James Reilly (Dublin North, Fine Gael)

I am pleased to have the opportunity to address the House today on Second Stage of the Health (Pricing and Supply of Medical Goods) Bill 2012. This Bill will introduce a system of generic substitution and reference pricing for prescribed drugs and medicines. These reforms will promote price competition among suppliers and ensure that lower prices are paid for these medicines, resulting in savings for both taxpayers and patients.

The Bill sets out the Government's proposals to allow the substitution of medicines by pharmacists at a patient's request and to improve and update the statutory basis for the supply of medicines and other prescribed items under the General Medical Services, GMS, and community drugs schemes. It sets out a clear legislative basis for the supply and reimbursement of items to patients under the GMS and community drugs schemes. It also sets out criteria which the HSE must take into account when making reimbursement decisions. This Bill will allow the HSE to attach conditions to the supply of certain items, provided that any restrictions are evidence-based and in the interests of patients and ensuring value for money. However, it is important to note this Bill does not change the existing arrangements for the supply of items through community pharmacies. This Bill is patient-focused and will allow patients to continue to be able to access prescribed medicines in line with their clinical requirements. In addition, if a particular brand of medicine is required by a patient for clinical reasons, then the patient will face no additional charge for that product. It is important, in the current economic climate, to take every step possible to provide public services efficiently, to limit costs to the greatest extent possible and to involve users of resources in better understanding the value of those resources and their appropriate use.

The magnitude of expenditure on medicines and non-drug items, such as dressings, in the public health service cannot be underestimated. In 2011, this expenditure amounted to just under €2 billion. In addition, hospital expenditure was in the region of €300 million. Significant savings on the drugs budget already have been made in recent years. In 2009, changes in wholesale mark-up paid on medicines and the introduction of a common sliding dispensing fee across all schemes, together with the reduction of the retail mark-up paid on a number of schemes, resulted in an ongoing annual saving of approximately €120 million. Further reductions in 2011 resulted in additional ongoing savings of more than €34 million. This included a reduction in wholesale mark-up on most drug items from 10% to 8%. In addition, my Department and the HSE continue to engage with the Irish Pharmaceutical Healthcare Association, IPHA, to secure reductions in the price of drugs. As an interim agreement, the IPHA has agreed to provide €10 million in savings in 2012, which represents €20 million in a full year, through reductions in the price of off-patent medicines. The HSE shall give its approval to the reimbursement of drugs, which in the normal course of events would have been approved for reimbursement under the schemes. This agreement is in advance of more substantive discussions to deliver a new agreement and substantive price reductions. Moreover, meetings have been held in recent days in this regard.

With regard to the reimbursement approval for new and expensive medicines, the Health Service Executive will look at a range of important inputs before making a recommendation regarding funding approval for particular drugs. The HSE seeks to provide the best access possible to new services and new technologies from within its resources. In any health system with a fixed budget, each decision to fund a new service or technology has implications for the availability of resources for other services or technologies. That, unfortunately, is a challenge faced by all health systems, even in a good economic climate.

The Chief Medical Officer was recently asked to examine the approval system for new drugs and to engage with the HSE to ensure a robust system is put in place for decision-making on drugs to promote and drive evidence-based prescribing. This should help to create capacity on a sustainable basis to provide for necessary new drugs when there is evidence to support their use. In addition, a national task force on prescribing and dispensing will be established to deal with prescribing and dispensing of existing medicines. It will address this from the perspective of quality and patient safety primarily. However, it can be anticipated significant cost savings will result. By addressing the issue from the perspective of quality and safety, and by working with the leadership of the medical, pharmaceutical and other professions, we have the best means of securing a sustainable means of improving value for money from the significant expenditure of the State on prescribed medicines.

The task force is made up of several key leaders from the health care system and chaired by the Chief Medical Officer. Its terms of reference require it to oversee and to direct analysis of the very extensive information that is held on prescribing patterns through the primary care reimbursement service. This information will be used to establish priorities to be addressed in quality and patient-safety prescribing and will inform decisions on the nature and scale of interventions that should be undertaken. These can range from providing advice, guidance and support to prescribers and dispensers to help them to improve prescribing practice to assessing the suitability of maintaining supply of certain items with limited efficacy where more appropriate items are available.

Despite the progress I have outlined, pharmaceutical expenditure continues to pose a challenge, particularly in light of our ageing population and increased usage of medicines. Further changes in the form of generic substitution and reference pricing are required to secure a sustainable system of pharmaceutical expenditure while, at the same time, ensuring patients can continue to access necessary and innovative medicines. Generic substitution allows pharmacists to substitute a cheaper generic equivalent at the patient's request when a more expensive product has been prescribed. Generic medicines are equally as safe and efficacious as proprietary products and are subject to the same requirements for quality, safety and efficacy. The Irish Medicines Board will have responsibility for the designation of interchangeable medicines.

Reference pricing involves setting a common reimbursement amount for selected groups of medicines. Only the reference price is reimbursed by the State. Eligible patients can avoid out-of-pocket payments by opting for a generic medicine at or below the reference price. Reference pricing coupled with generic substitution provides patients with an incentive to opt for the cheapest available product but does not impose any unavoidable additional costs on patients. Generic substitution and reference pricing represent significant structural change to the system of pricing and reimbursement of medicines.

As more medicines come off patent, the introduction of generic substitution and reference pricing will ensure both taxpayers and patients will benefit from increased competition in the pharmaceutical market. Giving patients more choice and promoting price competition between suppliers will help reduce the overall drugs bill without compromising the efficacy or safety of the treatment that patients receive. Savings will be achieved by limiting reimbursement to the reference price allowing patients to opt for less expensive versions of the prescribed medicine and promoting price competition between the manufacturers of interchangeable medicines.

The level of savings will be dependent on a range of factors including the number of medicines included in the reference price system, prescribing practices and the behaviour of manufacturers of interchangeable medicines. The system will be introduced on a phased basis and, accordingly, savings will be achieved on a phased basis.

Part 1 provides for the definition of certain terms used in the Bill and the laying of regulations. Part 2 provides for the establishment and maintenance of a list of interchangeable medicinal products. It sets out the duties of pharmacists for prescriptions for interchangeable medicinal products under their branded names and includes a number of scenarios. It also sets out the duties of pharmacists for prescriptions for interchangeable medicinal products under their common names.

Part 2 also contains some miscellaneous provisions. These include the provision that no action or other proceeding shall be instituted against a pharmacist or prescriber when a pharmacist substitutes a medicinal product for a branded interchangeable medicinal product in accordance with the legislation. Also included is the provision that a prescriber may indicate on a prescription if a branded interchangeable medicinal product should not be substituted for clinical reasons.

Part 3 provides for the dispensing of medicinal products under their common names where they are not interchangeable medicinal products. Part 4 provides for the establishment and maintenance of the reimbursement list. It also provides for the conditional supply of listed items by the HSE and the setting of prices for items and listed items. This provides the HSE with discretion to supply non-listed items to certain patients. Part 5 provides for the setting of a reference price for groups of interchangeable medicinal products. Part 6 provides for appeals to the High Court against relevant decisions of the IMB or the HSE; power to specify form of documents, fees to be paid to the IMB or the HSE and amendments to relevant Acts.

Schedules 1 and 2 pertain to procedural provisions relating to decisions by the IMB or the HSE. Schedule 3 sets out criteria for the purposes of decision making by the HSE under section 18.

Two issues were to the fore when this Bill was drafted, namely the sustainability of the supply of medicines and the safety of generic medicines. Shortages of essential medicines are a cause of concern not just in Ireland but throughout Europe and the rest of the world. It is a global problem affecting health systems in all countries and impacting on patients worldwide. Medicines shortages can be caused by a combination of factors throughout the pharmaceutical supply chain such as manufacturing difficulties, industry consolidation and commercial decisions by manufacturers to withdraw unprofitable lines.

Irish medicines regulations place an obligation on both manufacturers and pharmaceutical wholesalers, within the limits of their respective responsibilities, to ensure the adequate availability and supply of medicines on the Irish market to meet patient needs. My Department has been engaging with the IMB, the HSE and the Pharmaceutical Society of Ireland, PSI, to identify ways in which the Irish system can manage medicines shortages as effectively as possible to minimise the impact on patients. International efforts to effectively manage medicines shortages are also being considered. Pharmaceutical production is carried out by private enterprises. The State or my Department can only intervene to a limited extent to prevent medicines shortages occurring. The IMB and the HSE continue to work closely to operationally manage medicines shortages when they arise. In addition, the PSI works with the pharmacy profession and has recently published guidance to registered pharmacists on managing medicines shortages. Manufacturers, wholesalers and pharmacies all have responsibility to work together to identify shortages quickly and implement alternative arrangements to meet the needs of patients. In this context, section 24(3)(a) provides that when the HSE sets a reference price, or reviews a reference price for a group of interchangeable medicinal products, it has to take into account the ability of suppliers to meet patient demand. In other words, reference prices will be set at levels which will facilitate rather than jeopardise supply.

The safety of generic medicines underpins this Bill. However, it is important to point out that generic medicines must meet exactly the same standards of quality and safety and have the same effect as the original medicine. All of the generic medicines on the Irish market are required to be properly licensed and meet the requirements of the IMB. To further enhance the safety aspect of generic substitution, section 13 gives a prescriber the option of indicating on a prescription that a branded interchangeable medicinal product should not be substituted, if there are clinical reasons not to do so.

The programme for Government includes the commitment that reference pricing and greater use of generics will be introduced to reduce the State's large drug bill and the cost to individuals of their medicines. This legislation will introduce a system of reference pricing and generic substitution for prescribed drugs and medicines which will ultimately lead to savings for taxpayers and patients. It is envisaged the Bill will contribute to an increase in the rate of generic prescribing which stands at approximately 18%. I will, of course, keep the implementation of reference pricing and generic substitution under constant review and will report back to both Houses. This measure will allow for better prescribing, cost-effective prescribing and greater availability to patients as our funds must stretch further. I commend the Bill the House and look forward to hearing the views of Senators.