DUBLIN (Reuters) - Ireland's overspending health ministry has secured a deal with pharmaceutical companies to cut its medicine bill by over 100 million euros (81 million pounds) per year, to help the government meet its deficit target.
Swollen health and social protection budgets are the biggest threat to Ireland's efforts to cut its budget gap to below 8.6 percent of GDP this year from 9 percent in 2011, in line with targets imposed under its EU-IMF bailout.
Ireland's troika of lenders, the International Monetary Fund, European Central Bank and European Commission, have expressed concern about overspending in the health department, which was 250 million euros over target at the end of September.
With a further 700 million euros of savings to find next year, Health Minister James Reilly said he had secured a deal with the Irish Pharmaceutical Healthcare Association, which represents the likes of GlaxoSmithKline Plc, Novartis and Pfizer Inc
The agreement will generate savings of up to 116 million euros next year and a total of 400 million euros by 2015.
Ireland, which hosts production facilities for some of the world's top pharmaceutical companies, has in recent years paid higher rates for medicine than some of its European neighbours.
New legislation on the purchase of generic medication is set to save an additional 100 million euros per year, Reilly said. The government currently spends more than 2 billion euros per year on drugs.
The medicine agreements follow emergency cuts introduced in August that hit care for the elderly and the disabled, prompting protests outside government buildings, and a deal last month to make senior doctor work more flexible hours.
Talks with the doctors broke down last week, but Reilly told national broadcaster RTE on Monday that he still expected the deal to be implemented.
Asked about estimates that the department's overspend might hit 500 million euros in 2012, Reilly said "I don't think we will get anything like that at all."
(Reporting by Conor Humphries; Editing by Catherine Evans)