Lucinda Creighton (Dublin South East, Independent)
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89. To ask the Minister for Finance his views on a company's (details supplied) recent assessment that Irish GDP is understated because of the way Central Statistics Office measures production in the pharmaceutical sector arising from its statistical treatment of generic drugs as new products; if he will provide further detail on this alleged discrepancy; and if he will make a statement on the matter. [51885/13]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, industrial production and exports of chemicals and pharmaceuticals have been impacted by declines in volumes since early 2012. This is most likely due to the expiry of patents on certain ‘blockbuster’ drugs, an effect known as the ‘patent cliff’. The patent cliff has also weighed down on GDP, given the comparatively large weighting of the sector in Irish output and exports.

The impact of the patent cliff is likely to result in some shift in Irish pharmaceutical production away from branded blockbuster drugs towards generic drugs. When discussing the statistical treatment, consider the example where, in a given quarter, the patented version leaves the relevant price index and the off-patented version and/or generic equivalent enters. The Central Statistics Office (CSO) will treat these as a new product, rather than the same product at a lower price. This means that any decline in the value of production would be accounted for as a volume shift rather than a price change as there is no change in the price index per se . This methodology is in line with current international practice.

However the precise impact of the patent cliff on Irish production patterns remains to be seen. It is not certain that production of chemically-identical drugs will always continue in Irish plants in a post-patent environment. Also, residual loyalty for branded drugs can often remain even after patent expiry, implying continued demand for production of the patented variety.

My Department, when forecasting the impact of the patent cliff on economic output, does so with consideration of the methodology used by the CSO.