As a trade representative body, we are keen to work with all parties to help assure the delivery of savings to the State, while assuring continuity of supply and increased access to treatments for Irish patients.