An Australian Senate Committee is due to report to day on consultations concerning new legislation which aims to cut government drug spending by nearly A$2 billion over the next five years.

The National Health Amendment (PBS) Bill is based on a Memorandum of Understanding (MoU) signed by the federal Labour government with the research-based industry group Medicines Australia in May this year. It includes measures to make savings of around A$1.9 billion over the next five years, largely through price cuts across all products listed on Formulary 2 (F2) of the Pharmaceutical Benefits Scheme (PBS) and the extension of price disclosure arrangements to all products listed on F2, covering more than 1,600 brands of medicines from just 162 at present. 

The bill will ensure the price the government pays for a PBS medicine reflects the price at which it is sold to pharmacists, Medicines Australia chief executive Brendan Shaw told the Medicare conference in Sydney last week.

Currently, the government is paying “overblown prices for older, off-patent medicines,” said Dr Shaw. The PBS has been “blind” to the real price of medicines, but the new reforms to mandate disclosure of the price at which companies are selling to pharmacists will inform the government of the true market price and allow it to adjust downwards the price it pays, he said.

“The problem now is that disclosure is often optional. This makes it difficult for the government to drive a more efficient PBS,” he told the conference, adding that if the bill passes, patients will save substantially because price cuts will be passed on at the pharmacy.

“We can already see the benefit of price disclosure. The antibiotic vancomycin for example cost A$33.30 prior to price disclosure. Post-price disclosure the price is A$12.19. That's a saving of A$21.11 that goes back to the patient,” said Dr Shaw.

However, Australia’s Generic Medicines Industry Association (GMiA) says the legislation is unnecessary and that it was not consulted on the MoU. Moreover, passage of the bill “could destroy the generics sector,” it warns, in a submission to the Senate Community Affairs Legislation Committee, which is due today to publish all submissions received during its inquiry into the bill.

“The government claims that the bill has the support of the industry. This is not the case. Suppliers of generic medicines strongly oppose the bill,” says the GMiA. “The bill will enact a protection agreement by government of the interests of one sector of the industry - suppliers of originator medicines - to the detriment of another - suppliers of generic medicines,” it tells the Committee.

The government-funded National Prescribing Service (NPA) supports the bill, and says it is hopeful that it will provide a more complete picture of how the PBS is working to meet the medicines needs of Australians.

“We are particularly keen to see the realisation of improved data collection which is proposed by this bill,” said NPS chief executive Lynn Weekes.  

“For many years, NPS and other industry stakeholders have sought stronger provisions for collecting data about PBS prescriptions that do not attract a co-payment, in order to have accurate information about Australians’ medicines use,” Dr Weekes added.