Health Budget demonstrates commitment to medicines sector

Members of the Medicines Partnership of Australia (MPA), the nation’s pharmaceutical supply chain peak body, have welcomed key initiatives toward stability and ongoing support for the pharmaceutical sector announced as part of this year’s Federal Budget.

A five-year Strategic Agreement with Medicines Australia will deliver an estimated $1.8 billion in savings to the Pharmaceutical Benefits Scheme (PBS) that will be reinvested into the supply chain, enhance patient access to the latest innovative medicines, fund process improvements and provide significant taxpayer savings.

“In assessing the Health Budget, the MPA acknowledges that the needs of its members have been carefully considered. While there is substantial provision for more to be done, Minister Hunt has responded to pertinent issues around the stability and sustainability of the supply chain, patient access to medicines and certainty for the innovative medicines industry,” MPA Chair Donna Staunton said.

“The Australian pharmaceutical industry has been identified as one of the key sectors for our nation’s future economic success and the measures in the Budget are encouraging to the entire medicines supply chain,” she said.

Medicines Australia Chairman Wes Cook said that the Strategic Agreement with the Commonwealth provided much needed policy stability and provides a base from which to grow investment in the industry from within Australia and overseas.

“This Agreement upholds the key principles sought by Medicines Australia, such as the need for policy predictability and certainty for the industry; acknowledgment that the industry is currently delivering savings through recent reforms and that additional savings generated for taxpayers will be reinvested into new medicines on the PBS,” Mr Cook said.

“The Agreement ends a long period of uncertainty and will improve industry confidence to continue to bring innovative medicines to Australia and to invest in local research and development, such as clinical trials.”

The Generic and Biosimilar Medicines Association has welcomed initiatives to increase the use of affordable medicines, and a two-year extension to its Strategic Agreement with the Commonwealth.

“The biosimilar uptake drivers, amendments to price disclosure and enhancements to prescribing software announced in the Budget are important to ensure a sustainable PBS, increase patient access to affordable medicines, and support the viability of the industry that supplies them,” GBMA Chair Allan Tillack said.

It is anticipated that the increased prescription of generics and biosimilar will have a flow-on effect for Australia’s community pharmacies who fill a critical role in the supply chain and have suffered from years of PBS cuts.

“The Pharmacy Guild is pleased to have reached  a Budget agreement with the Turnbull Government that supports community pharmacies in return for the provision of additional services for patients and ongoing reform. This is a positive outcome for Australia’s community pharmacies, many of which are doing it tough after years of PBS savings measures,” George Tambassis, National President of the Pharmacy Guild of Australia said.

The peak national body for pharmacists, the Pharmaceutical Society of Australia (PSA) welcomed the investment by the Federal Government in Australia’s vital and established community pharmacy network. PSA National Vice President Michelle Lynch said, “While the commitment to community pharmacy programs is excellent news for pharmacists and consumers, there is a significant opportunity missed in the Budget for further maximising the role of pharmacists – the most accessible health professionals in Australia – especially in terms of innovation and delivering new, evidence-based services.”

As a consequence of medicines funding changes, Australia’s full-line CSO wholesalers will be compensated for the impact on their remuneration from cuts to the prices of medicines on the PBS.

“Our commitment is to provide Australians access to quality and affordable medicines and we welcome this funding agreement that will correct a short-term imbalance,” NPSA Chairman Mark Hooper said.

“As the Government has demonstrated it understands the issues we face, we are hopeful they will address our remuneration issues for the longer-term as set out in our submission to the Review of Pharmacy Remuneration and Regulation,” Mr Hooper said.

The Australian Self Medication Industry anticipates no Budget impacts for over-the-counter medicines.

Contact: Donna Staunton 0413 185 724

MPA welcomes predictability and certainty

The 2016-2017 Federal Budget confirms that the Pharmaceutical Benefits Scheme is stable and will continue to ensure Australian patients have access to safe, effective medicines following years of significant reforms in the sector.

The shared hard work of industry and successive governments to implement reforms to the PBS since 2007 has made a significant contribution to the fiscal challenge.

The Medicines Partnership of Australia (MPA) is an alliance of peak industry associations representing key members in the supply chain that deliver medicines and pharmacy expertise to Australian consumers. Its members are Medicines Australia, the Australian Self Medication Industry, the National Pharmaceutical Services Association, the Pharmacy Guild of Australia, the Pharmaceutical Society of Australia (PSA) and the Generic and Biosimilar Medicines Association.

This year’s Budget contains no surprises for the sector, with government investment in the PBS over the forward estimates largely in line with previous forecasts.
A predictable business and investment environment for the medicines industry and supply chain allows us to get on with the critical business of researching, manufacturing, supplying and dispensing safe, effective medicines to Australian patients, representing strong value for money for taxpayers.

The implementation of the latest reforms through the PBS Access and Sustainability Package in 2015 have resulted in significant changes to the costs of medicines for government. These changes have ensured that the PBS will remain fiscally affordable and sustainable into the future.

While the 2016-17 Budget has not included extra cuts to the PBS, further predictability and certainty remains critical beyond 2016 not only for the sector but for all Australians who rely upon the PBS for affordable access to treatments.

The Medicines Partnership of Australia is: The Pharmacy Guild, Medicines Australia, the Generic and Biosimilar Medicines Association, the Australian Self-Medication Industry, the Pharmaceutical Society of Australia and the National Pharmaceutical Services Association.

Media inquiries

Greg Turnbull – 0412 910 261
James Boyce – 0423 239 265
Marie Kelly-Davies – 0408 256 381
Brad Watts – 0487 922 176

1 October: cuts deliver $400 million annual saving to taxpayers

1 October 2014 saw the first set of price reductions under the new, further accelerated, Simplified Price Disclosure arrangements. Price reductions applied to 442 forms and strengths of 82 drugs and ranged between 10% and 62%.

As a result of these price reductions, pharmaceutical manufacturers, wholesalers and pharmacies have contributed more than $400 million in annual savings to taxpayers.

Table

Figure 1: Impact of 1 October 2014 Price Disclosure reductions by ATC Group

$1 billion in cuts in the last 12 months

The four sets of price disclosure reductions over the last 12 months (1 December 2013, 1 April 2014, 1 August 2014 and 1 October 2014) have reduced annual funding on affected drugs by approximately $1 billion. This is on top of the significant savings provided in earlier rounds.

PBS costing less for taxpayers

Government spending on the PBS per head of population has continued the decline that started with the inception of Expanded and Accelerated Price Disclosure in April 2012. Out-of-pocket costs have also declined as a result of price disclosure and more drugs being priced below the general co-payment level.

Graph

….with Price Disclosure delivering lower prices, and prescription volumes well under control.

Table 2 Table 3

Data Sources: PBS Date of Supply data published on pbs.gov.au, and population estimates from the Australian Bureau of Statistics. Date of Supply data is the only data that provides a reliable comparison over time. Date of Supply data is updated each month however the data used here was accessed in October 2014 and should be subject to only minor future revision.

Parliamentary Budget Office (PBO) Confirms Sustainability of the PBS

The Parliamentary Budget Office’s Projections of Government spending over the medium term confirmed that the PBS not only had grown slower than GDP historically but predicted that it would represent a “negligible” share of government expenditure growth over the medium term (see PBO chart below). It is now time that the consequences of sustained reductions in PBS prices, and the low growth outlook, are properly addressed. All components of the PBS – pharmacies, wholesalers and manufacturers – are under increasing pressure. Now is the time to provide certainty for the industry and for the patients that are so well served by the PBS.

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Price disclosure has generated massive savings and the PBS has been shown to be on a sustainable path. A commitment to further timely investment in cost effective new medicines, viable remuneration arrangements for pharmacist dispensing and professional services, and appropriate funding for wholesaling of PBS medicines, are now urgently required. To provide an environment that encourages investment, the sector also requires stability and predictability. Further changes to price disclosure would deter investment and more jobs would be lost. Changes are unnecessary and should not be contemplated.

PBS costing less for taxpayers

Government spending on the Pharmaceutical Benefits Scheme per head of population has been in decline for almost three years, reinforcing the sustainability of the current scheme.

The Medicines Partnership of Australia has tracked the decline that started with the inception of Expanded and Accelerated Price Disclosure in April 2012. Out-of pocket costs have also declined as a result of price disclosure and more drugs being priced below the general co-payment level.

The good news on the PBS is outlined in the Medicines Partnership of Australia PBS Scorecard – which will be available at www.medicinespartnership.com.au

The analysis also shows that not only is Price Disclosure delivering lower prices, but prescription volumes are also well under control.The first set of Pharmaceutical Benefits Scheme price reductions under the new, further accelerated, Simplified Price Disclosure arrangements which cut in from 1 October 2014 have contributed more than $400 million in annual savings to taxpayers. These savings also represent an equivalent reduction in revenue for pharmaceutical manufacturers, wholesalers and pharmacies

Price reductions applied to 442 forms and strengths of 82 drugs and ranged between 10 per cent and 62 per cent. The four sets of price disclosure reductions over the last 12 months (1 December 2013, 1 April 2014, 1 August 2014 and 1 October 2014) have reduced annual funding on affected drugs by approximately $1 billion. This is on top of the significant savings provided in earlier rounds.

In the period since the last MPA PBS Scorecard, the Parliamentary Budget Office’s Projections of Government spending over the medium term confirmed that the PBS not only had grown slower than GDP historically but predicted that it would represent a “negligible” share of government expenditure growth over the medium term.

It is now time that the consequences of sustained reductions in PBS prices, and the low growth outlook, are properly addressed. All components of the PBS – pharmacies, wholesalers and manufacturers – are under increasing pressure. Now is the time to provide certainty for the industry and for the patients that are so well served by the PBS.

A commitment to further timely investment in cost effective new medicines, viable
remuneration arrangements for pharmacist dispensing and professional services,
and appropriate funding for wholesaling of PBS medicines, is urgently required. To
provide an environment that encourages investment, the sector requires stability
and predictability. Further changes to price disclosure would deter investment and
more jobs would be lost.

PBS costing less for taxpayers

Media inquiries: Greg Turnbull 0412 910261
26 November 2014

PBS savings abound in Budget

This year’s Budget has again confirmed the significant savings being reaped by
taxpayers from ongoing reforms of the Pharmaceutical Benefits Scheme.
The Budget revealed that the PBS will cost $4.5 billion less from 2013-14 to 2016-
17 than was expected in last year’s Budget. $0.7 billion of that was attributed to
increases in co-payments and safety net thresholds to be introduced from January
2015. However the remaining $3.8 billion is a windfall benefit from existing reform
and lower than expected growth.

According to the Medicines Partnership of Australia PBS Scorecard, issued today,
the amount taken out of the PBS forward estimates over the next three financial
years had a larger positive impact on the Budget bottom line over that period than
any savings measure in the 2014 Budget. The PBS continues to do more than its
share of fiscal “heavy lifting”.

The 2014-15 Health Portfolio Budget Statements also showed all ongoing savings
from PBS Reforms. Next financial year the savings will be running at more than $2
billion per year. Two years later they will have increased to more than $2.5 billion
per year and cumulatively they will deliver $9.9 billion over the next four years.
Clearly, PBS Reforms are delivering massive savings. With those savings come
significant – and growing – impacts on all parts of the pharmaceutical industry –
manufacturers, the supply chain and community pharmacies.

The Budget also included a 13 per cent increase in PBS co-payments from 1
January 2015, over and above the usual CPI increase – an increase of $0.80 per
prescription for patients with a concession card and of $5.00 per prescription for
those without a concession card. Safety net thresholds will also increase well above
inflation through to 2018.

The most recent study on the impact of sharp co-payment increases concluded that
increases in patient contributions particularly impact on concessional patients’ ability
to afford medicines. This is an impact that should be of concern to policy makers.

The Medicines Partnership of Australia is: The Pharmacy Guild, Medicines Australia,
the Generic Medicines Industry Association, the Australian Self-Medication Industry,
the Pharmaceutical Society of Australia and the National Pharmaceutical Services
Association.

Media inquiries: Greg Turnbull 0412 910 261

May 2014: The PBS leads Budget ‘heavy lifting’

Figure 1: PBS forward estimates downgraded by another $4.5 billion

This year’s budget revealed that the PBS will cost $4.5 billion
less from 2013-14 to 2016-17 than was expected in last year’s
budget. $0.7 billion of that was attributed to increases in
co-payments and safety net thresholds to be introduced from
January 2015. However the remaining $3.8 billion is simply
windfall benefit from existing reform and lower than expected
growth. This is on top of a total of $4.1 billion in forward
estimate downgrades across the previous two budgets.

The amount taken out of the PBS forward estimates over the
next three financial years had a larger positive impact on the
budget bottom line over that period than any savings measure
in the 2014 Budget. The PBS continues to do more than its
share of fiscal “heavy lifting”.

As shown below, these latest forward estimates show that PBS
expenditure as a percentage of Gross Domestic Product (GDP)
is expected to decline to less than 0.62% by 2017-18.

Figure 1: PBS forward estimates downgraded by another $4.5 billion

Figure 2 – Savings from PBS Reforms top $2 billion per year

The 2014-15 Health Portfolio Budget Statements included a
new table showing all ongoing savings from PBS Reforms. Next
financial year the savings will be running at more than $2 billion
per year. Two years later they will have increased to more than
$2.5 billion per year and cumulatively they will deliver $9.9
billion over the next four years.

Clearly, PBS Reforms are delivering massive savings. With those
savings come significant—and growing—impacts on all parts
of the pharmaceutical industry—manufacturers, the supply
chain and community pharmacies.

Figure 2 – Savings from PBS Reforms top $2 billion per year

Figure 3 – PBS expenditure is growing slower than other major areas of the health budget

The Budget papers show that expenditure on the PBS will decline significantly in 2014-15, followed by further declines in each of the out years. This is despite significant savings measures in other areas of the health budget such as the MBS.

Figure 3 – PBS expenditure is growing slower than other major areas of the health budget

Figure 4 – How will PBS co-payment and Safety Net changes affect the PBS in 2015?

The Budget papers show that expenditure on the PBS will
decline significantly in 2014-15, followed by further declines
in each of the out years. This is despite significant savings
measures in other areas of the health budget such as the MBS.
It was announced in the Budget that PBS co-payments will
increase by 13% on 1 January 2015, over and above the usual
CPI increase – an increase of $0.80 per prescription for patients
with a concession card and of $5.00 per prescription for those
without a concession card. Of at least equal significance,
especially in the longer term, were progressive increases to
safety net thresholds. The concessional threshold will reach 68
co-payments by 2018, while the general safety net will increase
at 10% above inflation each year for four years, and will be well
over $2,000 by 2018.

The most recent major increase in co-payments was a 24%
increase to both co-payments effective from 1 January 2005.
A major study by the University of Western Australia found
that, compared with dispensings prior to the co-payment
increase, prescriptions fell by 8% for combination asthma
medicines, 9% for proton pump inhibitors and 5% for statins.
The study concluded that increases in patient contributions
particularly impact on concessional patients’ ability to afford
medicines. The increase in the co-payment in 2014 will be
somewhat smaller than in 2005 and the reductions in filled
prescriptions are likely to also be smaller. However the
introduction of a GP co-payment from 1 July 2015 may also
impact on the number of prescriptions written.

As shown below, following the 2005 co-payment increases, PBS
prescription volumes decreased in the two subsequent years.

Figure 4 – How will PBS co-payment and Safety Net changes affect the PBS in 2015?

 

National Commission of Audit report wrong on the PBS

The recommendations of the National Commission of Audit in relation to the
Pharmaceutical Benefits Scheme would see the dismantling of a system that is safe,
sustainable and effective for patients.

The Medicines Partnership of Australia urges the Federal Government to reject the
flawed recommendations in the report on the PBS, which reflect a disappointingly
superficial analysis of a very complex and crucial part of the health system.

The fact is that PBS expenditure is under control, has been subjected to extensive
reforms and savings for the past five years, and actually saw a reduction in
Government expenditure last financial year.

If adopted, the recommendations of the Commission would:

  • Limit access to medicines by imposing an artificial cap and seven year cycle
    on PBS spending
  • Increase the cost of medicines for consumers through increasing the PBS copayments
  • Decimate the pharmacy sector by removing pharmacy ownership and
    location rules, jeopardising the quality and accessibility of pharmacy services

During his appearance before a Senate Committee in Canberra on Friday, the Chair
of the Commission, Mr Tony Shepherd, said in relation to PBS listings and
expenditure: “”What is covered by the PBS just grows, and the cost of it grows, and
there is no sort of rational assessment of whether it is needed or not.” This flies in
the face of PBS reality, and would seem to be an example of what Mr Shepherd
described on Friday as “a layman’s look at the thing.”

The Commission’s reference to the New Zealand pharmaceuticals system ignores
the shortcomings of that country’s tendering system which include restrictions on
patient and doctor choice of medicines, and risks of medicine shortages through
reliance on single suppliers. Unhelpfully, the report uses as an example a single
medicine comparison, which includes out-of-date prices, and fails to recognise the
lack of choice.

Access to medicines for Australian health care consumers is underpinned by the
National Medicines Policy, established in 1999. The National Medicines Policy has
four central objectives:

  • timely access to the medicines that Australians need, at a cost individuals
    and the community can afford;
  • medicines meeting appropriate standards of quality, safety and efficacy;
  • quality use of medicines;
  • and maintaining a responsible and viable medicines industry.

Unfortunately, the recommendations of the National Commission of Audit fail the
test on all four of these objectives.

The Medicines Partnership of Australia is: The Pharmacy Guild, Medicines Australia,
the Generic Medicines Industry Association, the Australian Self-Medication Industry,
the Pharmaceutical Society of Australia and the National Pharmaceutical Services
Association.

Media inquiries: Greg Turnbull 0412 910 261

Medicines Partnership of Australia states that no further PBS savings measures are required or justified in the 2014 Federal Budget

With a united voice, members of The Medicines Partnership of Australia (MPA) have called on theGovernment to provide stability and certainty that is urgently required to continue the supply ofmedicines to Australian patients through the Pharmaceutical Benefits Scheme (PBS).

Given the recent passage of the Simplified Price Disclosure legislation, the MPA assumes the upcoming Federal Budget will not include further changes to price disclosure which is already reaping the Government billions of dollars a year in reduced PBS reimbursement costs.

However, it is clear from Mr Hockey’s speech last night that the Government is seriously looking at PBS co-payment and safety net levels as well as the eligibility for concessional PBS co-payments.

In its deliberations, the Government must recognise that medicines are not just a cost but a critically important investment in better health care for all Australians.

PBS medicines along with the professional advice and support of doctors and pharmacists keep people alive and out of more expensive hospital and residential aged care settings. They keep people productive in the economy, in the paid workforce and caring for family members.

The world’s largest health information company, IMS Health, has estimated that Australia would save $6 billion a year from reforms that increase the responsible use of medicines.

The Australian Commission on Safety and Quality in Health Care (ACSQHC) estimates there are 230,000 medication related admissions to hospitals annually costing an estimated $1.2 billion.

If changes to PBS co-payment levels and eligibility are not intelligently managed with a strong commitment to professionally supported medication adherence and management, there is a great risk that sick, elderly and less well-off Australians will be discouraged from taking their medicines.

This will not only be to the detriment of their own personal health, but will lead to further increased costs across the MBS, hospitals and aged care, all of which are considerably more expensive and growing much faster than the PBS.

The MPA also queried the longer term forecasts of PBS expenditures released by Treasurer Hockey.

Treasury and Finance do not have the best record in forecasting these expenditures. In the last three years, they have had to reduce their pharmaceutical expenditure forecasts by a cumulative total of $8.9 billion, including $2.7 billion in last December’s MYEFO (the largest downward forecast across the entire Federal Budget).

PBS expenditure actually fell last financial year and is forecast to rise at a rate lower than GDP growth throughout the current forward estimates, a fact confirmed in Mr Hockey’s latest figures.

How it is then suddenly forecast to start increasing by nearly $1billion a year is unexplained.

Attachment 1 provides a brief overview of PBS projections.

The National Commission of Audit’s projections for Pharmaceutical Benefits Scheme (PBS) expenditure as a percentage of Gross Domestic Product (GDP) show that the scheme is under control well into the future. PBS as a percentage of GDP will be stable at approximately 0.6% of GDP through until 2023-24. Based on recent experience, with successive downward revisions of PBS expenditure in budget after budget, this will be an overestimate.

It is also notable that the National Commission of Audit’s projections are below those  released in the most recent Intergenerational Report (IGR 2010). For example, the projection for 2019-20 was 0.7% in IGR 2010 compared with the new estimate of just 0.59%. IGR 2010 was in turn a massive reduction compared with previous Intergenerational Reports published in 2002 and 2007, as shown in the chart below.

Brief overview of PBS projections.

 

New introduction to the PBS launched today

A new publication which explains the scheme for subsidising medicines for Australian  patients has today been launched at Parliament House in Canberra by the Medicines Partnership of Australia.

An Introduction to the Pharmaceutical Benefits Scheme provides a simple explanation of how the PBS works in Australia. The paper includes the history of the PBS, what it does, the key participants in the manufacturing and supply process, and key issues for the Scheme going forwards.

In launching the report, the Chair of the Medicines Partnership of Australia, Ralf Dahmen, explained that it was designed to help people understand how the PBS works.

“We wrote this guide because while the PBS is often debated in the community, a lot of this debate is often technical, sometimes ill-informed, and difficult to follow for those who don’t understand how the Scheme works,” Mr Dahmen said.

“Many of us here today personally owe our health and productivity to medicines subsidised through the PBS, and all of us have relatives, friends and constituents who rely on the Scheme to obtain the medicines they need.

“So this Introduction is designed to help people get their heads around what the PBS does, and how it operates in practice.”

The Medicines Partnership of Australia (MPA) is an alliance of peak industry associations representing key members in the supply chain that deliver medicines and pharmacy expertise to Australian consumers. Its members include Medicines Australia, the Australian Self Medication Industry, the National Pharmaceutical Services Association, the Pharmacy Guild of Australia, the Pharmaceutical Society of Australia and the Generic Medicines Industry Association.

The publication, An Introduction to the Pharmaceutical Benefits Scheme, can be found on the MPA website.

27 February 2014

Requests for hard copies should be directed to Alexia Vlahos

20 February: The evidence is in – PBS expenditure is contained and sustainable.

In the last few months, major reports from three separate parts of government have confirmed that PBS expenditure is now decreasing and that price disclosure is delivering savings far in excess of what was expected.

No further PBS savings measures are required or justified. What is needed now is for part of the ongoing savings provided through price disclosure to be reinvested in the PBS. This will ensure patients continue to have access to new and innovative treatments and that the PBS can continue to be implemented efficiently and safely through aviable supply chain and community pharmacy network.

Exhibit 1 – Department of Health (November 2013)

The 2012-13 Department of Health & Ageing Annual Report confirmed that Commonwealth pharmaceutical expenditure fell by an unprecedented $820 million (8.5%) in just one year …

Exhibit 1 - Department of Health (November 2013)

Exhibit 2 – The Treasury (December 2013)

The 2013-14 Mid-Year Economic & Fiscal Outlook yet again listed the PBS as the largest single downward revision across the entire Commonwealth Budget …

Exhibit 2 - The Treasury (December 2013)

This MYEFO outcome was just the latest in a series of reductions to PBS forward estimates. These reductions have amounted to $8.9 billion since the 2011-12 Budget, with expenditure as a percentage of GDP now expected to fall in each of the next three financial years.

Exhibit 2 - The Treasury (December 2013)

Exhibit 3 – The Productivity Commission (January 2014)

In January the Productivity Commission’s Report on Government Services 2014 found that PBS pharmaceuticals had the slowest growth in prices across all areas of health expenditure – an average annual inflation of just 0.2% over nine years to 2011-12.

Exhibit 3 - The Productivity Commission (January 2014)