Australia’s government is planning to slash the prices it pays to drugmakers for 100 widely-used medicines, including drugs to lower blood pressure and cholesterol and treat arthritis.

The proposal, contained within Labour Prime Minister Kevin Rudd’s Budget plans, would mean consumers paying less when drugs affected by the mandatory price cuts cost under A$32.90. However, critics warn that drugmakers will respond by simply removing unprofitable products from the market or applying a price premium, follow the example of two firms this week which raised the prices of 12 products by A$2 per prescription following the last round of mandatory price cuts. This round was applied last August 1, when the government reduced by 25% the prices it paid to drugmakers for more than 800 widely-used products.

The Pharmacy Guild of Australia has also warned of the need to consider the long-term impact of the proposal. “The last thing we need to see is prices cut to the point where manufacturers withdraw their products from the market,” said the Guild’s national president, Kos Sclavos. “While cheaper prices would be welcome, the biggest concern we have is that this may force manufacturers out of Australia,” he added.

PBS savings fear greater than estimates
Meantime, a report commissioned by the Guild has revealed that savings to government from 2007’s reforms to Australia’s Pharmaceutical Benefits Scheme (PBS) will be substantially greater that previous estimates. The reforms will deliver A$7.4 billion in savings over 10 years, which is more than double the previous government’s own estimate of A$3 billion, it says.

The findings were welcomed by industry group Medicines Australia, whose chief executive, Ian Chalmers, said they confirm that the discovery-driven industry has done, and will continue to do, “its share of the heavy lifting ahead of this Budget and beyond.”

The industry signed up to the reforms in good faith in the interests of ensuring a sustainable PBS for future generations, said Mr Chalmers but, he added: “in the last year, PBS reforms have resulted in a loss of 5% of the workforce of Medicines Australia member companies. Any further unexpected cuts to the PBS would be damaging to the local industry and put more Australian jobs at risk.”