Drug payment scheme costs are spiralling, and pharmacists are making hefty margins.

Picture the scene. A 30-something professional is heading off on an expensive round-the-world trip with his wife. He walks into a pharmacy to pick up medicines for a journey that costs thousands of euro and most people could only dream about.

He hands over a prescription for himself and his wife and the pharmacist returns with the medication for the trip: Dioralyte rehydration mix, Fucibet cream for insect bites, anti-malarial tablets and the likes of Ciproxin, Imodium and Motilium for diarrhoea and stomach upsets.

But the traveller realises he has some Fucibet and Motilium left over from a previous trip and tells the pharmacist to leave them out.

‘‘You may as well take them,” says the pharmacist. ‘‘You’re not paying for them anyway.”

Welcome to the drugs payment scheme, where no individual or family has to pay more than €85 in any calendar month for approved prescribed medicines - irrespective of their income.

The bill for the travel drugs comes to just under €360.The traveller hands over €85 and the state covers the remaining €275. The pharmacist, meanwhile, gets a 50 per cent markup on the wholesale price of the medication, meaning it is in his interest to sell as much as possible to his customers.

It is no surprise then that the drugs payment scheme cost €281 million last year. About 303,000 individuals were claiming on the scheme in May this year and the scheme is set to overrun its budget by €168 million this year.

‘‘It sounds utopian,” one GP said, ‘‘but I do wonder at the wisdom of having anti-malarials and creams like Fucibet, for insect bites, included in the scheme. Surely people who can afford holidays to far-flung destinations should not have their medication for the trip paid for by the state, especially when there are desperate shortages in other areas?”

The GP said this was particularly pertinent, given the impact that health cutbacks were having around the country. In the past week, doctors in the Midland Regional Hospital in Portlaoise have been instructed to cut back on the number of day cases they process, while a cardiac unit at Ennis General Hospital in Clare is to close.

The drugs payment scheme is one of a number of demand-led drug schemes - others include the long-term illness and high-tech drug scheme - that fall under the Primary Care Reimbursement Scheme.

The drug s repayment scheme covers about 1,400 medications, including drugs used to treat depression, cholesterol, heart disease and asthma.

Few people argue against the rationale of offering financial support and subsidies to people needing regular medication - or indeed to cancer sufferers in need of high-tech drugs, or those suffering from a long-term illness such as cerebral palsy or multiple sclerosis.

But many in the health sector believe that certain changes could generate significant savings.

The Commission on Financial Management and Control Systems in the Health Service, the Brennan Commission and the National Centre for Pharmacoeconomics have substantiated these claims and made a compelling case for reform of certain schemes.

The Health Service Executive (HSE) recently identified the drugs payment scheme and other demand-led schemes as being among the main causes of its much publicised cost overrun, which has resulted in a freeze on health service recruitment.

‘‘The bigger factors driving the overrun are really things like the demand-out schemes, as they are known in the community - high tech medicines and drugs payment schemes,” Liam Woods, the national director of finance at the HSE, told the RTE Morning Ireland radio programme.

‘‘The pattern year-on-year in those schemes is that they are growing by between 15 per cent and 20 per cent per annum, and indeed we have been supported by government to grow those schemes.”

The cost of the drugs payment scheme has grown exponentially. In 2000, it cost €110 million.

This year the bill for the scheme is expected to be €323 million. According to a recent HSE analysis of the spend on statutory drug and allowance schemes, expenditure on such schemes is a ‘‘growing underlying problem’’, as budgetary allocations are not keeping pace with expenditure growth.

The analysis concluded that annual increases in the number of people using the schemes, coupled with rising epidemics of obesity and diabetes, were responsible for over-runs.

The GP source said he ‘‘regularly’’ came across individuals claiming under the drugs payment scheme who asked him to beef up prescriptions, as they knew the state was footing the bill.

‘‘I am regularly asked to add a few extra items - including Viagra for recreational use - onto prescriptions. Any doctor in the country will tell you that. People know how to work the system,” he said.

A further problem is that there is no incentive to prescribe cheaper, generic drugs under the drugs payment scheme.

Generic drugs have the same active ingredients but are less expensive than the branded products.

Some health service sources believe that there should be legislative provision that the state should only refund the equivalent of the cost of generic drugs.

Dr Michael Barry, clinical director of the National Centre for Pharmacoeconomics at St James’s Hospital in Dublin, carried out a survey of generic drug usage in Ireland.

Published in 2003, it estimated annual savings of up to €9 million could be achieved on the top 30 drugs by expenditure if generic drugs were used on the drugs payment scheme. Barry said the situation had not changed.

‘‘We tend to prefer to prescribe brands, as opposed to generic drugs. We’re not quite sure why that is the case,” he said.

Barry said that a drug budgeting scheme that allowed GPs to secure grants to improve their practices if they made savings on prescribing was in place since the early 1990s, but it only applied to medical card holders.

Over the past five years, generic substitution has been introduced in many EU member states including Portugal, Sweden, Finland and Germany. Barry believes incentivising the use of generic drugs would also reduce costs on the long-term illness and high-tech medicines scheme.

A report commissioned by the European Commission on pharmaceutical pricing found that Ireland had one of the lowest levels of consumption of generic drugs in Europe, at less than 10 per cent.

The HSE last year reached an agreement with the Irish Pharmaceutical Healthcare Association (IPHA) which should result in major savings.

Brian Buckley, consumer affairs director of the IPHA, said the four-year agreement set the ex-factory cost of medicines based on the average price of medicines in nine other European countries. The HSE estimated the deal would result in savings of up to €300 million over four years.

The HSE’s recent deal with the Pharmaceutical Distributors Federation has also secured savings. Since September 2006, the wholesale mark-up in drugs by companies such as United Drug, Celesio and Uniphar has been 15 per cent, down from 17.66 per cent.

The mark-up enjoyed by pharmacists has been a contentious issue for quite some time.

In 2005, the HSE paid out €284 million in fees and markups to pharmacists on drugs that cost €905 million. The pharmacists received an additional €8.7 million in patient care fees from the HSE.

The recent HSE report on demand-led schemes noted that when drugs are dispensed under the drugs payment scheme and the long-term illness scheme, the pharmacist earns a 50 per cent mark-up on the ingredient cost as well as a dispensing fee.

As retail pharmacies routinely negotiate discounts (in the form of rebates) with wholesalers in relation to the drugs, medicines and appliances they supply under the drugs payment scheme, the mark-ups are widely believed to be even higher.

The 50 per cent mark-up is not available to the pharmacist when the same drugs are dispensed under the general medical card scheme, however. Pharmacists are paid on a fee for service basis for the medical card scheme.

Barry said: ‘‘This means the state pays less for the medication of someone who holds a medical card than it does under the drugs payment scheme. We have argued for this to be reviewed, as it is a serious anomaly and the state is not getting good value for money.”

Under the high-tech medicinal products scheme, pharmacists get a patient care fee, as the wholesaler or pharmaceutical company invoices the HSE directly. In 2003, the Brennan Commission recommended that the 50 per cent mark-up paid to pharmacists under the drugs payment and long-term illness schemes be abolished.

However, the HSE has yet to tackle margins enjoyed by pharmacists. While it reported that Brendan Drumm, chief executive of the HSE, ordered a single review of demand-led schemes, including the drugs payment scheme, a spokeswoman for the HSE said that no major review was under way.

‘‘There is work in progress looking at the community pharmacy contract and the GP contract,” she said.

‘‘Any new contractual arrangements emerging from both reviews will promote rational prescribing and dispensing on the part of GPs and pharmacists.”

The HSE, in conjunction with the Irish Medical Organisation, is reviewing an independent evaluation of the integrated drug treatment system ‘‘and the outcome of this process is relevant in the context of the HSE’s objective to promote rational cost effective prescribing’’.

The HSE is also looking at its arrangements for the supply of non-drug items. It wants to exploit its buying power in the market to get better value for money from its spend in this area.

While Ireland has been criticised for its lack of a process to evaluate the cost-effectiveness of the health service, that has changed with the setting up of the Health Information and Quality Authority (HIQA), which also has a health technology assessment function.

Later this month, Dr Mairin Ryan will take up her post as director of health technology assessment at HIQA.

She will be responsible for evaluating the clinical and cost effectiveness of technologies adopted by Ireland’s health services. Whether the demand-led drugs scheme will come under her scrutiny remains to be seen.