Call for more PBS cuts rejected

PBS cuts: scissors cutting $20 note

Pharmacy stakeholders have slammed calls for further PBS cuts in a new Grattan report

The Pharmacy Guild says it “completely rejects” the headline assertion of the report, which is titled Cutting a better drug deal.

“The Grattan Institute’s claim that ‘Australians pay too much for prescription drugs’ is unbalanced and misleading,” the Guild says in a statement.

“The report seems to be based on the assumption that the pharmaceutical supply chain in Australia is one that can be squeezed and squeezed, and will still keep on giving. This is not sustainable.”

The Guild points out that price disclosure has already made significant savings for the Government from the PBS: an estimated $20 billion in the five years from 2015-16 from price disclosure, including $2.6 billion in 2015-16 alone.

“The express intention of PBS price disclosure is to ensure that the amount the Federal Government pays for PBS listed medicines is close to the price at which they are supplied in the market, based on the information disclosed by suppliers.”

David Quilty, the Guild’s executive director, says the Guild rejects the Grattan Institute’s assertion that price disclosure has not gone far enough or fast enough.

“The report fails to recognise the deep impact that price disclosure has already had on community pharmacy in Australia,” Mr Quilty says.

“We also reject the assertion that the pharmacy Location Rules are against the public interest. As the Guild’s submission to the Harper Competition Review made clear through empirical evidence, the Location Rules ensure that Australians have a very high level of access to community pharmacies, both in absolute terms and compared to other services.

“In relation to the price consumers pay for medicines dispensed in community pharmacies, we note that the report acknowledges that Australian pharmacist mark-ups are internationally competitive,” he says.

“We also note and support the Grattan Institute’s recognition of the benefits of an expanded role for pharmacists in primary health care.”

While the report says that Australian drug prices are “unacceptably high, at almost 3.7 times higher than the best international prices,” the Guild says because medicines systems differ worldwide it is not possible to simply cherry-pick lower prices in some markets for some medicines without having an impact on the quality and accessibility of medicines in the Australian PBS.

“For example, the Grattan Institute holds up New Zealand as an example where international pharmaceutical price benchmarking, competitive tendering and other policies have resulted in lower medicine prices and larger savings to taxpayers compared to price disclosure.

“Yet no mention is made of the resulting supply shortages, lack of competition and impact on the pharmaceutical industry in that country.”

And PSA’s Joe Demarte highlighted sector-wide repercussions from existing price disclosure policies, such as suppressing wage growth, which would be exacerbated if the recommendations were implemented.

He says cost-saving suggestions such as further accelerating price disclosure are cause for concern.

“We know that the effect of this is two-fold: it impacts the viability and future sustainability of the community pharmacy network, which provides a valuable access point for medicines and services,” Mr Demarte says.

“Secondly, it creates downward pressure on wages – the number one issue for pharmacists right now. The report identifies that payment for pharmacist services could mitigate reduced community pharmacy income but first and foremost, provision of evidence-based pharmacy services should be about meeting patient needs.

“PSA has been saying for some time that ensuring a sustainable business platform for community pharmacies and diversifying the funding sources for services beyond the PBS is urgently needed. 

“Pharmacist payment through the MBS, for example, would provide consumers with greater access to pharmacist services in a range of settings.”

PSA also urged careful consideration of the report’s suggestion for location rules to be replaced with simpler regulations.

“We urge decision-makers to consider international evidence on the unintended effects of loosening community pharmacy regulations (including location rules, ownership and the State and Territory legislative restrictions on co-location of pharmacies and supermarkets),” Mr Demarte says.

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  1. Owner

    Haha if I had a dollar everytime AJP said “slammed”. “Slammed with a wet lettuce leaf”. LOL

  2. Alexander Tran

    Some of the savings are due to shifting the costs of Therapeutic price premiums to patients. That essentially means that consumers pay the extra 445 million ‘savings’ rather than the government. most of this comes from the insulins and beta blocker group, which I can tell you as a healthcare professional that there are major differences between different brands of insulins.
    The report covers 19 out of the thousands of medications currently subsidized by the PBS. On top of that, it compares it to countries that have gone through multiple cycles of price reduction and most of the 19 Australian medications compared have not undergone any price reductions.
    It should also be noted that medications eventually do reach a similar price to other countries (see atorvastatin and Venalafaxine) and since 2013 we have had accelerated price disclosures (i.e. prices falling every 6 months rather than 12). In comparison, the UK has their cycles every 3 months, so there is room for improvement in the Australian system. It is also interesting to note that most of the 1.2 billion dollars in savings would have happened in 2013 before the cycle went from 12 monthly to 6 monthly.
    ”In 2013, we found that Australia was paying on average more than twice the Canadian price for the seven drugs considered. Now, Canada is paying on average almost twice what Australia does. Indeed, for 17 of the 19 drugs considered, Australia now has cheaper prices than either Ontario or Alberta.” So comparing a country with a similar size and population, Australia comes out ahead in this regard.
    Whilst international benchmarking is a good idea, sudden drops of medication prices (up to 83% of original prices for Olanzapine) will lead to both pharmacies and wholesalers ensuring that they have no stock before any price reductions. Even with the price reduction system as it currently stands, I am having trouble getting in regular medications for my patients before a price disclosure cycle with 60% drops. Accelerating this will most likely lead to supply issues.
    Another issue with international benchmarking is that Australia simply isn’t the UK or NZ. We have a lower population density and therefore higher costs of distribution. If we lowered the price to what the UK and NZ pay, most likely drug manufacturers will simply choose to exit the PBS as it will no longer be profitable.
    TLDR: The ”savings” will be most likely be borne by the consumer and international benchmarking has issues because Australia is not England or NZ.

  3. Mark

    Lol. You expect us to believe that lower competition led to lower prices in nz. And that the few companies that own most of Australia’s pharmacy franchise brands are fierce competitors.
    Next you’ll be telling us it’s good for the public when the existing operator uses the location rules to lock out competition by snagging any new licenses that come up in a town and opening up a shell of a store with next to no stock…

    • William

      Obviously the NZ authorities are better at negotiating with their suppliers.

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