Ireland’s introduction of generic substitution and reference pricing in 2011 will save the nation nearly 78 million euros a year and reduce spending by patients, says the government.

An implementation report on the planned new regime published last week by a joint Department of Health and Children/Health Service Executive (HSE) working group describes Ireland’s current system of drug purchasing as “unsustainable.”

“In 2008, the HSE paid for approximately 65 million prescription items at a cost of over 1.9 billion euros. As a result of demographic changes and prescribing trends, the number of prescription items is estimated to increase to 105 million by 2021 at cost of 2.4 billion euros,” it says.

The report’s authors also note that, in Ireland, generics currently account for only 18% of drugs dispensed under the medical card scheme and 11% of those supplied to private patients, compared to 83% in the UK.

While reference pricing will not apply to products used in the treatment of cancer and epilepsy, the report says the HSE has identified 100 potentially interchangeable medicines for the initial introduction of reference pricing, comprising almost 250 groups when different product strengths are taken into account.

A tendering process will be introduced and the lowest price selected based on the manufacturer’s ability to supply the volume needed, said the Minister for Health and Children, Mary Harney, who added: “that will be the reference price we will pay and we won’t pay any more.”

The introduction of generic substitution will allow patients to choose to receive the medicine at the reference price, or pay the difference if they want a more expensive equivalent.

Ms Harney noted that the new arrangements are part of “a set of key actions” being taken by the government to achieve greater value for money in pharmaceutical expenditure. “Off-patent price cuts have been introduced, wholesale and retail mark-ups have been reduced and further price cuts were achieved in February this year. These actions alone can be expected to save nearly a quarter of a billion euros for the taxpayer this year, from what would otherwise have been the cost,” she said.

“The new system of generic substitution and reference pricing will promote price competition and deliver greater value for money. Over the next five years, a number of high-volume medicines are expected to come off patent. These reforms will ensure that lower prices are paid for these medicines resulting in significant savings for taxpayers and patients,” the Minister added.

Groups representing pharmacists and consumers welcomed the report’s detailing of plans for generic substitution, but the Irish Pharmacy Union (IPU) warned that reference pricing could lead to shortages.

Concerns were also expressed by industry group the Irish Pharmaceutical Healthcare Association (IPHA), which pointed out that Ireland currently has a fair and equitable single-tier system whereby all patients, regardless of income, have access to a secure supply of the medicines which their doctors believe are most suitable for them. However, the report’s recommendation that the HSE should set the reference price at that offered by the lowest potential supplier “could give rise to patients being dependent on one supplier, perhaps with very limited infrastructure or commitment to the Irish market,” warned Brian Murphy, director of commercial affairs at the IPHA.

Security of supply of the full range of therapies to patients is “absolutely vital, and such a policy of going for the lowest price supplier rather than an average of a number of prices could seriously endanger this vital continuity of supply to patients,” he went on adding that the proposed resetting of reference prices up to four times a year “could see patients being regularly switched from one medicine, which they are doing well on, to another product.”

The proposal would appear to involve “a great deal of additional cost for the taxpayer without any guarantee of savings,” said Mr Murphy, who urged the government, instead of going down this route, to build on the current system for off-patent medicines and garner additional savings by addressing the “currently bizarre situation whereby generic medicines are up to 50% more expensive than their off-patent equivalents.”