A new report by the Economic and Social Research Institute has recommended new ways to agree prices for patent-protected and generic drugs, which it says will create value for money for drugs while guaranteeing security of supply.
The study - "Delivery of Pharmaceuticals in Ireland - Getting a Bigger Bang for the Buck" - also recommends that all pharmacies be required to show the mark-up on their drugs, as well as their dispensing fees.
Currently the Health Service Executive agrees prices for drugs with manufacturers based on their average price in nine other European Union states.
In 2010, the total health bill for pharmaceuticals was €1.9 billion.
The ESRI recommends prices for drugs under patent-protection be based instead on the lowest price in those nine countries.
It says it would result in prices falling by 20-25%.
Where drugs have competitors, the ESRI recommends doctors should write prescriptions using active pharmaceutical ingredients and pharmacists should be able to dispense certified alternatives to brand-name medicines - unless prescribers request otherwise.
It recommends prices should be decided through tendering and says State Pharmaceutical Schemes should pay the lowest price.
The Institute says this would see a drop of at least 10%.
The report also recommends that all pharmacies be required to post a notice setting out their dispensing fees and mark-ups, as well as what services are included for dispensing.
The HSE says the recommendations will now be considered in detail.
The Department of Health says it is finalising draft legislation to prepare for the introduction of reference pricing and generic substitution.
The Irish Patients Association welcomed the introduction of cheaper drugs, but said it was important to ensure that doctors are not being pushed into generic prescribing simply because it is cheaper.
It also welcomed the idea of pharmacies posting their fees and said that its important for all patients to know how much their medicines cost.
