Pricing of cancer drugs in Australia - update on changes to the Senate Notice Paper

The proposed (weighted average) price cut of 76.83% for docetaxel, a drug used in the treatment of cancer, has sparked controversy. There have been claims that cost to patients will increase by about $100 and that cancer services will close as a result of this reduction. On Monday 26 November, Senator Xenophon moved a motion to disallow this price reduction but this has been withdrawn. It was replaced with a cross-party motion (Senator Xenophon, the Coalition, Australian Greens and DLP Senator Madigan) to be moved on 29 November (the last sitting day of the Parliamentary year). The Greens are now no longer part of the motion and this is reflected on the Notice Paper for 29 November (*1080, p. 11).

The motion calls on the Government to negotiate with ‘relevant bodies regarding the cost of dispensing chemotherapy drugs’ and ensure that the ‘result of these negotiations will allow pharmacists to continue dispensing the drug (docetaxel), and other chemotherapy drugs, without disrupting patients’. The motion, did, however, ‘welcome’ the price disclosure policy framework. Although the voting intentions of the Greens is not yet known, the vote on this motion is likely to be close and 39 votes are required for it to pass. Despite this, motions passed by either House are not binding on the Government.

 This price cut is part of the Expanded and Accelerated Price Disclosure Policy (EAPD) agreed by the Government and Medicines Australia in the Memorandum of Understanding in relation to the Pharmaceutical Benefits Scheme (PBS) in 2010. Price disclosure is designed to ensure that the Government reaps the benefits of the discounting arrangements between pharmacists and wholesalers for generic medicines. Manufacturers are required to disclose the actual price at which medicines are supplied to wholesalers and/or pharmacists. Price reductions occur if there is a difference of more than ten per cent between the weighted average disclosed price and the price paid by the Government.

Price reductions occur three times a year on 1 April, 1 August and 1 December. Prior to the reduction taking effect, a legislative instrument is tabled in Parliament. The Instrument must be tabled when Parliament is sitting and 'laid before each House within 6 sitting days [of that House] after the registration of the instrument' (section 38 of the Legislative Instruments Act 2003). The Department is no longer legally obliged to notify manufacturers separately to the Instrument being tabled. It should be noted that there a significant time lag (around 18 months) between when the reporting period commences and when the reduction takes effect (see EAPD Operational Guidelines, p. 18).

The debate about the proposed price reduction of docetaxel has raised a number of questions about the pricing of pharmaceuticals in Australia. It has once again highlighted that Australia pays a high price for generic medicines. The Government has argued that prior to this policy being introduced, pharmacists had been charging 20% to 50% above market price for some drugs although this has been disputed by the Pharmacy Guild of Australia. Some pharmacists have argued that margin on generic medicines has been used to cross-subsidise other services and that these services will no longer be able to be provided once the price cut takes effect. Catholic Health Australia has warned that that cancer treatment services in rural and regional areas might close as a result. It has also raised questions about whether the remuneration for the dispensing of chemotherapy drugs is sufficient.

The pricing of pharmaceuticals on the PBS and the remuneration for supply of PBS medicines are two separate issues. Although there have been some challenges associated with the implementation of price disclosure (it has been subject to legal challenge) and there is debate about whether this is the most effective way to achieve savings for generic medicines, it is, currently, the dominant policy tool for the Government to reduce the cost of generic medicines. International comparisons show that the Australian Government pays considerably more for generic medicines. And while one needs to exercise caution when comparing the price of pharmaceuticals in different jurisdictions, other countries impose much harsher price reductions than the Australian government when the first generic medicine enters the market. The Australian Government imposes a reduction of only 16%, compared to around 95% achieved by countries such as the UK, Sweden and New Zealand.

Remuneration for pharmacists is governed by the Fifth Community Pharmacy Agreement. The current remuneration for dispensing chemotherapy drugs is $76.37. The Community Pharmacy Chemotherapy Group has estimated that this needs to be increased by $100 per infusion to account for preparation costs, the cost of consumables and dosage delivery services as well as other costs(such as return on capital). It is not possible to independently verify these amounts but the Minister has indicated that she is willing to consider ‘any evidence’ that the costs of delivering chemotherapy drugs needs to be reviewed.

The price cut is due to take effect on 1 December. It is not possible for pharmacists and hospitals to pass on these costs to consumers as the PBS co-payment is enshrined in legislation. Currently there is a stalemate – the Government is arguing that the cost of the medicine must ‘come down’ and stakeholders are concerned that vital services will no longer be delivered. One of the aims of the National Medicines Policy is timely and affordable access to medicines at a price that individuals and the community can afford. Perhaps a review of the cost of dispensing chemotherapy medicines might provide the evidence to inform future remuneration arrangements.


Flagpost is a blog on current issues of interest to members of the Australian Parliament

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