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Pharmaceutical Benefits Scheme
Rebecca de Boer
It is rare a thing for a Federal Budget to not include
measures affecting the Pharmaceutical Benefits Scheme (PBS). Whether it is the
announcement of the listing of new products or changes to co-payment
arrangements, the PBS rarely escapes the attention of those drafting the
Budget. This year proved no exception with the announcement of the inclusion of
several high-cost drugs to the PBS schedule, some of which had received a positive
recommendation from the Pharmaceutical Benefits Advisory Committee (PBAC)
almost twelve months ago. Other measures include improved access to the PBS for
Aboriginal and Torres Strait Islanders in remote areas, additional funding for
the National Prescribing Service and measures designed to maintain the
sustainability of the PBS.
Sustainability of the PBS
Two measures were introduced to enhance the sustainability
of the PBS. The first was the creation of an additional therapeutic group for
two statins and, the second was some changes to reference pricing arrangements
to include non-exempt items. These measures combined are expected to generate
savings of around $175 million over four years.
The Government proposes to create a new therapeutic group
for two statins (cholesterol lowering drugs), atorvastatin calcium (Lipitor)
and rosuvastatin calcium (Crestor).[1] Previously, these products have not been included in existing therapeutic group
arrangements for statins and will continue to remain separate. The therapeutic
group arrangements ensure that the Government pays the same price for products
that offer the same therapeutic outcome and the price paid by the Government is
the lowest price of the group. When a generic version of either product is
listed on the PBS, it will be subject to a 12.5 per cent statutory price
reduction and the subsequent price will ‘flow on’ to all products in that
therapeutic group. This will generate further savings to the Government that
have not been included in this measure, as it is impossible to predict when a
generic will enter the market (if at all) or the price that may be offered to
government by generic manufacturer(s).
Currently, the cost to Government for atorvastatin is $42.27
for a course of 10mg tablets and $69.48 for a course of rosuvastatin 10mg
tablets. As a result of this measure, it is likely that the price of
rosuvastatin will be reduced. It is not clear from the Budget papers whether
the Government will negotiate a price with the manufacturers of both products
or if the price of rosuvastatin will be automatically reduced. It should be
noted that the manufacturer does not have to accept the price paid by
government and can charge a premium—known as a therapeutic group premium—which
is borne by the consumer. This amount is not included towards the PBS safety
net. It is possible for an exemption to be granted, but the prescriber needs to
seek approval from Medicare Australia for this to take place.[2]
There are varying estimates for script volumes for
atorvastatin and rosuvastatin. Data from the Pharmacy Guild indicating that in
2008, atorvastatin accounted for 10.5 million scripts and rosuvastatin 2.2
million scripts.[3] The most recent data from Government sources indicates that in the 12 months to
June 2007, there were 9.4 million scripts dispensed for atorvastatin and 274 000
for rosuvastatin.[4] By any estimate, the script volumes for both products are significant.
Both the Pharmacy Guild and Medicines Australia have
indicated their willingness to cooperate with the Government in the
implementation of this measure. However, Medicines Australia has commented that
the ‘measure is regrettable’ and noted that the pharmaceutical industry is
‘confronting a very challenging operating environment’.[5] Despite these claims, it
should be noted that recent PBS reforms have not been nearly as severe to the
industry as they could have been. When the reforms were initially announced in
2006, it was anticipated that they would realise savings of $580 million over
four years. These anticipated savings have since been revised down to $103
million over four years.[6] In the context of an almost $8 billion dollar program and the revenues
generated by most pharmaceutical manufacturers, it could be argued that the
overall impact on the (branded) pharmaceutical industry is minimal. Evidence
also suggests that the pricing of several generic medicines in Australia is
higher in Australia than in the US, across a range of different products.[7]
One of the possible unintended consequences of this measure
is that the manufacturer will charge a therapeutic premium which approximates
the former price paid by government. If this occurred, this price would be
borne by the consumer, and, where a therapeutic group premium exemption is
granted, by the Government. Given the significant script volumes for both
atorvastatin and rosuvstatin, it is likely that these numbers could be high
potentially eroding the savings generated through the measure.
Extension to reference pricing
The Budget includes another measure that is designed to
correct some of the anomalies in the reference pricing system. The measure is
expected to generate revenue of around $61.2 million dollars. Although the budget
papers note that this measure will extend the reference pricing policies to all
‘non-exempt pharmaceutical items in a therapeutic group’, there is insufficient
detail in the budget papers to determine which drugs will be affected by the
measure.[8] Reference pricing arrangements extend to seven groups of drugs on the PBS[9] and presumably, the products affected by this measure are those which are not
currently captured by these arrangements.
Reference pricing is one of the cornerstones of the PBS and
has been in place since 1993. Under reference pricing, drugs that offer the
same clinical outcome are reimbursed at the same price and drugs which offer a
superior clinical benefit are often rewarded with a higher price.[10] However,
this policy has meant that the Government has not always achieved significant
savings when generic medicines entered the market. To address this, the
Government introduced the 12.5 per cent price reduction policy in 2005 under
which the first generic version of a PBS medicine was subject to an automatic
(statutory) reduction of 12.5 per cent when listed. In the context of the PBS
reform measures which commenced in 2008, both reference pricing and the 12.5
per cent price reduction policy still apply, but in much narrower
circumstances.[11]
It has been suggested that the creation of an additional
therapeutic group for atorvastatin and rosuvstatin is designed to ensure that
the Government achieves as many savings as possible when a generic version of
either product enters the market.[12] Although not directly commenting on the proposed budget measures, Deakin
University academic, Liliana Bulfone has recommended that the Government foster
increased competition in the generics sector by ceasing to disclose the price
of generic medicines to competitors and introducing periodic price reviews as a
way to achieve greater savings for generic medicines.[13]
The sustainability of the PBS and the pricing of generic
medicines have long been of concern to Government.[14] The measures put forward
in this Budget are expected to generate savings of around $175 million over
four years. It remains to be seen whether these savings will be realised, and
if the Government is able to achieve significant savings on generic medicines
while also promoting increased competition in the Australian generic medicines
sector.
[1]. This is in addition to the
therapeutic group for statins already on the PBS which includes simvastatin and
pravstatin.
[2]. Exemptions can
be granted on the following grounds: adverse effects of base-priced drugs,
interactions with base-priced drugs, interactions with expected base-priced
drugs and where the switch to a base-priced drug is likely to cause confusion
for the patient. See Australian Government, Schedule of pharmaceutical benefits:
May 2009, Commonwealth of Australia, Canberra, 2009, p. 815, viewed 15 May
2009, http://www.pbs.gov.au/html/healthpro/publication/
view?date=20090501&type=FlashPaper&name=general-schedule
[3]. Pharmacy Guild
of Australia, Pharmacy Guild budget brief 09, media release, 13 May
2009, viewed 14 May 2009, http://www.guild.org.au/uploadedfiles/National/Public/
News_and_Events/News_Archive/Pharmacy_Guild_budget_brief_2009.pdf
[4]. Crestor was
listed on the PBS in 2006-07 and the most recent data was for 12 months ending
to 30 June 2007. See Department of Health and Ageing, Expenditure and
prescriptions to 30 June 2007, Table 9 (a), p. 10, viewed 14 May 2009, http://www.health.gov.au/internet/main/publishing.nsf/Content/
A58720844CBFCB47CA257218000D91C7/$File/pbpa%20annual%20report%202007.pdf
[5]. Medicines Australia, PBS
cuts undermine commercial certainty, media release, 12 May 2009, viewed 14
May 2009, http://www.medicinesaustralia.com.au/pages/view_news.asp?id=134
[6]. Senate, Answers to Questions
on Notice, Minister for Health and Ageing, 14 May 2009, Question Number 1360.
These are net savings to Government which have, in part, been offset to
payments made to pharmacists as part of the PBS Reform compensation package.
PBS Reform has not had a uniform impact on the pharmaceutical industry – price
cuts ranged from a one off cut of 25 per cent on 1 August 2008 to a 6 per cent
price cut staged over three years, commencing on 1 August 2008. Price
disclosure arrangements will further reduce the price paid by government for
some medicines (namely generics) but the full impact of this will not be seen
for several years.
[7]. L. Bulfone,
‘High prices for generics in Australia – more competition might help’, Australian
health review, vol. 33 (2), 2009, pp. 200-214, viewed 22 May 2009, http://www.aushealthreview.com.au/publications/articles/issues/
ahr_33_2_0509/ahr_33_2_200.html
[8]. Australian Government, Budget
measures: budget paper no. 2: 2009–10, Commonwealth of Australia, Canberra,
2009, p. 303.
[9]. These are;
Angiotensin converting enzyme (ACE) inhibitors, Angiotensin II receptor
antagonists (ATRAs), Calcium channel blockers (CCBs), H2-receptor antagonists
(H2RAs). HMG Coenzyme A reductase inhibitors (statins). Proton Pump inhibitors
(PPIs), SSRIs plus. A subgroup of antidepressants, including selective
serotonin reuptake inhibitors (SSRIs) and other antidepressants that have been
listed on a cost minimisation basis with the SSRIs. Refer to Pharmaceutical
Benefits Pricing Authority, PBPA polices, procedures and methods, Section 2, viewed 22 May 2009, http://www.health.gov.au/internet/main/publishing.nsf/
Content/pbs-pbpa-policies-contents~pbs-pbpa-policies-ch2
[10]. D Henry, ‘Patients the losers
and makers the winners in PBS tinkering’, The Australian, 9 June 2007,
viewed 22 May 2009, http://www.theaustralian.news.com.au/story/0,20867,21872525-23289,00.html
[11]. A Searles, S
Jefferys, E Doran, D Henry. ‘Reference pricing, generic drugs and proposed
changes to the Pharmaceutical Benefits Scheme’, Medical journal of
Australia, vol. 184 (4), 2007, pp. 236-9, viewed 17 May 2009, http://www.mja.com.au/public/issues/187_04_200807/sea10591_fm.html
[12]. N Lush, ‘More to Budget than
meets the eye?’ Pharma in focus, 18-24 May 2009, viewed 18 May 2009, http://www.pharmainfocus.com.au/opinion.asp?opinionid=258
[13]. Bulfone, p.213.
[14]. For example, the response to
both Intergenerational Reports, and the various budget measures over the past
ten years were designed to reduce spending on the PBS. Comments made by Tony
Abbott at the introduction of PBS Reform in 2006 noted that PBS reform was
designed to address two problems; overpricing of generics to government and
difficulties of reference pricing in a system of mandatory price cuts.
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