LEGISLATION to cut the cost of medicines will seriously undermine the pharmaceutical industry in Ireland and lead to drug shortages, the industry has warned.

The legislation, currently before the Oireachtas, could lead to some branded drugs being withdrawn from the Irish market and will hinder the supply of innovative treatments for patients, according to the Irish Pharmaceutical Healthcare Association (IPHA).

In a broadside to Minister for Health James Reilly, the association says the legislation must be significantly amended.

Dr Reilly is under pressure to make major savings in the State’s annual drugs bill to help eliminate cost overruns in the health service which currently stand at €260 million. Talks between his officials and the pharmaceutical companies have yet to produce results.

Irish drug costs are among the highest in the world, although negotiations between the Department of Health and the industry have produced some reduction in prices in recent years. Almost one-fifth of health spending goes on drugs.

While both sides have remained tight-lipped about their discussions, IPHA chief executive Anne Nolan, writing in the association’s newsletter, has warned the Government that it needs to proceed “very carefully” with the Health Bill which came before the Seanad before the summer.

The Bill will allow pharmacists to substitute cheaper generic drugs for branded items on patients’ prescription and will also allow the State to save money by operating a system of reference pricing, where reimbursements are limited to the cost of the cheapest item in a basket of comparable drugs.

Ms Nolan said the legislation went well beyond what it had expected. “In giving the HSE alone the power to decide what medicines will be reimbursed under the State schemes and in what circumstances... will undermine the authority of the prescriber in choosing the medicine for patients under his/her care.

“This could result in shortages of some vital medicines and, due to the size of the Irish market, a steep fall in prices could lead to certain products becoming uneconomical and, as a consequence, they could be withdrawn from the Irish market altogether.”

Ms Nolan said the industry was well aware of the pressure on the Government from the troika and had helped to deliver €600 million in savings in recent years. However, “bad law is not good law”.

“This Bill could seriously undermine an industry which employs over 25,000 people, and hinder the supply of innovative medicines and treatments to Irish people.”

The pharmaceutical industry accounts for over 50 per cent of manufactured goods exports in Ireland and half of corporation tax.