Thursday 16 January 2014

Generic prescription medicine in Ireland - impact on all CPG brands?

The inevitability of the growth of generic medicines in Ireland moving from the current 5% to the UK 80% of prescriptions is being brought forward by market forces…

A Dublin pharmacy is to sell generic prescription drugs at Northern Ireland prices by introducing a radical business model likely to be closely watched by other pharmacies.

Healthwave, a recently opened Dundrum pharmacy, is promising to match cross-Border prices for generic medications. Under its scheme, people availing of the savings will have to join a subscription service with an upfront fee of €25 a year. The pharmacy will charge €4.95 for a 28-day supply of Atorvastatin, a generic cholesterol medication, which generally costs more than €10 in pharmacies in the Republic.

The scheme is aimed at the private market but could also save the State money. For instance, a customer with chronic obstructive pulmonary disease who pays €170 monthly for drugs currently has to pay the first €144, with the Government covering the rest. Under the new system the drugs would cost €100 per month, saving the patient €44 per month and the State €26.

With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest that change is inevitable. See here

However, adding the fact that Hickey's pharmacy group latest results earlier this week warned of 'excessive' rent levels adding to the pressure on pharmacies in Ireland (some leases upward only, based on Tiger valuations) and possibly higher import prices on many CPG brands vs. UK trade prices, means that the Generics initiative will draw attention to net margins in Irish retail pharmacy and retailing  generally.

Over time, media and consumer pressure, combined with the economic downturn we believe will eventually cause the government to legislate for increased use of generics.

However, the real issue will be a renewed  focus on the overall cost of trading in Ireland...  In other words, an opportunity for all branded goods suppliers to examine potential or actual disparities in their pricing structures between the UK and Ireland, and take appropriate steps, now...

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