Fresh cuts to Australia's PBS are "bad news for patients;" Backing for industry marketing code

Research-based drugmakers in Australia received some good and bad news this week, with the announcement of moves that will add to their costs and backing for their Code of Conduct provisions.

The Australian government yesterday revealed three measures to further cut its investment in the Pharmaceutical Benefits Scheme (PBS). The Mid-Year Economic and Fiscal Outlook includes as one savings measures:

' the creation of three new 'therapeutic groups' under the PBS - under which the government will pay the same amount for medicines that deliver a similar health outcome (because the price at which it subsidizes the cheapest medicine in the group are used as the basis for pricing the other medicines in that group). The new therapeutic groups, being created on the advice of the independent Pharmaceutical Benefits Advisory Council (PBAC), will result in a saving to the PBS of A$48.2 million ($43.5 million) over the next four years. Changes in the price paid by the government for these medications will not affect the majority of patients as their prescriber will choose the cheaper alternative medicine.

The move undermines the pharmaceutical industry's ability to bring new medicines to Australian patients, say research-based drugmakers. 'The government's decision to create three new therapeutic groups, contained in today's Mid Year Economic and Fiscal Outlook is effectively an unannounced price cut,' Medicines Australia's acting chief executive Dr Brendan Shaw said.

'It is a substantial blow to companies who have negotiated a fair price in good faith with the Government. Last week Victoria University published a major report which concluded that the PBS is sustainable, is one of the most affordable, efficient and effective parts of the health system and requires no further savings measures. The measure announced today appears to disregard that evidence,' Dr Shaw continued.

The creation of new therapeutic groups effectively lowers the price that the government pays manufacturers for certain new medicines, says the trade group, noting that the prices the Australian government pays manufacturers for new medicines are already the lowest in the OECD.

'The Australian Government has a responsibility to pay a fair and reasonable price by OECD standards. The pharmaceutical industry does not expect the Government to pay over the odds, but industry doesn't expect to be short-changed either. At some stage there must be a tipping point where companies will think twice before seeking PBS listing for new medicines,' said Dr Shaw.

'Changing the agreed parameters for PBS reform without sufficient warning removes the policy certainty on which companies rely to make their business decisions. This is at odds with the intent of PBS reform. The PBS listing environment is becoming increasingly discouraging for global companies making investment decisions about whether or not it is viable to bring new medicines to Australia. That is ultimately bad news for patients,' he argued.

ACCC backs industry Code of Conduct

Meantime, the Australian Competition and Consumer Commission has issued a draft determination proposing to grant authorization for five years to Medicines Australia's 16th edition of its Code of Conduct. The Code sets standards for the marketing and promotion of prescription pharmaceutical products in Australia.

The Code provides, among other things, a standard to address potential conflicts of interest from unrestricted relationships between pharmaceutical companies and healthcare professionals, which may harm consumers, for example, through inappropriate prescribing by healthcare professionals.
The Code prohibits pharmaceutical companies from providing entertainment and extravagant hospitality to healthcare professionals, with the requirement that all benefits provided by companies successfully withstand public and professional scrutiny.

"One important way in which the potential for conflicts of interest is addressed is through the public disclosure of any hospitality, including costs, providing transparency around the relationship between member companies and healthcare professionals. This goes to the Code's effectiveness," said CCC chairman Graeme Samuel.

"The requirement for public disclosure was imposed by the ACCC as a condition of authorization of the previous version of Medicines Australia's Code and was confirmed on appeal by the Australian Competition Tribunal," he added.

Edition 16 of the Code fully incorporates the public reporting requirements as stipulated by the ACCC and the Tribunal, it was noted.