Bigger onshore generic medicines stockpiles on the way

bright pills

Health Minister announces new Medicines Supply Security Guarantee to prevent shortages as part of deals with pharma industry

Generic medicines companies will start to hold a minimum of four to six months of onshore stocks of critical medicines under a new deal Health Minister Greg Hunt has declared an “Australian first”.

The new initiative, dubbed the Medicines Supply Security Guarantee, is part of the latest wide-ranging five-year strategic agreements between the Government, Medicines Australia (MA) and the Generic and Biosimilar Medicines Association (GBMA) announced early on Tuesday.

The agreements were signed virtually by all involved parties after a year of negotiations.

The supply guarantee is a major negotiation success for the GBMA, which it described as a “ new era in securing medicine supply for Australian patients.”

Health Minister Hunt’s statement on announcing the deal said the guarantee “means that manufacturers will be able to better manage supply chain risks for medicines that have been prone to shortage, which includes an agreed commitment by medicines companies to hold at least four to six months of stock of critical medicines in Australia”.

“The Medicines Supply Security Guarantee is designed to better protect Australian patients, pharmacists, and prescribers from the impact of the increasing number of medicines supply shortages and interruptions, both globally and domestically,” he said.

The GBMA board said in its statement that “we have committed ourselves to substantially increase our own stockpiles of vital medicines stored in country,” adding, without further explanation, “we have managed to do this, together with the Australian Government, without burdening taxpayers.”

There have long been complaints in industry that price disclosure had made some genericised drug prices unsustainable and that it was excerbating the shortages of older, commonly prescribed medications used to treat diabetes, asthma, epilepsy, mental health conditions as well as of antibiotics.

Arrotex Australia CEO Dennis Bastas, who was the GBMA’s chief negotiator in the deal told AJP that the guarantee would have no cost effects on either pharmacies or wholesalers.

According to Mr Bastas, the payback for holding much larger stocks was that around 120 drugs “will no longer have any further price disclosure” by government, he said.

To hold stocks of that magnitude agreed, he said, “we need pricing that doesn’t change and isn’t subject to further price cuts”. It would also mean in the future drugs would reach a certain price but decline no further.

Some drugs would have an ex-manufacturer increase, he said, but this cost would be offset by changes to pricing on more expensive drugs, he said.

“The whole mechanism is cost neutral or cost beneficial to the PBS and taxpayers,” he said. “the price changes are being absorbed by the PBS and offset by a basket of measures we’ve put in place altering the price on other drugs”.

Generic companies would need to substantially increase their working capital with the three key players Arrotex,Viatris and Sandoz, which provide nearly 90 per cent of all generics in the country, increasing this by more than $150 million.

The old MA and GBMA strategic agreements deals are due expire next year and the new ones will come into force from 1 July.

Other key points in the MA and GBMA agreement, which are;

  • An expected investment of approximately $5 billion in PBS medicines listings over the life of the agreement through the PBS New Medicines Funding Guarantee and “the reinvestment of efficiencies agreed with the sector”.
  • The inclusion of patients in a new Health Technology Assessment (HTA) system which will incorporate their views in the PBAC assessment of PBS funded medicines.
  • Enhancements to HTA policy and methods.
  • ”An improved statutory pricing system for medicines with efficiencies from price reductions agreed with the medicines industry to be reinvested in PBS medicines listings”.
  • A Horizon Scanning Forum to ensure Australians have early access to breakthrough treatments.
  • Commitments to policy stability and predictability for the industry and Government.

Mr Hunt said “these landmark agreements” would further strengthen the PBS for patients and ensure improved stability, predictability and viability for the medicines industry.

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