Drugmakers in Australia have welcomed the government’s pledge that they will not be asked to bear any further price cuts - beyond the A$2.3 billion-worth already agreed - before June 30, 2014, but have also warned that the government’s therapeutic drug group policy could be putting patients at risk.

The price pledge is included in a four-year Memorandum of Understanding (MOU), announced this week between the federal Labour government and the industry group Medicines Australia. The deal aims to save about A$1.9 billion over the next five years through price cut to be implemented next February and again in 2012, and also through boosting the price disclosure programme to over 1,600 brands of medicines, from just 162 at present.

This will mean that when prices drop through competition, the price the government pays for medicines supplied through the Pharmaceutical Benefits Scheme (PBS) will also decrease, says the government, which has also announced that it will fund a A$10 million generic drugs awareness campaign.

As Pharma Times reported last week, Medicines Australia has already agreed drug price cuts aimed at saving the government A$2 billion and consumers A$300 million over a four-year period.

In return, the industry will be provided with business certainty and a predictable PBS policy environment, said Medicines Australia’s chief executive, Brendan Shaw, who welcomed the MOU as “a historic agreement,” and added: “the savings measures will impose a significant burden on Australian pharmaceutical companies, but longer-term business certainty for the industry is paramount.”

The deal is part of this week’s federal government budget which also includes a new Community Pharmacy Agreement. This will provide, among other things, A$968.7 million funding to ensure all PBS medicines are available within 24 hours for all patients, wherever they live.

Meantime, Medicines Australia has also warned Parliament that the PBS’ current therapeutic drug group policy could be putting patients at risk.

Under the policy, medicines which are deemed interchangeable are grouped together and the prices are linked to the cheapest in the group. However, it is not at all clear whether these products are in fact interchangeable, Medicines Australia chairman Will Delaat has told a Senate committee.

“The risk for consumers is whether these medicines are truly interchangeable on an individual patient basis, whereby patients are able to switch from one medicine to another medicine in that group, without detriment to their health,” said Mr Delaat.

He also warned of the risk to patients from the mandatory Cabinet approval of new medicines costing over A$10 million a year before they can be PBS-listed, given that this process delay can listings for 12 months or more. “While patients wait for the Cabinet to review a recommendation that has already been made by the clinical experts at the Pharmaceutical Benefits Advisory Committee (PBAC), there is no subsidised consumer access to that new medicine,” he told the legislators.
“As a direct result of this policy, patients may experience deterioration of their condition before gaining access to their medicine - even premature death,” he added.

This week, the government pledged to streamline the Cabinet approval process so that it takes no more than six months, but Mr Delaat points out that, as new drugs undergo a comprehensive cost effectiveness assessment by the PBAC to determine value for money, “the Cabinet approval process doesn’t make sense.”

“At the very least, the A$10 million cost threshold at which Cabinet approval becomes mandatory should be doubled. That would have an enormous impact, halving the number of medicines that get caught up in the Cabinet process after the PBAC has already deemed them cost-effective, without leading to an increase in expenditure,” he told the Senate panel.