Healthy Skepticism Library item: 11957

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Publication type: news

Cresswell A.
Big Pharma erodes Govt's pricing plans
The Australian 2007 Nov 3
http://www.theaustralian.news.com.au/story/0,25197,22688582-23289,00.html

Full text:

PHARMACEUTICAL companies have won another concession from the Coalition Government with respect to its drug subsidy reforms, with the Government agreeing to delay some of its planned price cuts.

Although the changes only apply to five medicines — the stomach acid drugs esomeprazole, lansoprazole, pantoprazole and rabeprazole, and the blood-pressure-lowering medication lercanidipine — they will still result in a $104 million reduction in the savings that were due to flow from the reforms over four years.

The drugs were originally going to be included in a 25 per cent cut in the price the Pharmaceutical Benefits Scheme pays for them, which is due to come into force from August 1 next year.

Under the reforms, drugs listed on the PBS will be split into two main “formularies”, F1 and F2. The split is designed to protect patented medications from price reductions that are triggered when a generic version of a different drug enters the market, which then triggers an automatic cut to the price the PBS pays for branded version of that generic. But these price cuts can also extend to different drugs that are within the same class and therefore have the same therapeutic effect — a phenomenon the new formularies will reduce or eliminate.

As part of the new concession, the five drugs — which are all only available as a single brand, with no competing brands — will only have a 4 per cent cut on that date. The remainder of the reductions will be spread over the following years — with a further 7 per cent cut being applied on August 1 2011, 2014 and the final cut in 2018.

The changes were published with little fanfare as part of the Mid-Year Economic and Fiscal Outlook, published by Treasurer Peter Costello last month.

A spokeswoman for Federal Health Minister Tony Abbott said the changes would require alterations to regulations and the Government “intends to progress these amendments at the earliest opportunity”.

“The Government has made an offer to the companies of five medications to extend the phasing of price reductions on the F2T formulary to August 1 2018,” she said. “All other medicines on the F2T formulary are multiple-brand medicines and will receive a 25 per cent price reduction on 1 August 2008. The five single-brand medicines are included on the F2T formulary because they are interchangeable at the patient level with other medicines on the F2T formulary.”

However, the move has renewed criticisms that the PBS reforms have unfairly ignored pressures on consumers — who will not pay less at the pharmacy counter as a result of any of the changes — and instead concentrate on sharing benefits between the Government, the drug makers and pharmacists.

Lesley Russell, Menzies Foundation Fellow at the Menzies Centre for Health Policy at Sydney University, and a policy advisor to Julia Gillard when she was Labor’s health spokeswoman, said there “isn’t really any recognition that if the PBS is spent wisely, then you save money elsewhere in the system. There were no gains (in the PBS reform legislation) for the general public — it was largely done by working with the (drug) industry, paying off alternatively Medicines Australia, the Pharmacy Guild and the AMA,” doctor Russell said.

“So Medicines Australia are saying ‘oops, now we are not going to make as much money as we were going to make’.”

In a paper Russell prepared analysing information disclosed in the MYEFO, she also said the Government’s pharmaceuticals budget was also affected by a $46 million increase in expenses for pharmacies, as a result of a higher than expected uptake of the PBS Online claiming facility, which allows pharmacists to send in their claims electronically. There was also extra spending of $93.6 million over the forward estimates for increased pharmacy dispensing fees as part fo the Community Pharmacy Agreement.

Russell told Weekend Health that another issue with the PBS currently was that the cost of the scheme had only grown by about 2 per cent annually for the past two years — a fraction of the double-digit growth seen in the late 1990s.

“Virtually all of that cost is driven by new cancer drugs,” Russell said. “If you take that out, the increase in the cost of the PBS is zero. To me, that means that people aren’t taking the medicines they are supposed to be taking long-term.”

However, she conceded that some of this might be accounted for by appropriate reductions in prescribing of medicines including antibiotics and antidepressants, both of which have come under scrutiny for prescribing patterns.