Ireland retracts threat to impose unilateral price cuts, agreement reached "in principle" on price reduction deal

Media organisations in Ireland are reporting that agreement has been reached "in principle" on a voluntary price reduction agreement between the government and representatives of innovative pharmaceutical companies. The outline of the agreement has not been made publically available at this stage. However, the agreement will apply to patent-protected medicines purchased by Ireland's Health Service Executive (HSE). According to reports, the deal is aimed at restricting the HSE's pharmaceutical expenditure to EUR1.2 billion per annum. Estimated savings of EUR775 million, spread over a fixed four-year period, have been secured by the state.

Given the economic power of pharmaceutical industry in Ireland, and the fact that pharmaceutical manufacturing comprised a 26.4% share of exports in 2015 (equivalent to USD31.7 billion), the government has done reasonably well in securing the projected savings (see Ireland: 17 November 2015: A check-up on P&R negotiations for innovative medicines in Ireland and Ireland: 19 May 2016: New Irish government threatens action over lack of progress on price-reduction agreement with pharmaceutical industry). In that context, it is likely that the IPHA held the upper-hand in the majority of the protracted negotiations. However, the conclusion of a deal was also delayed by the February parliamentary election and the subsequent time needed to form a new government.

The reported EUR775 million in savings that the government has secured is an increase from the IPHA's previous offer of EUR700 million made earlier in the year. The majority of these financial savings will be directed towards procuring new innovative medicines and improving patient access to the latest high-cost drugs.

There are also reports that Ireland will expand its international reference pricing (IRP) basket from nine to 14 countries. This aligns with a previous parliamentary committee that had recommended that Ireland should use a larger basket of countries when referencing pharmaceutical prices in order to include low-cost EU member states (see Ireland: 13 October 2015: Parliamentary report recommends changes to Ireland's international reference pricing model). Until the HSE/IPHA agreement has been published in full, it is unclear which new EU countries will be added to the country's IRP system. The probability is that government would look to expand the list of reference countries to include Sweden and Slovakia, among others. The changes to the IRP methodology are substantial and would probably also have a knock-on impact on prices in other countries that reference drug prices in Ireland.

Another aspect of the rule changes will apply to reimbursement approval decisions for expensive new medicines. In future, under the terms of the agreement, HSE pricing and reimbursement (P&R) approvals will be required to take into account a drug's cost effectiveness as well as the budgetary impact involved (see Ireland: 31 May 2015: Government ministers assume powers to sanction life-saving medicines from HSE). This criterion would mean that even if a HSE evaluation determines that a high-cost medicine is not cost-effective, the minister of health will make the final pricing and reimbursement decision.

Ireland enters race to attract EMA headquarters to its shores

Ireland has joined Sweden, Italy, and Denmark in the race to potentially become the headquarters of the London-based European Medicines Agency (EMA). The move to position Ireland as a possible alternative home for the EMA follows the UK referendum vote to leave the European Union. Calls for Ireland to pursue a strategy focused on attracting the EMA have been voiced by the pharmaceutical division of the Irish Business and Employers Confederation (IBEC), an influential lobby group. The IBEC-affiliated PharmaChemical Ireland (PCI) has also signalled its strong support for a strategy to attract the EMA's headquarters to Ireland.

The main advantages that Ireland has as a location for the EMA's headquarters are that it is the only English-speaking country in the Eurozone and that it has a large export-orientated pharmaceutical industry that already hosts the EU headquarters of several of global pharmaceutical companies. On the downside, the Health Products Regulatory Authority (HPRA), the Irish medicines regulatory authority, is expecting to have a substantially increased workload in the aftermath of the United Kingdom's vote to leave the EU. This is due to that fact that Ireland's pharmaceutical exports reached about EUR3.5 billion (2015 figures) to the UK annually. Once the UK exits the EU, this will require EU customs imports (and potentially duties) to be imposed, which would add to the regulatory burden in Ireland.

A November 2015 report by the Department of Finance (available here) previously concluded that bilateral trade between Ireland and the UK could fall by more than 20% following a UK opt-out from the EU. The disruption to economic linkages would particularly negatively affect the pharmaceutical sector in Ireland.

Outlook and implications

A final decision to approve the HSE/IPHA agreement must be taken by Minister of Health Simon Harris. The political indications are that the minister is favourable to agreeing the deal. Assuming this is the case, the new pricing and supply framework agreement would come into operation from September 2016 and last until 2020. The government is expected to formally endorse and publish details of the agreement during the first week of July. Further details regarding a potential early access agreement for new innovative medicines will only become clearer at that point. In the meantime, both sides are continuing to negotiate some of the finer details.

Once implemented, the deal will commit Ireland to no increases in the HSE's annual medicine expenditure bill during the next four years, beyond the current threshold of EUR1.2 billion per annum. Pharmaceutical companies that have received letters of notification from the HSE regarding unilateral price reductions should be aware that these notifications will now be withdrawn (see Ireland: 23 May 2015: HSE confirms process under way to issue pharma companies notice of new proposed lower prices).