Healthy Skepticism Library item: 931

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

12.5 per cent price cut for generic drugs
Australian Government Department of Health and Ageing 2005 Mar 29

Full text:

The 12.5 per cent mandatory price reduction for new generic drugs will be implemented by agreement with the pharmaceutical industry rather than by legislation.

During the election, the government promised that there would be a 12.5 per cent mandatory price cut for generic drugs, that it would deliver about $800 million in savings and that it would be implemented in consultation with the industry. The government has delivered on these commitments.

From 1 April 2005, the listing of new generic versions of existing PBS medicines will be subject to an automatic reduction of at least 12.5 per cent in the government benchmark price. The reduction will occur only once in any group of related drugs.

Following extensive consultations, the government and the pharmaceutical industry have agreed that the Pharmaceutical Benefits Pricing Authority will only list a new generic drug if the sponsor accepts a price at least 12.5 per cent below the current benchmark. As a result, legislative change is unnecessary and will not proceed.

The industry has told the government that while it does not welcome price reductions, it respects the government’s right to implement this new policy.

This measure will ensure that taxpayers receive better value for the medicines subsidised by the PBS. Significant savings should begin after the first of the ‘statin’ cholesterol lowering drugs comes off patent in July 2005.

The government has consulted widely on this measure, including with Medicines Australia, the Generic Medicines Industry Association, the Pharmacy Guild of Australia and the National Pharmaceutical Services Association (pharmaceuticals wholesalers) and Consumers’ Health Forum Australia.

More information on the new measure can be found at:

http://www.health.gov.au/internet/wcms/publishing.nsf/Content/health-pbs-pricereductions