The Irish government has agreed a pricing deal with the pharmaceutical industry which is expected to yield savings to the state of more than 400 million euros over a three-year period.

The agreement, which has been drawn up between the Department of Health, the Health Service Executive (HSE) and the Irish Pharmaceutical Healthcare Association (IPHA), will take effect from November 1 and is "an important step in reducing the cost base of the health system," said the government.

About half the estimated 400 million-euro savings over the period will be linked to reductions in the cost of both in-patent and off-patent drugs, and the other half is related to the state securing the provision of "new, cutting-edge drugs for certain conditions" for the duration of the agreement "in an exceptionally difficult economic climate," it added.

Minister for Health James Reilly said the savings would be "significant," and that while the negotiations had been difficult, "complicated and protracted," the deal was "worth waiting for" and would be very good for patients and the taxpayer. 

Dave Gallagher, the outgoing president of the IPHA, agreed, pointing out that the deal will provide assurance for Irish patients that they will be able to get new medicines when they become available. However, he added that the agreement would be "very painful" for the industry.

The price reductions delivered by drugmakers in Ireland since 2006 have now reached a total of 600 million euros. These cuts have impacted on the Irish operations of pharmaceutical companies, and the newly-agreed savings "will undoubtedly have further impact," says the industry group.

The new deal, combined with another agreed between the government and the IPHA earlier this year, means that 16 million euros-worth of drug savings will be made this year, with much greater savings to be achieved in 2013-15. It is estimated that the deal will generate savings of up to 116 million euros gross in 2013, according to government figures.

Alex White, Minister of State with responsibility for Primary Care, pointed out that the current cost of drugs to the Irish health system is more than 2 billion euros a year, and while this represents a major challenge to the state, the value of life-saving, life-enhancing drugs to patients is "incalculable."

"The importance of this new deal to the state and to patients alike will be felt well into the future," he said.

Among the measures that have been agreed are that the prices of medicines marketed by IPHA companies which are off-patent prior to November 1 2012 will be reduced to 50% of their original price by November 1 2013. Also, the prices of up to 400 patented drugs which have been available on the HSE Community Drug Schemes prior to 2006 will be subject to a price review, with the aim of achieving price reductions averaging 16%.

In addition, a National Task Force on Prescribing and Dispensing has been set up. It will address these issues primarily from the perspective of quality and patient safety, but is also expected to deliver "significant" cost savings in terms of achieving more cost-conscious prescribing, says the government.

"The work of the Task Force will be wide-ranging, and include providing advice and 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," it adds.

The new deal comes as the Health (Pricing and Supply of Medical Goods) Bill 2012, which seeks to reduce the cost of generic drugs, makes its way through the Oireachtas (national legislature). The government expects the Bill, which will introduce a system of reference pricing and generic substitution, to be enacted before year-end, and that it will deliver further savings in the costs of medicines.

Also, the Department and the HSE are due shortly to finalise discussions with the Association of Pharmaceutical Manufacturers in Ireland (APMI), which represents the generic makers, on further savings in the costs of generic drugs.