Healthy Skepticism Library item: 10385

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Publication type: news

Henry D.
Patients the losers and makers the winners in PBS tinkering
The Australian 2007 Jun 9
http://www.theaustralian.news.com.au/story/0,20867,21872525-23289,00.html

Full text:

IT’S become an axiom of Australian medicines policy that everyone loves the Pharmaceutical Benefits Scheme, or must appear to do so, particularly if they’re planning to change it.
For some observers of Australia’s pharmaceutical sector, the amount of love that’s around the PBS at the moment is making them nervous.

What’s worrying is that those who appear to have been involved in planning the current “reforms” to the PBS – the Commonwealth Government, big drug companies, the Pharmacy Guild and the Australian Medical Association – are not being open about whether the PBS is being changed a little or a lot and, importantly, why it’s happening at all.

Amendments to the National Health Act, which governs the operation of the PBS, were introduced into the House of Representatives last week and are due to be debated in the Senate this coming Tuesday.

On the one hand these aim (laudably) to cheapen generic drugs. On the other hand they appear to be designed to protect the patented products of the big drug manufacturers from having their newer products compared, for pricing purposes, with cheaper older products that work just as well. This performance test has been set by the Pharmaceutical Benefits Advisory Committee since 1993.

The rule has been simple – superior clinical performance is likely be rewarded by a higher price. Mere equivalence receives the same reimbursement level as existing drugs. This approach is known internationally as “reference pricing”.

Major companies have objected strongly to Australia’s use of reference pricing. But their response, in this case, has not been to make better drugs (which admittedly has got harder over time), but to ask the Government to put their newer products in a separate formulary from the older drugs; this is what the legislative amendments are designed to provide.

The creation of two formularies represents a weakening of the evidentiary process used to list drugs on the PBS since 1993. The first formulary (F1) will list drugs that are only available as a single brand and are not considered “interchangeable” at the patient level. The drugs listed in F1 will not be price-linked to the drugs in the second formulary (F2), which will mainly be older drugs available in multiple brands.

By requesting that drugs be proven “interchangeable” before they are priced down to the level of older equally effective products, the industry has made it harder for the Pharmaceutical Benefits Advisory Committee to base their decisions on the results of clinical trials. This is a move away from evidence-based medicine, which has become a major driving force in modern clinical care.

While accepting that a drug, on average, is no better than an older product, a doctor can often find a reason why a new product is not strictly interchangeable in every patient. As a consequence companies will likely argue for higher prices for drugs that do not offer better measurable performance, on the grounds that someone, somewhere, has a unique need for their products.

But the PBS was not designed to, and could never, meet every conceivable need of every patient. Decisions about what drugs are listed and at what price must be based on average effects seen in good quality clinical trials.

The likely impact of the formulary changes is underscored by the announcement that around 450 single-brand products will be placed in F1, and will thus be protected from price competition from around 230 multiple-brand medications in F2. This means that drugs like the cholesterol-lowering agent atorvastatin – sold under the brand name Lipitor, and the biggest single cost to the PBS, costing taxpayers nearly $500 million in 2005-06 – will probably escape price competition from generic forms of the closely related drugs simvastatin and pravastatin.

Likewise, the antidepressant escitalopram (Lexapro) and the peptic ulcer treatment esomeprazole (Nexium) are likely to be protected from price competition from the older and near-identical drugs citalopram and omeprazole. If this happens, it will break the link between clinical performance and price.

Another legislative amendment concerns the prices of generic medicines. It has become apparent that Australia, in the past, has not taken full advantage of the savings offered by cheaper generic medicines. Tightening the policy on generic drugs therefore makes sense.

But the Government could have gone much further in delivering cheaper medicines to the public. It could have introduced tendering arrangements and taken advantage of the availability of low-cost, high-quality generic drugs now available on international markets. It could have allowed supermarkets to expand into the pharmacy market. While one would never hold up the US as a general model of affordable pharmaceutical access, Wal-Mart’s $US4 per prescription generic drugs program has demonstrated that many important drugs (for blood pressure, cholesterol, depression) can be made very affordable. Such a move by an Australian retailer would reduce hardship for the many families who cannot afford the (very high) patient contributions levied on PBS prescriptions.

So, for pharmaceutical manufacturers the reforms offer opportunities to protect newer drugs from legitimate price competition. For patients the reforms offer modest price cuts for some medicines starting in 2008. At a time of rising costs of petrol and home ownership, and with mounting evidence of patient hardship with prescription costs, the contrast between the generosity shown to big business and the meagre offer to patients couldn’t be starker.

David Henry is professor of clinical pharmacology at the University of Newcastle, Australia