Mr. John Hennessy:

In the interests of time and with the Chairman's permission, I will skip through some of the text in my opening statement, as it is on the lengthy side, but I will cover the key points. I thank the Chairman and members of the committee for the invitation to attend today to discuss the cost of pharmaceuticals.

We welcome the opportunity to outline the progress that has been made with regard to the price of medicines in Ireland during recent years. I am joined by my colleagues Mr. Shaun Flanagan, chief pharmacist, Mr. Patrick Burke, assistant national director, and Professor Michael Barry, chief pharmacologist at St. James's Hospital and head of the HSE medicines management programme.

The HSE provides reimbursement support for medicines and appliances across three main community drugs schemes – the general medical services scheme, or the medical card scheme, the long-term illness scheme, and the drugs payment scheme. Additionally, arrangements are in place for the supply of hospital-initiated high-tech medicines through the community pharmacy contractor network of approximately 1,800 pharmacies covering the country and a population of approximately 4.6 million people. It should be noted that the HSE does not set the prices that pharmacists charge to patients on private prescriptions, but only becomes involved when a claim is made under one or other of the aforementioned community drug schemes. For example, it does not cover patients who pay less than €144 per month and are not covered under either the GMS scheme or the long-term illness scheme.

In terms of current expenditure, the HSE reimbursed the following amounts in 2014 on medicines and appliances across those three main schemes and in the high-tech medicines area. The expenditure covered the ex-factory price of €1.3 billion, wholesale mark-up costs of €107 million, pharmacy fees of €379 million and VAT of €115 million, giving an overall total expenditure of €1.92 billion. Those figures cover reimbursement claims for medicines and appliances dispensed in 2014, involving approximately 70 million separate prescription items. Aggregate spending on the GMS scheme, the drugs payment scheme and long-term illness scheme has decreased since 2009 despite the growth in numbers, changes in eligibility during that period and the introduction of more expensive new medicines such as new oral anticoagulants. This is due to a sustained and ongoing programme of price reductions, on which I hope to elaborate during the course of my presentation. The exception in that respect is expenditure on high-tech medicines, which has increased from €315 million in 2009 to €485 million in 2014. This is as a consequence of the introduction of some highly expensive new drugs and medicines and increased use of some existing products.

With regard to price reductions, expenditure on reimbursed medicines has remained stable between 2009 and 2014 despite the introduction of that range of new medicines. The average price of an item dispensed on the GMS scheme has decreased to below the price paid in 2002, and the average long-term illness scheme price is less than the price paid in 2000.

Detailed information on that is outlined in appendix 3 to the information pack that has been made available to members. Details of the list of actions taken to achieve those reductions are also available. The price reductions have resulted in savings and cost avoidance for the State, amounting to €1.5 billion over the period in question. A significant proportion of the money saved has been invested in new medicines for Irish patients.

The focus on savings has been concentrated in three key areas, the first of which is new patented medicines. The maximum price a company can seek when it applies for reimbursement for a new patented medicine is the average of the approved prices across nine EU member states, as detailed in the 2012 Irish Pharmaceutical Healthcare Association agreement. Those member states are listed in the document. The 2012 agreement also required companies to submit an evidence dossier containing clinical and economic data in support of reimbursement at the price applied for. This was subsequently underpinned by the Health (Pricing and Supply of Medical Goods) Act 2013, which my colleague Mr. Goodman mentioned. The 2013 Act requires the HSE to consider detailed criteria, as outlined in appendix 5 of the information document, when making decisions. The net effect is that companies must provide robust evidence to justify the price of every new patented medicine. Company dossiers are evaluated by technical staff at the National Centre for Pharmacoeconomics, which is based on the campus of St. James’s Hospital and headed by Professor Barry, who is in attendance this morning. Summaries of all the evaluations carried out are publicly available on the website.

Under the 2012 agreement, a medicine that satisfies a cost-effectiveness threshold of €45,000 per quality-adjusted life year progresses to reimbursement. In exceptional cases, medicines are considered for reimbursement above the threshold, subject to meaningful negotiations having been concluded. The HSE has been increasingly faced with what individual companies consider are exceptional medicines and increasing expectations that the State will be in a position to reimburse medicines which in no way approach any conventional understanding of cost-effectiveness. In such cases, the HSE, like pretty much every other health care system worldwide, is faced with a difficult decision on whether to fund a medicine which the company dossier has demonstrated is not an economic use of resources. The HSE would like to be in a position to reimburse all medicines, but that is not possible given the competing demands for resources. Members will remember that the director general of the HSE, Mr. Tony O'Brien, recently appealed to Alexion Pharmaceuticals to reconsider the price it charges for eculizumab, or Soliris. The HSE's national drugs committee considers all the evidence provided and issues its advice on the basis of pricing offers made by companies and in light of the degree of unmet need, clinical evidence, cost-effectiveness, budget impact and any other relevant factors regarding whether the medicine should be reimbursed.

The second area of focus for control is the off-patent medicines sector, which has also been the subject of a series of downward price revisions under national agreements. When they are launched, generic medicines are now required to be 60% lower in price than the pre-patent expiry price of the branded product. The first reference prices were set on 1 November 2013. As of January of this year, the HSE has set reference prices for 110 interchangeable groups across 37 medicine combinations. It is now reimbursing approximately 1.5 million items per month in relation to reference-priced medicines. The aim in setting reference prices is to achieve the lowest possible price commensurate with continuity of supply. The industry has consistently claimed the HSE is setting its prices too low. On the other hand, some commentators would contend that our prices are still too high. We believe the decisions taken to date are proportionate and reasonable, and are consistent with continuity of supply and the policy of reducing Irish prices to acceptable levels. This project is ongoing.

The third main area of control is the HSE medicines management programme, which is headed by Professor Barry and was established in January 2013 with the aim of enhancing safe, effective and cost-effective prescribing of medicines in the Irish health care setting. The details of the programme's wide range of ongoing activities are outlined in appendix 9 of the information pack. One of the main ways the programme communicates with prescribers is through a series of meetings with general practitioners. These meetings are held across the country in collaboration with the Irish College of General Practitioners, which invites the programme to make presentations on prescribing issues. This has proven to be an extremely valuable way of getting key messages across to prescribers. The programme has met more than 1,100 general practitioners over the past 18 months.

I would like to comment on the impact of these measures. The HSE and the State have benefited from price reductions on new medicines and are regularly paying lower prices than companies would have applied for or indeed would wish. Our most recent audit revealed that Irish prices are now at the average of the nine-country basket and are close to the average price of a wider group of EU member states. However, Irish prices are still above the average calculated across the full 28 EU member states when the more recent entrants from Eastern Europe are included. In the off-patent category, I should point out that when the 2013 Act was introduced, the HSE was reimbursing in excess of €22 million per month on medicines reference-priced in 2014, but by December 2014 this amount had been reduced to €10.3 million per month. Savings of €47.4 million were achieved in 2014 from reference pricing alone. The full-year impact of that will amount to €60 million. This is of course ongoing. The cost of reference-priced drugs now is between 70% and 80% lower than the price paid when medicines were on patent. As of the final quarter of last year, generics now account for 68% of reimbursed claims.

The HSE is continuing with reference pricing. We expect to deliver in excess of €25 million in additional reference-priced savings in 2015. The HSE has been successful in providing access to many new medicines while reducing the prices of new and existing products. The figures speak for themselves. Savings of €1.5 billion have been achieved to date in this complex area. Members will understand that the various stakeholders involved will try to protect and defend what they have and resist changes that may reduce their incomes. We remain committed to ensuring pricing in Ireland is reasonable and fair. We want to provide access to as many new medicines as possible from within the resources available to us. At all times, our concern is to ensure continuity of supply and avoid causing additional co-payments for patients when making pricing decisions. My colleagues and I will endeavour to answer any questions that members may have.