Healthy Skepticism Library item: 19271

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Publication type: news

Taylor L
'Dramatic changes' set for Australian pharma
Pharma Times 2011 Feb 23
http://www.pharmatimes.com/Article/11-02-23/Dramatic_changes_set_for_Australian_pharma.aspx

Full text:

The Australian pharmaceutical industry landscape is set to change dramatically as a result of government changes to the Pharmaceutical Benefits Scheme (PBS), says a new report.
Following Parliamentary approval last November of the National Health Amendment (Pharmaceutical Benefits Scheme) Bill of 2010, which aims to make savings of around A$1.9 billion over five years, the outlook for the future includes withdrawn products, a struggling generics industry and reorganisation within the wholesaling sector, warns the study, from Datamonitor.

“As further statutory price cuts and ‘expanded and accelerated’ price disclosure is applied to substitutable medicines by the PBS, downward pricing pressures will affect everyone in the industry. Some, however, will suffer more than others,” forecasts Erin Brady, Australian healthcare analyst at Datamonitor.
“The local generics sector will need to seek new efficiencies to continue competing in the Australian prescription pharmaceuticals market, and wholesalers must assess their strategic options in a changing market,” she says.
Innovator companies were involved in negotiating a memorandum of understanding (MoU) with the government concerning the reforms, and they are positive about the stability that this will provide to the industry to 2014.
“This legislation will lead to reductions in the price consumers pay for hundreds of medicines on the PBS,” said Brendan Shaw, chief executive of the research-based trade group Medicines Australia, speaking after the bill was passed by Parliament last November. “It will also ensure that Australian taxpayers get a fairer deal on the price the government pays for PBS medicines,” he added.
The industry fully supported the bill’s introduction of new tracking and monitoring tools for medicines, and welcomed other process improvements included in the legislation such as parallel regulatory and reimbursement evaluation, a managed entry scheme for new medicines and a maximum six-month time limit for federal cabinet approval of new PBS listings, said Dr Shaw.
Generics companies, however, were not included in any negotiations and staunchly opposed the bill. The A$1.9 billion planned savings will be made largely through price cuts across all products listed on Formulary 2 (F2) of the PBS, and the extension of price disclosure arrangements to all F2-list products, covering over 1,600 brands instead of just 162 as was previously the case.
Each price change point is likely to result in shortages of medicines at pharmacies, and the government has not advised the pharmaceutical industry, pharmacists or patients how this situation will be managed, the Generic Medicines Industry Association (GMiA) warned, as the bill made its way through Parliament.
“The bill is so flawed because it arose out of highly irregular and inappropriate government processes that resulted in a protectionist deal negotiated in secret between the government and….Medicines Australia,” added GMiA chairman Martin Cross.
“The generics sector claims that the price cuts and price disclosure requirements will greatly hinder their sector going forward,” says Ms Brady. As a result of all the price reductions targeting medicines in F2, prices may become too low for manufacturers to bear and some product withdrawals could be expected, she warns.
The pharmaceutical wholesaling industry has also been hit hard by PBS reforms as suppliers alter trading terms to reflect decreased prices, and Pfizer has decided to cease using wholesalers and distribute direct to community pharmacies.
“While Australian patients should benefit as downward pressure input on drug prices, pharmacists will suffer decreased margins as wholesales cut discounting, putting pressure on revenue margins,” Ms Brady concludes.
• Around 80% of Australian prescriptions are government-subsidised, and the PBS covers over 850 medicines, marketed as almost 4,000 branded products, notes Datamonitor.