Healthy Skepticism Library item: 804
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
Metherell M.
Generic drug price cut limited to one-off
The Sydney Morning Herald 2005 Feb 8
Full text:
The Federal Government has tweaked its plan to cut into drug company revenues but says it still expects to save about $740 million in prescription costs and is warning of further moves to rein in the $6 billion-a-year Pharmaceutical Benefits Scheme.
Cabinet yesterday clarified the measure, which will require pharmaceutical companies to reduce prices automatically by 12.5 per cent when new generic (copycat) drugs are introduced.
Drug companies have said the cuts could blow out by more than $1 billion under the Government’s original scheme, announced in October.
According to an analysis commissioned by generic drug companies, the discounts could generate more than $2 billion in savings over four years if the price cuts were imposed every time a new generic drug was introduced.
Under the changed plan decided by the cabinet yesterday, the 12.5 per cent cut to a particular group of similar drugs will occur only once when a new generic drug of that group is introduced, saving $740 million in four years.
The Health Minister, Tony Abbott, denied the Government had changed its basic approach on the generics issue.
He said the change was a response to information from pharmaceutical companies showing that the potential “cascade” of new generic drugs could have a much greater price-cutting effect than originally calculated by the Government.
The discount was devised to finance the Coalition’s $1 billion in handouts to elderly Australians. Mr Abbott denied the measure was a policy on the run designed to match Labor’s Medicare Gold policy, announced days beforehand. He said the measure implemented a very good principle that protected both the industry and the taxpayers.
“I think the industry is well and truly on notice that we are concerned about the sustainability of the Pharmaceutical Benefits Scheme and we do want to see more genuine competition inside the PBS, and that is what this measure was all about.”
The big pharmaceutical companies, through their lobby group, Medicines Australia, have been privately scathing of the enforced price cut, which they say will discourage the introduction of expensive new drugs in Australia.
The chairman of the Generic Medicine Industry Association, John Montgomery, has warned of the cumulative impact of more than one 12.5 per cent cut on a particular range of drugs. It would have meant overall price cuts of up to 40 per cent, Mr Montgomery said, making it difficult for some generic companies to survive.
But Mr Abbott said that prices paid for generic medicines in Australia were high compared with those in other countries.
“Many new brands of existing PBS-listed drugs are added to the list without any price reduction.”
Cabinet also discussed the impact of the $1 billion in aid from Australia to countries devastated by the tsunami. Government sources said it was recognised that the aid would have a serious impact on the budget bottom line, but was manageable.
Meeting separately with his full ministry, the Prime Minister, John Howard, confirmed the Government would not change Medicare legislation affecting payments for abortion, but said that if people wanted to debate the issues they were free to do so.
He warned his ministers that the new Labor leader, Kim Beazley, whom he faces in Parliament today, is more determined than last time and should not be underestimated.
Mr Howard also warned his ministers against trying to introduce radical changes when the Government assumed control of the Senate in July.
