Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Cuirim fáilte roimh an Aire Stáit. The Bill is a welcome development, although it is long overdue. Generic substitution and reference pricing have been talked about for a long time but no action was taken by previous Governments. This is something we in Sinn Féin have advocated over many years. In welcoming the Bill, I also welcome the agreement between the Department of Health, the Health Service Executive, HSE, and the Irish Pharmaceutical Healthcare Association announced on Monday by the Minister for Health in so far as it goes.

Exactly how far it goes we are not sure because we do not have the detail. The deal is projected to save in excess of €400 million over the next three years, beginning with €16 million to the end of this year and €116 million next year. I ask the Minister of State for a breakdown of how these figures have been arrived at. More detail on the agreement should be made available. The Minister predicted far greater savings this year. What has happened? Has the pharmaceutical industry successfully used its muscle yet again? Why is the projected return for the rest of this year as low as €16 million?

The Minister will not thank me for reminding him that this was one of the issues raised by his former Minister of State, Deputy Shortall, who expressed frustration at the lack of progress on the reduction of medicine costs. I hope Deputy Shortall speaks in this debate and sets out her experience and concerns at some length and with the freedom of one who is no longer in office in this coalition. What she says may shed some light on how the agreement was handled and progressed.

The Bill is an important step on the road to reducing the costs of medicines. The HSE spent an estimated €1.9 billion in 2010, the last full year for which we have figures, on medicines and non-drug items supplied to patients under the GMS and community drug scheme. This included approximately €384 million paid to community pharmacy contractors in respect of dispensing fees and retail mark-ups. The expenditure more than tripled between the years 2000 and 2010, which is a worrying statistic.

In his remarks on the pharmacy agreement yesterday, the new Minister of State with responsibility for primary care, Deputy Alex White, cited a current figure of more than €2 billion per year. It is a huge challenge to reduce that cost. I wish the new Minister of State well in that task and in his other responsibilities. For years, Sinn Féin and others have been calling for greater use of generic drugs and for control of profiteering by pharmaceutical manufacturers and distributors. Successive Ministers with responsibility for health from 1997 failed to act. I welcome that some steps are being taken.

A survey in The Sunday Business Post last August showed the HSE and patients here are paying up to 12 times more than the National Health Service for the same generic drugs. I did not need The Sunday Business Post to tell me because I live only four miles from the Border. Patients and taxpayers are quite simply being ripped off by the pharmaceutical industry. It has been facilitated by successive Governments' relationship with the industry. For the industry to claim, as it did, that the massive price differential is accounted for by specific packaging required by this State is beyond belief and an insult to people's intelligence. It is quite incredible and in no way explains the colossal North-South differential in the price of patent or generic drugs or between these islands and across member states of the EU. Anyone who took a holiday overseas in better times is able to attest to this if they needed to get prescription drugs in pharmacies in various European settings.

I have repeatedly raised with the Minister for Health, Deputy James Reilly, the need for action to require greater use of generic drugs and to address drug prices overall. The survey showed the situation was even worse than suspected and that it was long past time for the profiteering of the pharmaceutical industry to be confronted once and for all. I hope we are of one mind on that point. I would much rather say we are of one intent in terms of the urgency required.

The Bill focuses on generic substitution and reference pricing. It is a necessary measure, if just one of a range of measures that need to be undertaken. It is a complex Bill and needs to be processed carefully to ensure there are no unintended consequences. The prime consideration at all times must be the health of the people, the rights of citizens as health service users and the provision of the best possible health services.

One of the concerns raised about the Bill is the issue of continuity of supply. It has been raised with me, as an Opposition spokesperson on health, and I am sure other Members have been engaged on the matter. The pharmacy companies have a role, to which I will return, but the Irish Pharmacy Union, IPU, has raised a concern about section 24(2), which provides for the HSE to review the reference price at least once a year but not more than once every three months. The IPU is worried the HSE will err on the side of more frequent reviews - once every three months -and this could lead to problems regarding stock-holding for wholesalers and pharmacists, in turn affecting continuity of supply of medicines to patients. They have asked for the three month period to be replaced by six months. I would like to hear the Minister's view. It can be addressed on Committee Stage.

There are concerns also about the need for the HSE and the Irish Medicines Board to keep pharmacists fully informed and in due time about the addition, removal, retention or refusal of an item on the reimbursement list, about changes to the list of interchangeable medicinal products, or about changes to a reference price. I hope the Minister examines and responds constructively to the detail of the IPU submission with regard to these matters. I know the difficulties recent decisions have presented to pharmacists in a variety of settings throughout the country and in my constituency.

Important points have been raised with regard to ensuring the welfare of the patient is written into relevant sections of the Bill, as well as the taking into consideration of the impact of reference pricing on the continuity of supply of medicines. How far have the Department and the HSE explored the possibility that the reliance in the Bill on competition to reduce prices could have unintended consequences? I alluded to this point earlier. These points are important if the Bill is to be adjudged fit for purpose.

Could it worsen the situation if the presence or absence of necessary medicines on the Irish market is unduly dictated by the profit motive of manufacturers or wholesalers? That is an important question.

Some parts of the Bill are written in impenetrable legalese and require clarification. Could sections 5(12), 5(13) and 19(6) be translated? Section 13 refers to regulations to be made by the Minister. Could the Minister clarify the nature of the regulations referred to? I hope the Minister will address some of these matters in his summing up, but we will address them in detail on Committee Stage when we have a complete sense of what the Bill intends to do.

Other measures to address the cost of medicines in our health care system need to be considered. Sinn Féin would go much further than the Bill and urge consideration of the establishment of a State wholesale distributor of drugs. The cost savings of such an undertaking regarding the Exchequer outlay on medicines and medical products could be very significant. After all, public health and not private profit must be the primary consideration in the supply of medicines.

The expansion of the role of pharmacists to include medicine use review, to help ensure that patients get optimum benefit from medication and that waste is reduced, should also be considered. Significant waste is caused by over-prescription of medication, from blister pack to blister pack. Tackling this calls for a holistic response by everyone who has a role to play. Can that be accommodated in the Bill? The Minister for Health should initiate the carrying out of a comprehensive national audit of drug prescriptions, in hospitals and in the community. We know that over-prescription is a major problem. We do not have an overview of how prescribed medicines are taken. In many cases they are not taken and go to waste. GPs and consultants have a major responsibility in that regard, yet the Bill deals only with pharmacists. Can this matter be dealt with in the Bill or does it require further legislation? If it does, we must do that.

In Monday's announcement of the agreement with the Irish Pharmaceutical Healthcare Association, IPHA, it was stated that a national task force on prescribing and dispensing has been established to deal with the prescribing and dispensing of medicines. I welcome that. We are told it will address this issue from the perspective of quality and patient safety primarily, but that it can be anticipated that the work of the task force will also deliver significant cost savings through more cost-conscious prescribing. We are told also that the work of the task force will be wide ranging and will include providing advice, guidance and support to prescribers and dispensers to help them improve prescribing practices, and assessing the suitability of maintaining supply of certain items with limited efficacy where more appropriate items are available. These are important commitments. I welcome them, but they must be kept and honoured in practice.

The former Minister for Health and Children, Ms Mary Harney, introduced the notorious prescription charges for medical card patients. It would be remiss of me not to mention this. We all agree, and I said it at the time, that the cost of medicines to the State and to individuals is too high and we acknowledge that there is wastage and over-prescription of medicines. We all agree that measures must be undertaken to address these problems. The very last way to address this, however, was to punish those who are least able to pay. I do not accept the notion that the charge is merely a token, and I did not accept it then. It can build up to a significant sum on a monthly basis.

In opposition, the Minister, Deputy James Reilly, as Fine Gael spokesperson on health, opposed the charges and promised to abolish them when the opportunity presented itself. The Government has been in office for 19 months and we are still waiting. I earnestly urge a revisitation of that measure. It is part of the legacy of Mary Harney and the former Government. The Fine Gael and Labour parties roundly and rightly opposed it when in opposition. Age Action said of the prescription charges:

Over-prescribing and inappropriate prescribing is a problem in Ireland but the Minister needs to address this issue with the doctors who write the prescriptions, rather than hitting their patients. The patient is not the person writing the prescription so penalising them will do little to change prescribing practices.

The pharmaceutical industry also needs to be reined in. Earlier this year, the giant multinational GlaxoSmithKline was found guilty of massive malpractice in the United States, incurring fines totalling $3 billion. This malpractice included marketing drugs for unauthorised uses and holding back safety data. There can be no mistake about the gravity of what was being done. The courts in the United States did not make this decision lightly. The $3 billion fine was meant to underscore the seriousness of what was involved. It was not only patients in the United States who were at risk from the withholding of safety data and the marketing of drugs for unauthorised use. It affects each of us as citizens and our families. There needs to be an immediate investigation into the granting by the previous Government of an absolute indemnity to GlaxoSmithKline, the manufacturers of the swine 'flu vaccine, Pandemrix, which caused the sleeping disorder, narcolepsy, in a number of Irish children. When the Joint Committee on Health and Children met on 8 September 2009 to address the swine 'flu issue, I and other members, including the Minister, Deputy James Reilly, then in opposition, expressed serious concern about the indemnity granted to GlaxoSmithKline.

When I asked the Minister in September 2011, six months after he took office, if the nature of that indemnity was such that GlaxoSmithKline will be legally absolved from any accountability for the drug causing narcolepsy in Irish children, he did not reply. I have had no response to that question to date. I would welcome that matter being addressed by the new Minister of State. It is not a party political issue but something that is in the interest of all citizens. The safety of our citizens is at stake and GlaxoSmithKline, like many of these major conglomerates in the pharmaceutical sector, needs to know that it does not have a green light to do as it pleases in every situation.

I welcome the Bill, although I wish it was part of a comprehensive and radical reform of our health services based on public good, not private profit. The Bill demonstrates the potential for real savings in preference to the savage cuts to services now being imposed by this Government. We addressed those cuts at some length over the past two evenings but, sadly, it appears they will proceed. The passage of the Bill, as far as it goes, should be facilitated. I will play my part in that and, if possible, help to improve it on Committee and Report Stages. The Minister's responses to my questions would help greatly in achieving a better understanding of all that is intended in order that we can play a fully informed role on the remaining Stages.

Thomas Pringle (Donegal South West, Independent)
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I wish to share time with Deputies Mattie McGrath and Michael Healy-Rae.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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Is that agreed? Agreed.

Thomas Pringle (Donegal South West, Independent)
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I welcome the opportunity to contribute to the debate. It is an important Bill. It is also very technical and detailed. Is it necessary to go into so much detail for setting prices for the drugs that patients require? Obviously, the Department of Health believes it is necessary to be so technical, but it means one must concentrate hard when trying to wade through the Bill to find out exactly what is meant by each section.

This debate is being held in the context of the deal that was concluded between the Irish Pharmaceutical Healthcare Association, the Department of Health and the HSE earlier this week. It seems to have taken a long time to arrive at this agreement, which is supposed to result in savings of €400 million over the next three years. We hope those savings will be achieved. It will go some way towards easing the number of cutbacks that are causing suffering for patients in the health services. That remains to be seen. An interesting aspect of the deal is the automatic approval for new drugs coming on the market. That has huge cost implications. I worry that this time next year, as new drugs are automatically approved and come on line, the HSE will be lamenting the cost of those drugs. This year, for example, two new drugs will cost approximately €30 million. In the next year or two will we hear the HSE saying that the cost of new drugs is undermining its ability to save money under this process and see the process running into the sand, with further cutbacks being imposed on patients and hospitals, because the savings cannot be achieved?

It is important that new drugs are introduced and made available to patients. They could offer life-saving opportunities to patients or an improved quality of life for patients who have terminal illnesses. I am concerned this will become a football again, with further cuts being imposed. There must be some way to deal with it, whereby realistic pricing can be imposed on the pharmaceutical companies and the deal can be revisited to ensure new drugs do not have that potential impact.

It is very interesting to see all the commentary about the deal and this legislation, with many of the articles discussing the savings the deal will generate over the years. One then also sees commentary about how important the pharmaceutical companies are to our economy by providing 25,000 jobs. The underlying implication is that we cannot be too hard with these companies because they support so many jobs in the economy and if we do push them too hard, they might up sticks and leave. I doubt the pharmaceutical companies make the decision to base their operations in Ireland based on the fact that they can get good prices for their drugs in a market of 4.5 million people. They are using their location here to access a market of 495 million people.

That line about the importance of the pharmaceutical companies should not be taken or encouraged. I do not believe that if we drive a hard bargain with those companies and reduce the cost of medicines, they will all suddenly decide to leave with the loss of 25,000 jobs. The implication is that we depend on them so much that we must take it easy on them. In the years to come the HSE and the Department of Health should put that argument to one side and concentrate on what they should be doing, which is achieving the best possible value for the patients who depend on the medicines. That issue must be tackled. It is probably a sign of the culture that appears to have taken hold of this country. We tipped our hats to the bankers and gave them an easy deal for years. After that it was the developers and now it is the pharmaceutical companies. We must take a much stronger stance to achieve the best outcome for patients.

The Bill focuses on reference pricing and generic substitution. The Minister said that reference prices will be set at levels which will facilitate rather than jeopardise supply. That again smacks of allowing the pharmaceutical companies to maximise their profit-taking from supplying drugs in this country. Reference prices should be set on a basis that they provide a reasonable profit for the company, make it feasible for us as a society to provide the drugs and make it affordable for patients who depend on them and, perhaps, do not have medical cards. I would be very concerned if we were allowing profit maximisation to take place in setting the reference prices.

On generic substitution, the legislation provides that the general practitioner, GP, can specify on the prescription whether substitution should be allowed. It also provides with regard to the reference pricing that if the patient requests a drug that has a higher reference price, they will have to pay the difference. If a GP specifies a drug and a pharmacist offers a cheaper substitute and the patient opts to take it, are they still liable for the increase in the reference price? I cannot see where that is dealt with in the Bill. It might be there but, given the technical nature of the Bill, I did not see it. However, it would appear to be very unfair.

Generic substitution offers the possibility of reducing the cost of medicines. In a number of European countries it is part of their formal policy to ensure they can reduce costs. I note in the Minister's contribution and also in some of the commentary the question of the safety of generic drugs is raised. That is a red herring. It is possibly related to the fact that the people who develop the brand names like to convey the idea that the generic substitute might not necessarily be as good as their product. There were a couple of comments in the Minister's speech about the safety of generic medicines. That might serve to strengthen the perception that generic substitutes might not be as good. We need to make a cultural change among patients so that when they are offered a generic substitute they will accept that it is as good, has gone through the same testing and has all the same components as the branded drug. As politicians, we can lead that cultural change. The Minister and the Department can lead it as well. It is very important.

Why, then, the emphasis on safety in the contributions? It should be taken as read that systems for testing drugs and approving them are robust enough to ensure there are no safety issues. In the past manufacturers of patented drugs could get 98% of the price of the drug when it came off patent. Such deals were done in a way that showed the Department and the HSE were not strong enough when dealing with the companies and gave them favourable contracts and pricing regimes. We must take a harder line if we are to achieve the real savings and ensure the overall cost to the Exchequer and society is achieved through the workings of this Bill. That will come through after the Bill has passed and we will see it happen over time.

Mattie McGrath (Tipperary South, Independent)
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I too welcome the opportunity to speak today on this Bill. Previous speakers have referred to many of the issues that are involved. This is a huge area and a serious issue that addresses the supply chain of vital medicines being prescribed by GPs for the health and welfare of the people. We should not lose sight of that during the debate; we are talking about the health and well-being of our families and communities. We sometimes talk about health care and think about large conglomerates and big business but when it comes into our own kitchens or bedrooms, it is a sensitive and important area. The Bill is technical in nature but the drafters and the HSE advisors must know best here. Perhaps we can tease it out a little on Committee Stage.

South Tipperary is almost the home of the pharmaceutical industry in Ireland, there is a huge pharmaceutical presence there, with companies like Merck Sharp and Dohme, Clonmel Healthcare, GlaxoSmithKline in Dungarvan over the border, Boston Scientific, Abbott Vascular and many more. They play a huge role in the community in south Tipperary, providing well paid employment and investment in the community. All these companies run various schemes to support community initiatives in Cashel and Clonmel and that is appreciated and recognised. I have been through these plants and the technology in them is fascinating. The investment that has been put into these workplaces is amazing and the process, from the raw materials right through to the production of the capsule we take, is amazing. We welcome these companies and want them to stay.

We must, however, also respond to pricing for customers. We cannot have a knee-jerk reaction but we must rein in costs and spending at this point particularly in view of the debate we have had in the last two nights on the Sinn Féin Private Members' motion and the general debate on home helps and cutbacks. We must strike the balance in every Bill. To quote some of the figures, in 2011, the HSE spent €1.9 billion on medicines and non-drug items for patients in the community. This includes mark-ups and dispensing fees paid to farmers and wholesalers. In addition, hospital expenditure was approximately €300 million. That is staggering by any measure. HSE expenditure on medicine and non-drug items is huge. We must recognise that and we all came under huge pressure when the former Minister for Health and Children, Mary Harney, was trying to rein in these costs. There are powerful lobby groups in the pharmaceutical sector. Anyone with that level of investment and employment can call the shots because they are needed in the country. It is a gateway to Europe but nevertheless they have massive investments and they must be balanced against our approach to driving down pricing.

This is a timely Bill and it sends out the message to these people that they must change their policy on generic drugs. Almost €2 billion was spent in 2010 on the GMS for drugs, a huge amount. It increased by 140% in the decade from 2000 to 2010, when everything went crazy in this country. We never thought we would see a poor day again during the boom but everything slid past and prices escalated. Now we are left to try to deal with these legacy issues. We cannot afford to continue paying that sort of money. We must also ensure continuity of supply and it is vital we have the latest medicines that have been tested and approved and that will improve people's health and well-being. That can never be forgotten.

The Bill has had a long gestation period with a lot of debate on the areas of generic substitutes and reference drugs. It is now time to act in a manner that avoids knee-jerk reactions so continuity of supply is maintained and above all the health and well-being of patients and all other citizens is protected and enhanced.

The IPU is worried about the review period of three months that the Department has set in the Bill. There must be review periods but the union is worried that we have all been lobbied and that this is too narrow a window that might affect continuity of supply. Perhaps some aspects could be reviewed every three months and the rest could be pushed out to six months. We need the review and we cannot have another decade like the one between 2000 and 2010, when everything just slid by.

The pharmacists should be thanked for the work they have done over the years. At this point they are working to overcome the delays in issuing medical cards. I know of countless cases where medical cards have not arrived but the pharmacists with their local knowledge knew the people and dispensed the drugs without payment. I compliment them for that and for being ready and willing at weekends and during the night to be available to supply drugs. We must protect those local, family-run pharmacists and chemists at all costs. I have nothing against bigger chains like Boots but I do not want to see smaller, family-run business being forced to shut; they are all good employers and practitioners, who have invested huge amounts in their education and the establishment of a practice. They must be protected while we deal with charges and costs because these are valuable employers in the towns where they operate.

I differ from Deputy Ó Caoláin on the prescription charge.

We have to look at it in a holistic manner and cannot bash the large companies with which we have to deal. Those of us who have canvassed houses, and we all have to do it in order to become Members, will have seen a large amount of medicines on the dresser in some of them, to the extent that one could almost be in a chemist shop. That is dangerous because much of it may be out of date and the elderly and people who are not well may make mistakes in terms of an overdose. The 50 cent charge is a pittance. Nothing should be totally free. I mean that. I do not want to be hard on people but having discussed the matter with the then Minister, Mary Harney, I thought the charge would be more. We are trying to educate people to the fact that there is a cost for drugs, tablets and prescriptions. There is no better way to educate people than to tell them there is a cost. That is the way is has to be done.

I appreciate the time made available to me. I wish the Minister of State well and hope the Bill gets a speedy passage and is dealt with sensitively to ensure the safety and wellbeing of the people. We must also safeguard the local family run pharmacists and businesses as too many of these businesses are being lost across society. All big is not wonderful. We must protect them as they are employers, ratepayers, taxpayers and provide a valuable service to the community.

Michael Healy-Rae (Kerry South, Independent)
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I thank the Technical Group and Deputy Finian McGrath for sharing time with me. The Health (Pricing and Supply of Medical Goods) Bill 2012 is very important as the whole sector needed to be examined. There are huge difficulties in this area because the cost of drugs had risen enormously in recent years. One has only to look at the motor industry and some of the more expensive brand names of cars. When other car manufacturers upped the game they were able to provide cars that may not have had the same elaborate flagship brand as other manufacturers but the quality of the product supplied was just as good. The drugs industry is the same. One can find similar examples in the farming sector with the purchase of sprays where, in the past, one could have bought a gallon of spray costing €120 per gallon. However, due to competition one can now buy a gallon of spray that would do the same job for €30 or €40. There is no reason to believe the same is not happening with the purchase of drugs. Drugs were being priced beyond reason.

The introduction of generic substitution and reference pricing has the potential to deliver significant savings to the State. When the Government is trying to save money for the State it must be supported and complimented. I apologise to the Minister of State, Deputy Alex White, whom I meant to acknowledge at the beginning of my contribution. I congratulated him in the past but I do so again and wish him well in a very demanding role. I am pleased he is present for the debate.

We must ensure a safe and fair delivery of medicine to the people who require it. We must ensure, as Deputy Finian McGrath stated, that this is not seen as an attack by the Government on the pharmaceutical industry or on those who sell the drugs over the counter, the local pharmacies and chemist shops, who have an excellent record of working well in the communities with the local general practitioner. In the majority of cases, especially in the smaller towns, the person behind the counter of the chemist shop knows the name of the patient when he or she walks through the door; he also knew their parents and children and knows the general practitioner. That knowledge and relationship is important when it comes to the safe delivery of drugs to patients who require them. We must ensure this is not seen as an attack on anybody, including the pharmaceutical companies. I recently visited an excellent pharmaceutical premises, in Killorglin, County Kerry which in recent years has invested huge sums in its factory. The company provides much needed jobs and drugs which are being shipped worldwide. I know it is not the Government's intention to endanger those jobs or to come done on the pharmaceutical industry but in life one has to modernise and economise and look at things in a different way when it comes to saving money. In this regard the drugs industry must be tackled in the same way as any other industry.

I compliment all those taking care of patients who need drugs, be it the local general practitioners who look after the elderly, or family resource centres, which are a new development, which take care of the elderly and young people in the communities. We have an ageing population which brings health difficulties which may not have been as prevalent in the past. It also bring financial difficulties. One has to look at the bigger picture and hope they can be taken care of and the necessary drugs provided to maintain them for a long, healthy and happy life.

In regard to reference pricing, section 24 of the Bill provides for the setting of a price for a group of interchangeable medicinal products in regard to the listed items which fall within the group. It also provides for the regular review of the reference price for a group of interchangeable medicines by the HSE, and it outlines the criteria to be taken into account by the HSE when it is setting or reviewing a reference price. This is a very important point because one would always be concerned about a major purchaser of drugs, such as the HSE, where huge amounts of money change hands. It would be important to know if in the past it got value for money or if there were big savings to be made owing to a lack of clarity on pricing structures with the result that the HSE paid too much for the drugs supplied every day. As the HSE is a huge procurer of drugs in all the hospitals and all the institutions that provide care it is important that the utmost prudence and pricing management is strictly adhered to. As there is an onus of responsibility on those who purchase drugs for the HSE, the legislation will be of major assistance in enabling them get a better deal for the Government and the taxpayer, which is very important. I hope those people who work for the HSE in the buying departments and who deal with large sums of money every day will see the legislation as enabling them to be tougher and stricter about the amounts they pay for certain products.

I wish the Minister well in the future. While people may have different issues with certain parts of the legislation before us, overall it is prudent and timely for us to review the pricing and supply of medical goods. If it results in solid savings for the State, that is to be welcomed.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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I call Deputy Fitzpatrick, who is sharing time with Deputy Mitchell.

Peter Fitzpatrick (Louth, Fine Gael)
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I welcome the opportunity to discuss the Health (Pricing and Supply of Medical Goods) Bill 2012. There was a time when senior company executives travelled exclusively in first class, but no longer. Shareholders are seeking better use of their company funds. Airlines are reducing the space allocated to the first-class brigade, as these sections of the aeroplane are not filling as they once did. These airlines are responding to the market conditions to reduce the space allocated to a product that has low demand and occupancy.

What is notable is that the airline customers are not choosing to avoid travelling, but rather the way they travel in choosing economy class rather than first or business class. The result for customers is still the same - they still arrive at their destination. There was also a time when executives of public service companies used to travel by business class. Thanks to this Government, these are now a thing of the past. Indeed there was a time when Government officials used to also avail of excessive travel perks, both by air and by land. The stakeholders of this country, the people, deserve and demand better. We are all aware of the dubious and excessive use the Government jet was subjected to. Again, and fortunately thanks to this Government, this is now a thing of the past.

I think it is clear that there has been a seismic shift in attitudes and actions since this Government's inception. This shift is based on two simple principles. The first is that we could not condone and continue the outrageous excess of the previous Administration, which was unethical and simply unsustainable. The second point is that the Government has inherited an economic and spending mess. This needs to be addressed and that is why we were elected. This Bill is a part of that process because it addresses overspending in the health sector.

The Bill proposes to allow pharmacists to substitute cheaper medicines for the ones prescribed, if patients agree. It also sets out statutory procedures for HSE supply and reimbursement of medicines and other goods. The overall aim of the Bill is to reduce the cost of pharmaceuticals to the State by promoting competition and achieving greater value for money. No patient will suffer or receive inferior medication. However, using cheaper medication will produce savings for the Government at a time when they are needed.

The Bill aims to increase the use of generic medicines, which are generally cheaper alternatives to brand name or originator medicines. There is broad agreement that generic substitution and reference pricing have the potential to reduce the State's pharmaceutical bill through encouraging greater use of cheaper generic drugs and price competition among manufacturers.

Further savings were achieved this week when the Minister for Health, Deputy Reilly, announced that intensive negotiations involving the Irish Pharmaceutical Healthcare Association, IPHA, the HSE and the Department of Health had reached a successful conclusion with a major new deal on the cost of drugs in the State. The deal is an important step in reducing the cost base of the health system and is further evidence that the Government is firmly committed to address State overruns. The new deal, with a value in excess of €400 million over the next three years, will mean significant reductions for patients in the cost of drugs, a lowering of the drugs bill to the State, greater access to new cutting-edge drugs for certain conditions and an easing of financial pressure on the health services into the future. These results represent a win-win for the State and the people.

The deal is beneficial in two broad ways. Approximately half the financial value is related to reductions in the cost of patent and off-patent drugs, and the other half is related to the State securing the provision of new and innovative drugs for the duration of the agreement in an exceptionally difficult economic climate. The new deal, combined with the IPHA agreement reached earlier this year, means that €16 million in drug savings will be made this year with much greater savings to be achieved in the following three years. It is estimated the deal will generate gross savings of up to €116 million in 2013.

This is the type of forward thinking and decisive action that is needed to haul the State out of its budgetary mess. I applaud the Minister for these enormous savings and in conjunction with the Bill being presented to the House it is a clear sign of the determination of the Government to redress the State's finances. I commend the Bill to the House.

Olivia Mitchell (Dublin South, Fine Gael)
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I also welcome the opportunity to speak on this legislation. It could hardly be more crucial and discussion on it could not be more timely as we approach a budget with a health bill that takes up 27% of all Government expenditure, costing a massive €13 billion, with medicines now comprising almost €2 billion. It must be a major element of any cost-containment exercise. It is vital that we contain costs because we need to maintain access to vital medicines.

I very much welcome the conclusion this week of an agreement with the Irish Pharmaceutical Healthcare Association. While it took considerable effort the savings for next year are projected to be €116 million. I seek more information on the deal. Is it a once-off three-year arrangement? Will our medicines continue to be priced by reference to a basket of European medicines as we did in the past or is a new formula being found? I take the opportunity to congratulate the Minister of State and wish him well in his difficult job.

Alex White (Dublin South, Labour)
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I thank the Deputy.

Olivia Mitchell (Dublin South, Fine Gael)
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I am sure he is already finding out how arcane the system and procedure for setting the prices of medicines is, given that it is influenced by so many factors and interests. These include factors as diverse as wholesaler stocks at any time of the year and significantly - something mentioned by others - the presence in Ireland of so many drug manufacturers' research and development, and manufacturing facilities.

There has been a perception that there is a tension between the State's role in incentivising inward investment and high-end employment in pharmaceuticals, and the State's role as a purchaser of medicines from those companies. However, given the proportion of the market that Ireland represents, I believe that is a bit of a red herring. I cannot see how the price we pay would influence their decision to invest in Ireland. They invest in Ireland for a variety of reasons but I do not believe any of them relate to the size of the market here.

Whatever the reason, the general perception of the international price-referencing system is that we seem to do very badly out of it. There is anecdotal evidence and I listened to a report on the radio yesterday. Regardless of where one goes in Europe, it always seems we are charged more than those abroad. We need considerably more transparency in how prices are decided. I heard the spokesperson for the Irish Pharmaceutical Healthcare Association state that some are dearer and some are cheaper, but that does not reflect our experience.

In the past ten years the drugs bill has quadrupled from €570 million to €2 billion now and average prices have doubled. The most interesting and inexplicable figure is the growth in the volume of prescriptions which seems to have more than doubled in the past ten years from 20 million items per annum to 44 million items per annum. Some of it relates to population, which increased but it did not double. While the population is getting older, it is not that much older and we have a relatively young population. I would like to see some analysis of this apparently inexorable trend. It cannot be that we are sicker than we used to be. It is possible that we think we are sicker or that we think there is a pill for everything. Coming from either patients or the drug companies' sales representatives there seems to be pressure on doctors to prescribe. Whatever the reason is, we need to identify the underlying factor.

Last year, the Government introduced a 50 cent charge on each GMS prescription item dispensed, up to a maximum of €10 in any one year. What has been the impact of that charge? Has it resulted in a reduction in the number of medicines dispensed? Is there a need to look at this again? People who obtain medicine free will not be conscious of cost containment whereas people who are paying for medicine will not buy anything that is not essential. I do not believe the €10 maximum in any one year will be a constraint. Perhaps we need to look at how this charge is applied. One could buy 20 medicines over a year for €10, which is not that much. People with minor illnesses would buy at least 20 medicinal items a year. Perhaps we should provide that the charge comes into play after the first 20 items purchased. Issues such as what is motivating the increase in prescriptions need to be examined and could be addressed by the task force which is being established under this legislation.

I read in a newspaper during the week that the Medical Council has clarified the ethics code for doctors' interaction with drug companies around the acceptance of trips abroad to medical conferences and so on. One of the issues on which clarification was provided was the acceptability of doctors charging a fee to drug sales representatives for a visit to their surgery, which knocked me back a little. I mention this only because it highlights the complexity of the relationships and the potential for undue influence that exists between all of the players, be it drug manufacturers, distributors, doctors, wholesalers, hospitals, the Irish Medicines Board and the pharmacists. I include the Irish Medicines Board because it is the gate keeper for medicines. It is the body which decides what is made available to us and how we get it.

A point often heard anecdotally is that one has to visit one's doctor here in order to get a prescription for many of the medicines available over the counter in other countries, although in pharmacies rather than supermarkets. This turns the doctor into the gate keeper, which must push up the cost of medicines in Ireland relative to other countries. While obviously people who have medical cards do not have to pay the doctor, this costs the State more. I understand that the main task of the Irish Medicines Board is to ensure safety of medicines. However, some type of balance must be struck. In this regard, there must be reference to what is happening in other countries. Also, pharmacists attend school and college for as long as doctors. We must have more faith in our pharmacists and give them the same responsibilities as given to pharmacists in other countries. If pharmacists do not know as much about medicine as doctors, what do they know? This issue also needs to be addressed.

The complex supply chain relationship needs to be analysed in terms of negotiation, monitoring and determination of the cost of medicines. It is a total minefield, one which is constantly changing. It is a little like politics in that one never knows where the mines will be. The Minister of the day will need to be ever vigilant of the factors influencing prices, practices and procedures. We have in recent times seen many changes in the mark-ups available to wholesalers and retailer-pharmacists, which are to be welcomed. Last week, agreement was reached with the Irish Pharmaceutical Health Care Association on new on-patent drugs. Today, we are debating the introduction of generic substitution and reference pricing. This step is a major departure in this country, which I welcome. One or other, or both, are in use in other developed countries.

Provided we put in safeguards this new arrangement has enormous potential to save the consumer and the State a lot of money. This arrangement will, however, need to be carefully monitored. My concern around price referencing is that a floor price will be introduced. One needs to be careful when attempting to control prices. Every manufacturer will want to be producing the drug of choice. While manufacturers should be competing, they will only compete to the floor price. As such, the Minister of the day will have to be vigilant to ensure that floor does not act as a barrier to prices falling. The danger of this happening will be there at all times.

Putting the reimbursement list on a statutory basis is new. I want to comment specifically on new medicines getting on the list, which is a major challenge. While we all want access to the latest medicine a balance must be struck, by reference to clear criteria, between efficiency and cost. Choices have to be made in any country, in good and in bad times. This is what must happen all the time as new medicines become available. The decision in terms of medicines is a life and death one, one which I would not like to have to make. It is an important decision which must be made by the Irish Medicines Board.

While there is in place a mechanism of appeal by the professionals, from the manufacturer to the dispenser, in respect of all decisions made by the Irish Medicines Board or Health Service Executive, there is no mechanism in place for the patient. I do not believe that access to medicines should be decided by virtue of access to the media. There is a need to put in place a system that works quickly for patients. Patients who, in terms of their condition, believe a particular medicine is for them at least deserve to have their concerns dealt with in a prompt manner and through an established mechanism rather than the media.

Also on the reimbursement price list, currently a price is put on every product on the list that will be reimbursed by the HSE. This could also be a minefield. There is nothing in the legislation to suggest that the reimbursement must or will be the same as that charged by the pharmacist. As such, it could be the case that this legislation will not only permit but facilitate an entirely new system whereby patients could end up paying the difference between the real price and the reimbursement price. This is inherent in the new reference price system for interchangeable medicines, in respect of which the patient at least has a choice in terms of use. I am flagging that this legislation could be used - I am not suggesting it will be used now - in the future to usher in a regime whereby only partial payment is made by the State for medicines. It may be that that is what will have to be done. However, I would like to think this will not happen by stealth and that it is something that would be openly flagged. Everybody, be it a medical card patient or a person dependant on the drug refund scheme, needs some element of certainty around the cost of medicines and health generally.

I would welcome if the Minister of State, Deputy White, could respond to some of my questions and concerns. I welcome this legislation, which has huge potential to save money for all of us and to ensure that people continue to have access to vital medicines.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I welcome the opportunity to contribute to the debate on the Health (Pricing and Supply of Medical Goods) Bill 2012, although I understand the Second Stage debate will be adjourned at 12.30 p.m. and will be resumed in a couple of weeks.

Before I get into the details of the Bill, I congratulate the Minister of State, Deputy Alex White, on his appointment.

I look forward to seeing him in the Chamber on numerous occasions when I speak about health issues. Fianna Fáil welcomes the Bill, which has been a long time in gestation. The main purpose of the Bill is to promote competition between suppliers of interchangeable medicines to ensure value for money in the supply of medicines and other prescribed health items. We spend almost €2 billion in this area each year, which is a phenomenal amount. Savings can and must be made and it is very important that this is done.

The Bill will enable patients to opt for lower cost generic medicines on a list prescribed by the Irish Medicines Board. This sounds as though an onus will be placed on the individual but it will not work this way. The Bill provides for the introduction of a system of generic substitution and reference pricing. This is a new concept and is an important part of controlling the overall medicines bill. Reference pricing involves setting a common amount for selected groups of medicines on a list approved by the Irish Medicines Board and operated by the HSE. The Irish taxpayer will only pay the reference price for a particular medicine. This is the only amount that will be reimbursed by the State to the pharmacist and the pharmaceutical industry.

If eligible patients want a branded product they are entitled to it, but they will pay over and above the reference price. In the legislation the Government is stating it will pay a certain amount for equivalent medicines but if the patient wishes to choose a branded product which costs more he or she is free to do so but must pay the excess. It is a matter of consumer choice. Some people will always be happier to pay for a brand. I do not want to trivialise it by comparing it to the fashion industry, but some people like to have a particular brand when they pay for a product. Other people are happy to know the substance of the product is the same and they are unconcerned about the brand name. It is important we get away from this because it has cost the Irish taxpayer a great deal of money. People are free to choose the branded medicine if they choose to do so. I would be happy to take the product provided for by the Irish Medicines Board and the HSE. If other people wish to pay extra that is their affair and more power to them if they want to do so. If they want to add to the profits of the pharmaceutical industry they are welcome to do so.

Unfortunately the Bill is overdue. We should have had it a long time ago. We welcome that it will make savings, but the Minister's failure to introduce it earlier this year has cost the taxpayer more than €100 million in savings which should have been achieved from 1 January this year rather than having this legislation at the tail end of the year. The spending of this €120 million will result in the HSE having to make major cuts to bring it closer to its budget because it has not achieved savings in this area.

The Bill has already gone through the Seanad. I understand this Second Stage debate will be adjourned and will not resume next week. The Dáil will not set the following week so we will not resume Second Stage until well into November. I hope the legislation will be enacted before the Christmas recess but this will be 11 months too late and will have cost an extra €120 million in profits the taxpayer has had paid to somebody in the industry. This at a cost of cutting home help and front line services.

It would be remiss of me if I did not mention some of the possible front line cuts proposed in my area. In Abbeyleix a proposal to close a hospital is still awaiting decision by the Minister. A decision is also awaited with regard to St. Brigid's hospital in Shane. These issues are up for consideration to ensure the HSE lives within its budget. The financial assumptions underlying the potential decision to close these units are fundamentally flawed. They are being considered because the Minister did not bring forward this legislation to save this money. Had he saved €120 million on this over the full calendar year we would not have to consider downgrading the respite services available in Mountrath or the adult service available in Abbeyleix. In particular I make a plea on behalf of those with disabilities and special needs that the funding of the HSE, and those contracted to do its work such as the Muiriosa foundation in my area, is maintained in the Estimates for the coming years so some of these proposed cuts will not have to be made. The way to do this is by reducing the medicines bill. Had this been done sooner I would not have to raise these topics on this occasion.

I will recount an anecdote to demonstrate what I consider to be the outrageous prices charged by the pharmaceutical and health care association. Approximately 30 years ago I wore contact lenses for a year or two. It was okay but something happened and it did not work out in the long term. I remember I had to buy solution to clean the lenses. The solution was made by Allergan, which is based in Westport, County Mayo. It used to cost £14 for a bottle which lasted approximately a month. During that time I went on holiday to Rio de Janeiro in Brazil where I saw in a pharmacy the exact same bottle, made by Allergan in Westport, being sold for the equivalent of £7, which was half the price. The Irish taxpayer was being ripped off no matter how one looks at it. The product was made in Mayo and sold in Castlebar for £14 while the same bottle made in the same factory was on sale in Brazil on the same day for £7. This shows the rip-off with regard to pharmaceutical and health care products being sold in Ireland. I do not know how they got it to Brazil and could sell it at a profit at half the price it was being sold in the pharmacy next door to the factory where it was made. It defies all logic and is one of the reasons we are having this debate. Perhaps this legislation should have been introduced 30 years ago. It is long overdue.

Perhaps over-prescribing takes place. We all know that in most houses in Ireland one will open a cabinet full of medicine. Every doctor, nurse or home care worker will tell one they have gone into many houses where a person has died and the first thing they had to do was fill up a few black bags with all of the unused medicines. This is a huge waste of taxpayer's money. These products have been paid for but not consumed. A pharmacist is not allowed re-use them because it cannot be guaranteed that they have not been interfered with and on health and safety grounds they must all be incinerated. This is too convenient, simple and lazy an approach for the HSE to take and I ask it to reconsider. The same used to be true about appliances. There was a time when hospitals did not take back crutches because they could not guarantee they were not damaged. Now a facility is available to examine crutches and if they are in good condition they can be reused. The HSE changed its position on some small appliances when it was forced to do so on economic grounds. While health and safety is the overriding feature it should be able to do the same with regard to medicines. The HSE needs to examine this important factor.

It would be strange if we did not refer to the new deal with the pharmaceutical industry which the Minister announced during the week. This is also an effort to reduce some costs. The Minister will have to explain how reference pricing will integrate with the pricing agreements in the deal announced this week. The announcement did not include details and I am sure we will hear them in due course.

The Bill is necessary. We will propose amendments on Committee Stage as we did in the Seanad. We will need to see a definition of reference pricing of drugs because if it is set too high at the outset it will be an excessive cost to the Irish taxpayer. We must look at the situation in other European countries and countries outside Europe.

Europe is one of the highest cost centres in the world. Going back to my example where the health care and pharmaceutical industry can make products in the EU and sell them cheaply in South America, maybe we should be looking at the world prices at which these products are being sold.

Michael Kitt (Galway East, Fianna Fail)
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I hate to interrupt the Deputy but I must ask him to move that the debate be adjourned.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I will conclude my contribution and will resume it when the Bill is debated again.