Ireland's new Fine Gael (FG) minority government warned on 17 May that it plans to invoke legislation of last-resort that imposes unilateral price reductions for certain high-cost medicines, unless protracted negotiations with the Irish Pharmaceutical Healthcare Association (IPHA) on a voluntary price-reduction agreement achieve rapid progress.
Implications | The Irish government has issued its strongest warning to date that it may consider using 2013 legislation to automatically lower the reimbursement price for some patent-protected medicines. This follows claims that intensive negotiations between the IPHA, the Health Service Executive (HSE), and the Department of Health regarding a three-year fixed-term voluntary price-reduction agreement are deadlocked. Government representatives reported that negotiations ended in early May without achieving a deal. The IPHA disputes this, and issued a response stating that the representative of the innovative industry had "not ended negotiations". |
Outlook | The government's warning is being treated seriously by the IPHA, and should not be regarded as an empty threat. A unilateral price reduction, if implemented, would represent a major blow to relations between the government and the pharmaceutical industry. An alternative explanation is that the new administration is flexing its political muscles in order to gain leverage over the IPHA, and force the association back to the negotiating table in a weakened bargaining position. Having assumed office so recently, the ruling FG party is in a strong position to secure political credibility with the public by adopting a tough approach with drug companies. |
Ireland's cabinet met on 17 May to consider the possibility of invoking special legislative powers under the Health (Pricing and Supply of Medical Goods) Act 2013 that allow the state to unilaterally review and alter patent-protected medicine prices. The warning that the government could act unilaterally to force reductions on reimbursement prices follows intensive and long-running negotiations between the Irish Pharmaceutical Healthcare Association (IPHA), the Department of Health (DoH), the Department of Public Expenditure and Reform, the Office of Government Procurement, and the Health Service Executive (HSE). Negotiations were resumed in March; the talks have to date failed to reach an agreement. Local news organisations reported on 18 May that Ireland's new health minister Simon Harris had advised Prime Minister Enda Kenny that a successor deal to the Supply Agreement for Medicines was less likely to be concluded (see Special Report: Ireland: 17 November 2015: A check-up on P&R negotiations for innovative medicines in Ireland).
The IPHA responded by stating it had "engaged in good faith", and that the body representing the innovative sector had "not ended negotiations"; the IPHA also expressed "surprise" at the tone of government briefings against it. To resolve the situation, the IPHA is now requesting meetings with the country's health minister "to discuss realistic proposals for a new supply agreement". This relatively low-key and non-combative response suggests that – given the absence of any serious alternative – the industry remains desirous of striking a deal. On that basis, some form of agreement is still the most likely outcome after the talks resume.
Outlook and implications
There is an increased likelihood that Ireland will use legislative powers to unilaterally set reimbursement prices for certain patent-protected medicines. This would be carried out on a case-by-case basis, and the government would take such action only where it assesses that inadequate financial savings have been secured; the legislation would not be applied to all patent-protected reimbursed medicines. The government's attempt to pressure the industry into delivering increased affordability is based on the HSE's premise that drug prices are likely to increase by EUR100 million (USD112 million) per annum (10%); medicine expenditure in Ireland's 2016 health budget is set at EUR1.7 billion.
In the event that IPHA–HSE negotiations are unsuccessful, the government has effectively granted authority to the HSE to initiate a process that could lead to unilateral reductions in reimbursement prices. This would mark the first time that the government has attempted to utilise this legislation to enforce a price reduction; a timeline for this process to begin could come as soon as September 2016. Pharmaceutical manufacturers would be given an opportunity to appeal decisions. Under the legislation, the HSE is obliged to issue pharmaceutical companies with notice of any planned reimbursement reduction. A 12-week "waiting period" would then follow, before the new unilaterally-set lower drug price applied; during this 12-week period, the government would allow pharmaceutical companies to issue counter-submissions.
The threat of unilateral price reductions is such that it is likely to compel the IPHA to return to the negotiating table; this is despite the IPHA's insistence that the negotiations have not been suspended. IHS therefore continues to forecast that, on balance, a deal on a supply agreement for medicines is still likely to emerge. There has been a strong trend in Ireland in recent years towards containing public expenditure on medicines, and this is likely to continue. A deal would be a positive development for the innovative sector, since a central feature of an agreement is likely to include provisions for early-access drug schemes (EAS). Expanded EAS have the potential to increase access to innovative medicines across all therapy areas.