News Release

23rd February 2012

IMPORTANT NEWS FOR ALL COMMUNITY PHARMACISTS AND PHARMACY OWNERS: GMiA call to action to pharmacists to maximise profitability in 2012

Pharmacists need to act now to try to increase their dispensaries' profitability in 2012, despite Expanded and Accelerated Price Disclosure (EAPD).

The key to mitigating the impact of EAPD and prospering as never before is as simple as effectively managing new generic product launches this year in partnership with members of the Generic Medicines Industry Association (GMiA). The members of the GMiA are Alphapharm, Apotex, Ascent (a Watson Company), Aspen and Hospira who supply more than 90% of follow-on generic medicines in Australia.

In 2012, the GMiA members will drive hundreds of millions of savings to the PBS due to the introduction of new generic medicines and statutory reforms introduced by government in 2010. Supporting the uptake of follow-on generic medicines in Australia provides a three way win for the patient, the taxpayer and the economy.

However, the extensive price cuts resulting from EAPD negotiated between Medicines Australia companies and the Government will have a detrimental impact on pharmacy profitability this year. The EAPD cuts were negotiated without consultation or agreement of GMiA members.  The good news for pharmacists is that members of GMiA are mobilised to work with pharmacists and pharmacy owners to maximise their profitability during this turbulent year by substitution and making the most of the new product launches.

GMiA members have made a significant investment in Australian pharmacy. Their collective years of experience and expertise place them as important partners for pharmacists as pharmacists implement these significant changes to the PBS.

On 1 April 2012, 75 medicines on the F2 formulary will undergo an overnight price reduction of between 82.7% - 10.5%. This is the largest single price cut in the PBS history.

But the largest driver to PBS savings in 2012 will be the market entry of a number of high value generic medicines that will drive savings of approximately $200 million (annualised) to the PBS via a 16 per cent statutory price cut. In addition, further significant savings will flow from EAPD in future years.

Without effective management by pharmacists, these policies could have a negative financial impact on the dispensary and profitability of pharmacy.

GMiA makes the following six calls to action to pharmacists, to try to minimise the impacts of EAPD and to maximise the profitability of their dispensaries:

1.     Pharmacists should not make bulk purchases of new generic medicines in advance of market competition of generic entrants. Advance purchase simply locks in the price and does not allow pharmacists to take advantage of the expected, significant price competition throughout 2012 flowing from additional generic entrants.

2.     Be aware that the price of any generic medicine can be decreased by any sponsor at any time. With the expected additional entrants, the generic medicines market is expected to become more competitive in 2012.

3.     Be mindful that the government is trying to bring the Federal Budget to surplus in 2012-13 and may introduce policy changes that could alter usage patterns of high cost medicines, such as statins. GMiA advises that it would not be prudent to commit to any large purchase of a generic medicine ahead of 8 May 2012 which could impact future prices of PBS medicines.

4.     Be aware that the first month’s data of newly launched brands of generic medicines are excluded from the calculation of the future weighted average disclosed price^[1]. This applies to ALL new generic brands, not just the first generic brand to launch on the market.

5.     Now is the time for pharmacists to drive profitability by increasing substitution, especially to avoid significant unnecessary loss overnight on 1 April in the value of inventory. Medicines from suppliers who have not yet made their new, post 1 April prices available for forward charge, should be substituted now for generics from GMiA members who are already forward charging the post 1 April prices. Full priced products left on the shelf on 31 March will devalue overnight.

6.     Guard against any extension to direct distribution of pharmaceuticals. The Pfizer direct distribution model took significant volume away from traditional wholesalers and as a consequence wholesalers have looked to cut back on the rebates they traditionally provided to pharmacy. Supporting direct distribution models and making them successful will encourage others to adopt the direct distribution model and could further diminish rebates to pharmacy.  This could also significantly change the convenient ordering and supply chain that benefits both pharmacists and patients today.

Kate Lynch CEO of the GMiA said, "Most pharmacies have a very strong relationship with their GMiA generic partner who has helped them build their businesses over the past 10 years."   “This is a seminal year and pharmacists really do have the future of pharmacy in their hands depending on who they support during these major generic product launches".

ENDS

The Generic Medicines Industry Association (GMiA) is the national association representing companies that manufacture, supply and export generic medicines. The generic medicines sector is a high value-add sector delivering significant benefits to the Australian public by way of affordable medicines and high skilled jobs.

Contact:        Kate Lynch CEO 0432 500 308