HEALTH MINISTER Mary Harney is likely to attempt to increase the number of drugs banned by the state on cost grounds in the next phase of her battle to reduce the state's annual €1.6bn medicines bill, according to industry sources.

Harney is currently facing the prospect that the majority of the state's 1,500 pharmacies will pull out of the medical card scheme from 1 August after she used emergency powers to slash their fees last Wednesday.

Despite this, the drugs industry believes the minister is now working on plans to increase the number of drugs reviewed on cost grounds with a view to reducing the number of expensive new medicines available here.

The move raises the prospect of the emergence of an Irish equivalent to Britain's National Institute for Clinical Excellence (NICE), which is notorious for having blocked new treatments for cancer, arthritis and kidney failure on cost grounds.

Although a small number of cost reviews are already carried out here by the National Centre for Pharmacoeconomics (NCPE), Harney is expected to tighten the guidelines governing medicine costs so that manufacturers will be forced to submit more drugs for assessment.

"The likelihood is that we will have far more NCPE assessments and the guidelines will be much tighter," said an industry source.

A spokeswoman for the Department of Health de­clined to rule out the possibility of tighter assessments, saying that "the department and the HSE will continue to examine all elements of pharmaceutical expenditure and consider all options for improving value for money for the state and taxpayers".

It is expected, however, that any changes to Ireland's assessment regime will only come late next year when the department is due to renegotiate its drug supply deal with the Irish Pharmaceutical Healthcare Association (IPHA), which repre- sents the interests of multinational pharmaceutical companies here.

Fine Gael's health spokes­man Dr James Reilly said he would welcome any extension of economic assessments for drugs but said it could prove to be a "double-edged sword" if mismanaged by the government.

"My real worry and concern is where you could end up with situations like the Herceptin affair in Britain where breast cancer patients were being denied life-saving drugs because some bean-counter thought it wasn't cost effective," said Dr Reilly.

"This is a double-edged sword which if used properly could benefit patients and bring treatment costs down but, on the other hand, it could prove catastrophic for some patients if it isn't done correctly."

Britain's economic assessment system for medicines, which is operated by NICE, continues to prove controversial despite having been in operation for a decade.

Earlier this year, it has banned Tyverb, a long-prolonging drug for terminally ill breast cancer sufferers, which halves the speed of the disease's progression in 20% of patients. The decision is being appealed by its makers, GlaxoSmithKline.

NICE 's deputy chief executive Dr Gillian Leng told journalists that "the committee concluded that Lapatinib is not a cost-effective use of NHS resources when compared with current treatment".