PriceWatch: While Irish people have grown wearily accustomed to paying over the odds for almost everything in recent years, there are some prices which we still find very hard to stomach - and the high cost of prescription drugs is a particularly bitter pill to swallow.

PriceWatch has received many examples of cheap pharmacy prices in Spain and Portugal from readers sick of the sums they shell out for the same medications in chemist shops in Ireland. After developing an ear infection in Barcelona, one reader was given a prescription for an antibiotic which cost €4.01 for a box of 12 - or 33 cent a tablet. At home their GP prescribed the same medication but the price had trebled and a box of 15 tablets cost €15.73 or €1.04 each.

"We need to stop ignoring the problem and look at what can be done," says Dermott Jewell, the chief executive of the Consumers Association of Ireland. "In other parts of the world not very far from here, the same medicines can be bought for far cheaper. Nothing is being done at the highest level and consumers have the right to be very annoyed."

From the beginning of the supply chain, consumers are getting a bad deal. Manufacturer prices are set between the Irish Pharmaceutical Healthcare Association (IPHA) and the Department of Health and Children. Under a formula dating back to 1972, Irish prices are linked to five countries - Denmark, France, Germany, the Netherlands and Britain. The countries are chosen because of their proximity to Ireland but it means our cost structure reflects Northern European prices, which are much higher than the EU average.

Talks on re-negotiating this agreement, which expired last July, only got under way recently but, according to a Department of Health spokeswoman, "significant progress" has been made.

Once the cost price has been established, wholesalers add their 15 per cent before passing the drugs on to pharmacies who take their cut, which is, unless you have a medical card, enormous. For people with medical cards, pharmacies charge the ingredient cost, plus a dispensing fee of €3.25 and VAT. For nearly everyone else, on the Drug Payment Scheme (DPS), pharmacists charge the ingredient cost, a 33 per cent profit margin, plus a dispensing fee and VAT.

The Irish Pharmaceutical Union, which represents 1,600 pharmacists across the State, accepts that as a result of this system, private patients are paying high prices. But it blames the Government, for paying an "unrealistic" cost price to pharmacists for medical card patients who make up more than 70 per cent of the client base. It says that 66.7 per cent of a pharmacist's core stock is dispensed to the patient at cost price with zero margins for the pharmacist.

"Irish pharmacists provide a quality service and excellent value for money for patients," IPU president Michael Guckian says. "However the private patient is subsidising the public patient. We believe that the key to reducing the cost of medicines for the private patient is for the department to pay a realistic rate to the pharmacist under the Medical Card Scheme."

He says the IPU has sought a renegotiation of its payment arrangements and "we will be seeking market rates for the delivery of this scheme now that we are operating in the most competitive pharmacy sector in all of Europe. The Government cannot have it both ways, a liberal market without market rates."

Irish GPs aren't helping consumers by continuing to prescribe brand-name, proprietary drugs even though many are out of patent and cheaper generic equivalents are available. A 2003 report from the National Centre for Pharmacoeconomics (NCPE) showed that more than 20 per cent of prescription items were dispensed as brand-name drugs although generic versions were available. In cases where drugs have gone off patent, doctors still prescribe brand-name products in 80 per cent of cases. In the UK that figure is closer to 20 per cent.

The Department of Health believes consumers of off-patent medicines "should be in a position to benefit from competition in the market following patent expiry. How best this benefit can be achieved will be determined in the context of negotiations" with the industry, PriceWatch was told last week.

Jewell has an idea which could be implemented without extensive negotiations. "It would help enormously if doctors said 'or other' on the prescriptions allowing pharmacists swap named brand with much cheaper generic products," he says. "It could save consumers a fortune."

At least the Government is tackling one issue which, it claims, is an obstacle to lower prices - the lack of competition. Earlier this month it approved a draft Pharmacy Bill including a proposal to remove the derogation on non-Irish graduates owning, operating or supervising pharmacies less than three years old.

"This first Pharmacy Bill will introduce measures which will increase competition and benefit consumers by making it easier to open new pharmacies," the Minister for Health, Mary Harney said. For its part, the IPU says competition is not the issue, so the move will have little, if any, impact on prices.

Pharmaceuticals and the Consumer, a report prepared for the Consumer Strategy Group in late 2004, outlined a number of recommendations to bring lower prices. It called for a change in the way manufacturers' prices of pharmaceuticals to include a consumer impact assessment "to ensure that consumers are getting best value for money".

The report also said a review of mark-ups in the DPS and other schemes was necessary, as well as increased incentives for GPs to encourage generic prescribing. It said prices for branded and generic drugs in pharmacies should also be displayed at the point of purchase and pharmacists should be able to provide generic substitutions for branded drugs.

It's clear the steps both the Government and the industry need to provide consumers with better value are not complicated.

Whether anyone is prepared to take these steps remains the question.