Update on Pharmaceutical Benefit Scheme (PBS) Reforms
Medicines Australia MOU
On 6 May 2010 (re-signed 28 September 2010), the Commonwealth Government and Medicines Australia signed a Memorandum of Understanding with effect until 30 June 2014.
The intent of the MOU was to:
.."promote the efficiency and sustainability of the PBS and support, by the provision of a stable pricing policy environment, a viable and responsible medicines industry in Australia, consistent with the objectives of the National Medicines Policy."
The MOU covered the following issues:
• strengthened price disclosure arrangements
• price reductions for certain medicines listed on the PBS
• the creation of new therapeutic groups
• the consistent treatment of brands of medicines sold at the same price
• comparators
• parallel TGA and Pharmaceutical Benefits Advisory Committee (PBAC) evaluation and assessment processes
• a managed entry scheme from 1 January 2011
• timing and maximum timeframes for PBS pricing negotiations and consideration by Cabinet and
• resolution of issues in good faith.
The National Health Amendment (Pharmaceutical Benefits Scheme) Act 2010 (Commonwealth) was passed to implement these arrangements.
Announcement of listing deferrals
On 25 February 2011, the Minister for Health and Ageing, the Hon Nicola Roxon MP, announced the deferral of the listing of seven medicines under the PBS. The explanation was that, for those medicines which had been deferred, there were existing or alternative treatments that are already available or there is no
additional clinical benefit.
The Government also announced that all listings with a financial impact will now be considered by Cabinet. The deferral of the listing was characterised as a cost saving measure.
This was an extraordinary change from previous Government policy in which it was extremely rare for a medicine which had received a positive response from the PBAC – an independent body comprised of doctors, health professionals and consumer representatives – to not be listed.
Previously only medicines that had a financial impact of $10 million or more would require Cabinet approval.
In view of significant stakeholder concern, the Government announced a Senate Inquiry into the Government’s administration of the Pharmaceutical Benefits Scheme. A number of industry submissions were provided. The Senate Finance and Public Administration References Committee tabled its report on the Government’s Administration of the Pharmaceutical Benefits Scheme in Parliament on 17 August 2011.
The Committee concluded that the decision to defer the listing of certain medicines under the PBS, despite positive recommendations by the PBAC, and the decision to subject all future listings with financial implications for the budget to Cabinet review, constitutes a "major, unnecessary and unwelcome" change to Government policy. "This profound and ill-considered change in policy puts at risk affordable access to medicines for Australians, and will have significant consequences for the pharmaceutical sector, including research and development”.
The committee acknowledged Government’s responsibility to be mindful of budgetary constraints, however, it considers that responsible fiscal management should be applied at a whole of government level as opposed to trying to create savings through "piecemeal and ill-advised policy changes".
The Government announcement came as a complete surprise to industry, consumer and patient groups alike and constituted a significant departure from previous policy. Such a change was a possible contravention of at least the spirit of the MOU with Medicines Australia and will have repercussions when it comes to future negotiations with industry.
The committee was concerned that the change of policy will lead to a politicisation of the listing process and would irreversibly damage the independence and reputation of the PBAC.
The committee was very concerned about the uncertainty which has arisen from the Government’s decision to defer the listing
of medicines. The added layer of uncertainty will undoubtedly impact on investment decisions by the pharmaceutical sector, to the detriment of health consumers.
The Committee considered that the unprecedented changes introduced by the Government to the listing of medicines in Australia was "unacceptable and is based on short-term and ill-conceived policy goals".
The Committee made the following recommendations:
• The committee recommends that the Government withdraw the statement made on 25 February 2011 regarding the deferral of the listing of new medicines and the new rules applying to listings from that point forward.
• The committee recommends that the Government retract the statement that PBAC listing recommendations will not be proceeded with until savings are found to offset the costs of listing those medicines under the PBS.
• The committee recommends that the Government should explicitly state that it rejects any implication that the listing of new medicines requires savings to be made elsewhere in the health portfolio.
• The Government should reinstate its commitment to making an explicit decision regarding the listing of new medicines on the PBS within the terms and intent of the Memorandum of Understanding signed with Medicines Australia on 6 May 2010 and re-signed on 28 September 2010.
• That the Government reinstate the "$10 million rule" so that medicines that have a financial impact of less than $10 million in each year over the forward estimates can be listed on the PBS Schedule by the Minister without waiting for Cabinet approval.
At the time of writing this article, the Government has yet to formally respond to the Senate Report.
Alison Choy Flannigan
Partner
T: +61 2 9390 8338
E: alison.choyflannigan@holmanwebb.com.au