Healthy Skepticism Library item: 773
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
Harvey M, Frenkel J.
PBS fix-it plan to save billions
The Hearld Sun 2004 Dec 20
Full text:
Lucrative price mark-ups for medicine wholesalers are set to be slashed in a new bid to save $8 billion over 10 years on the Pharmaceutical Benefits Scheme.
The move would also force a clampdown on the dubious practice of offering chemists expensive kickbacks for buying PBS-listed medicines.
An industry agreement between the Federal Government and the Pharmacy Guild of Australia, which allows the costly mark-ups and underpins the PBS, expires in June.
Treasurer Peter Costello told the Herald Sun the Government is ready to renegotiate the deal and reduce the growing public cost of the PBS.
“We will look at a very competitive renegotiation of the pharmacy agreement,” Mr Costello said.
“We will try to get the best deal we can for the taxpayer. We respect pharmacists. We think they do great work, but we have to make sure we get the best outcomes we can for the taxpayer.”
Under the present agreement, medicine wholesalers are paid 10 per cent mark-up on the cost of every PBS drug they deliver to chemists.
The deal effectively locks in huge cost increases for the already creaking PBS.
For one box of medicine costing $50, there could be another medicine costing $500 in a box of identical size, shape and weight.
The pharmacy agreement means wholesalers get $5 for every delivery of the first medicine, but $50 for every box of the second, though delivery costs are usually no different.
(In some cases, storage costs for particularly sensitive vaccines can be greater because of the need for wholesalers to provide added security).
Instead of the 10 per cent mark-up, the Government’s options include reducing wholesalers’ cut to 5 per cent or replacing it with a flat fee.
Neither would increase patient cost of a script.
Pharmaceutical industry calculations show the change would save taxpayers about $8 billion over the next decade, during which the cost of the PBS will have increased dramatically.
With negotiations starting soon, Mr Costello declined to nominate his preferred solution.
“I am not signalling our negotiating strategy, except to say that it will be competitive,” he said.
It is estimated that medicine wholesalers were paid $500 million last year under the pharmacy agreement.
Big profit margins that flow from the deal allow wholesalers to woo chemists into buying their PBS-listed stock with heavy discounts and gifts.
Though not illegal, recent examples include a competition exclusively for chemists in which two Mazda RX-8 cars were the major prizes.
Other gifts that routinely come with big regular orders to particular wholesalers include bottles of Grange Hermitage and shopping vouchers.
Mr Costello said skyrocketing PBS costs were a major challenge for an ageing population.
“As I have said, demography is destiny. This is our destiny. It cannot be changed,” he said.
“The only question is how we will respond. We will either respond early with small adjustments or have to respond late with huge dislocation, but we will have to respond.”
