Ireland finalises USD785-mil. medicines-savings agreement with industry

Ireland's Minister for Health Simon Harris announced on 20 July that an agreement on the cost of state-funded medicines had been finalised following protracted negotiations between the Irish Pharmaceutical Healthcare Association (IPHA), the Health Service Executive (HSE), and the Department of Health (DoH). The scope of the agreement will cover the next four-year period (from 1 August 2016 to 31 July 2020), and is valued at EUR785 million (USD865 million). The financial value of the agreement will be partly achieved by reductions in the cost of both on-patent and off-patent medicines supplied to or reimbursed by the HSE.

The agreed measures include reductions in prices of medicines marketed by the 38 IPHA member companies, which represents the innovative sector. These companies will account for EUR600 million in projected savings, while non-IPHA firms contribute EUR150 million.

The content of the framework agreement is available to view here.

Price cut of 50% on entry of generic competitor for an off-patent medicine

Clause seven of the pricing arrangements applies to patent-expired medicines. The provision applies to patent-expired, non-exclusive medicines (excluding biologics) where there is a generic medicine available for supply. Patent-expired medicines that have come off-patent prior to 1 August 2016 will be subject to a 50% reduction of the original ex-factory pharmaceutical price; prices of medicines that become a patent-expired, non-exclusive medicine after 1 August will be reduced to 50% of the original ex-factory price of that medicine. The cut will be triggered after the HSE notifies companies that a generic medicine is available for supply.

Reduction of 20% in biologic medicine prices where a biosimilar medicine is available

Clause eight of the framework agreement governs pricing arrangements for patent-expired, non-exclusive biologic medicines where a biosimilar is available for supply. From the 1 August 2016 the price of existing patent-expired, non-exclusive biologic medicines will be reduced to 80% of the original ex-factory price; the price of a biologic medicine that becomes patent-expired after the 1 August 2016 will be reduced by 80% of the ex-factory price of the biologic medicine as of 31 July 2016. In addition, clause 8.1.3 adopts a 12.5% rebate on sales of patent-expired, non-exclusive biologic medicines where a biosimilar is available.

The Healthcare Executive Alliance (HEA) – which includes Teva (Israel) and Mylan (US) as members – criticised the provisions related to biosimilar medicines on the Irish market. The president of the HEA organisation, Sandra Gannon, is reported by the Irish Medical Times as stating that the agreement represented a "missed opportunity" as far as biosimilar-medicine uptake was concerned. Gannon is reported as saying that an "artificial pricing clause… blocks better-value biosimilar medicines entering the market", and "leaves Ireland alone in Europe…[in] preventing competition in this part of the medicines market". The HEA advocates on behalf of generic- and biosimilar-medicine manufacturers. There is some merit in the organisation's argument that elements of the deal will protect more expensive medicine suppliers to the disadvantage of lower-cost biosimilar-medicine producers. The HEA has also been highly critical in the past of the government's negotiating model, which stipulates negotiation only with the IPHA and to exclude the HEA from discussions (see Special Report: 17 November 2015: A check-up on P&R negotiations for innovative medicines in Ireland).

Other implications of the framework agreement

Ireland will introduce an annual downward-only price re-alignment for the first time; the first reduction will be carried out on 1 August 2016, and thereafter on 1 July for each subsequent year of the agreement. In previous framework agreements, prices were benchmarked against Ireland's international reference pricing (IRP) basket. However, prices decreased only at the start of the multi-annual framework agreement. When medicine prices fell in other countries in the country's IRP basket, Ireland did not benefit from the price decreases in those countries until the agreement had expired. This situation will now be rectified, with pharmaceutical companies subject to more frequent, periodic price changes.

There will also be a clearer approval process for the reimbursement of new medicines. This should address some of the dissatisfaction in the pharmaceutical industry, and among patient groups, over the extensive delays in the process of Ireland's funding of cost-effective medicines.

In future, some new high-cost medicines will be presented to the cabinet for approval. The case will be presented by the health minister, and will require a majority cabinet approval; IHS Markit previously reported that cabinet ministers would have the final say in approving certain high-cost medicines for reimbursement (see Ireland: 31 May 2016: Government ministers assume powers to sanction life-saving medicines from HSE). This development will not undermine the impact of cost assessments carried out by the National Centre for Pharmacoeconomics (NCPE), which have been enshrined in the 2016–2020 framework agreement. However, it will mean that where the HSE is not in a position to fund a particular high-cost medicine from within its existing financial resources, the agency will inform the DoH, which can bring a memorandum to the government requesting the medicine's consideration for funding. In order for this to take place, the HSE will be required to make a judgement (based on nine criteria – including one for cost) that the reimbursement of a particular drug would be beneficial, but that the HSE requires additional resources to fund the treatment. It is likely the cabinet will examine about 20 such medicines per year, although this figure could increase.

It is important to note that the new health minister Simon Harris has voiced his opposition to the system in which the cabinet wields the final decision on some high-cost drug approvals. Harris cautioned that under his tenure as minister, decisions would only be taken by government ministers "if all of the other processes have been followed through and there is a resource implication…that the HSE cannot meet". Among the first decisions that are likely to come before the cabinet will be funding for the cystic fibrosis drug Orkambi (lumacaftor + ivacaftor; Vertex, US); ministers are likely to face intensive lobbying by patient groups to approve the EUR160,000 per patient, per annum medication. The downside for the pharmaceutical sector is that the tweaked approval system will mean that it is increasingly difficult for companies to plan ahead. However, the new approval system should at the least improve transparency in the medicines-approval process in Ireland. The cabinet may be required to provide a full reason for decisions to sign-off on a medicine, as well as a detailed explanation of how the medicine will be funded and from where resources will be taken in the health service. However, it is not clear that this process would in fact expedite the reimbursement decisions themselves.

The public mood in Ireland is generally in favour of reimbursing higher-cost medicines; this should mean that in the first years of the agreement, cabinet ministers will come under intense political pressure to approve new high-cost medicines. However, in the longer term it is apparent that public support for funding higher-cost treatment is limited; public opinion would likely harden in the event that funding increases for high-cost drugs resulted in reduced financial resources to utilise elsewhere in the health system.

Finally, the new agreement creates an outline for an annual "horizon scan" review. Meetings will be held to highlight new medicines that are likely to enter the Irish market in the medium-term outlook (about two years and over). This will in addition trigger a budgetary review process for these new medicines, which should result in improved planning for new therapies.

Outlook and implications

The 2016–2020 framework agreement is considered to have brought improved terms for the Irish state than its predecessor 2012–2015 agreement. It is certainly the case that government negotiators have succeeded in extracting greater financial savings; the previous 2012–2015 agreement projected savings to the taxpayer of about EUR400 million. State spending on medicines amounted to EUR1.7 billion in 2015 (or in excess of EUR2 billion when other hospital medicines expenditure is included). Under the new agreement, the savings to the state are forecast to average about EUR190 million per annum. The level of savings that will be achieved this year is unclear, but will be on a lower order. The majority of the savings that are achieved will be re-directed to funding access to new innovative medicine treatments. The expansion of the IRP basket is a relevant development, which the pharmaceutical industry will monitor closely (see Ireland: 19 July 2016: New price-reduction agreement reported to contain sterling devaluation clause, expands Ireland's IRP basket). Overall, the government's objective is to bring Ireland closer to European Union-average pharmaceutical prices. This should continue to encourage pharmaceutical companies to bring innovative products onto the market.