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Latest News
22 July 2011
Sponsors of PBS listed products must be given the opportunity to successfully obtain price increases to ensure continued access of medicines to patients
The Finance and Public Affairs Senate Reference Committee is currently receiving evidence as it completes its Inquiry into the Government’s administration of the Pharmaceutical Benefits Scheme (PBS). Witnesses were called to present yesterday in Melbourne and further witnesses will give evidence next Monday in Canberra.
The Inquiry was called after a surprising announcement by Government on 25 February 2011 that it is:
i. Indefinitely deferring PBS listing of some new medicines that have been found to be highly cost-effective that is denying the public access to important health benefits; and
ii. Indefinitely deferring implementation of Pharmaceutical Benefits Pricing Authority (PBPA) recommended price increases that jeopardises the ongoing supply of essential medicines to patients.
At the hearing yesterday, the Generic Medicines Industry Association (GMiA) called on Government to ensure the ongoing supply of essential medicines to Australians. GMiA highlighted that sponsors must be confident that price increases for medicines will be granted when recommended by the PBPA, after its rigorous review mechanism.
Regrettably, already one GMiA sponsor has had to take the step of delisting a product from the PBS. The sponsor successfully applied to the PBPA for a price increase on 15 March 2011. The Department of Health and Ageing (DOHA) advised the sponsor in April 2011 that the price increase would not be implemented due to the Government’s decision to indefinitely defer all PBPA recommended price increases. The sponsor had to immediately set in train steps to delist the product, to meet DOHA’s 15 June 2011 deadline for notification.
The internal company processes overtook the sponsor’s ability to react positively to the Government’s surprising advice on 21 June 2011 that a price increase had been approved.
The sponsor acknowledges that the Government’s revised decision had been made in good faith, however as it had taken the company by surprise it was limited in how it could react to the offer. The sponsor informed the Government on 22 June 2011 that it had already taken steps internally to meet its parent's directive to delist and, after further discussion between DOHA and the sponsor, the sponsor had no choice but to proceed with delisting from 1 September 2011.
GMiA is aware of another product that is being delisted from the PBS as a result of the Government’s decision to indefinitely defer all price increases recommended by PBPA. GMiA expects that further products will be delisted from the PBS as companies assess the ramifications of the Government’s decision not to implement price increases recommended by the PBPA and the impact of the PBS reforms generally.
Price increases on the PBS are generally only recommended by the PBPA where the sponsor can demonstrate BOTH a clear commercial need AND where there is no alternative medicine available at a more competitive price. No price increases are granted for normal business costs such as exchange rate fluctuations and CPI increases.
The ability of sponsors to obtain price increases on PBS listed commodity (F2) medicines is even more critical to the effective application of Government policies, such as price disclosure and statutory price reductions, which reduce the price of commodity medicines over time. These Government policies are broad brushed policies that reduce the price of medicines without full consideration of the clinical need or commercial viability of the individual medicine.
The PBPA review is an important ‘safety valve’ – providing sponsors the opportunity to seek a price restoration for products that have a clinical need and are not commercially viable. This ‘safety valve’ is more important in the current climate of price reductions stemming from the PBS reforms.
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.