Healthy Skepticism Library item: 10440

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Cresswell A.
Threat to drug subsidies
The Australian 2007 Jun 14
http://www.theaustralian.news.com.au/story/0,20867,21902085-23289,00.html

Full text:

REFORMS to the Pharmaceutical Benefits Scheme now before the Senate reflect pressure from the US to weaken the 60-year-old drug subsidy program, and could lead to it being undermined altogether, experts claim.

The proposed changes – designed to save the federal Government more than $580 million over the next four years – will cut prices of some generic drugs, but will also protect many expensive branded medicines from automatic price cuts.

Drug policy experts warn that the little-publicised bill appears to follow US government wishes by striking at the heart of the PBS’s use of “reference pricing”, which bases the price the PBS pays on the cost of the cheapest equivalent drug.

Separate articles, published online yesterday by the Medical Journal of Australia, argue that while some prices may fall, the latest reforms will do nothing to reduce PBS patient co-payments of up to $30.70. The reforms may even increase the prices the PBS pays for new medicines that are no better – or even less effective – than existing products.

But the most damaging allegation is that the changes reflect pressure from the US, which, as part of the negotiations for the free trade agreement struck in 2004, forced the creation of a new bilateral working group to discuss medicines policy. Critics warned then that the deal failed to adequately shield the PBS from US attempts to dismantle it.

Thomas Faunce, senior lecturer in law and medicine at the Australian National University, argued in one of yesterday’s MJA papers that if US “influence on Australian medicines policy continues, there are likely to be adverse consequences for all Australians”. These could lead “eventually, (to) the end of public-funded medicines”.

As evidence of US intent, Dr Faunce cited the 2003 Act of Congress instructing the US FTA negotiators to “achieve the elimination of (Australian) government measures such as price controls and reference pricing which deny full market access for US products”.

Under reference pricing, new drugs are listed on the PBS after their maker submits evidence comparing their efficacy with that of existing alternatives. The price the PBS pays for the drug is meant to reflect the additional benefit from the new drug, if any.

The measures before parliament would restrict reference pricing by dividing medicines on the PBS into two separate “formularies”, or lists, with one for big-brand patented medicines and the other for generics. Drugs would only be compared with other medicines in the same list – so new generics would no longer affect the branded drugs.

“No matter how much spin you put on it, breaking the PBS into a patented component and a generic component is a fundamental change to the PBS – and exactly what the Americans wanted,” Dr Faunce wrote.

A second paper, co-written by David Henry, a former member of the Pharmaceutical Benefits Advisory Committee, said the bill “undermines the evidence-based approach” now used by the PBS.