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Thursday, 25 August 2011
Page: 5641

Pharmaceutical Benefits Scheme

(Question No. 371)

Senator Boswell asked the Minister representing the Minister for Health and Ageing, upon notice, on 12 January 2011:

Why is further reform of the Pharmaceutical Benefits Scheme necessary when the 2007 reforms introduced an ongoing market mechanism that ensures that discounts given to pharmacists are ‘clawed back’ by the Government, ensuring the Government only pays the true market price for medicine.

Senator Ludwig: The Minister for Health and Ageing has provided the following answer to the honourable senator's question:

Two key goals of the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2010 are to contribute to the sustainability of the Pharmaceutical Benefits Scheme (PBS) and to maintain access to quality medicines at a lower cost to the taxpayer. The pricing reforms in this Act build on the 2007 PBS reforms which showed that price disclosure is an effective mechanism for getting better value by taking advantage of discounting that is occurring in the market for branded pharmaceutical products.

While the 2007 PBS reforms are anticipated to provide more savings than originally estimated, these will be more than outweighed by higher than expected growth in PBS costs. The February 2010 Impact of PBS Reform report to government stated that on current projections, PBS outlays in 2018 will be in the order of $13 billion to $13.7 billion.

The operation of price disclosure under the 2007 reforms was limited as it was only triggered when a new brand of a medicine was listed on the PBS. Consequently, by October 2010 it only applied to about 45 medicines, being one fifth of the medicines listed on the PBS. For medicines that have a mature and saturated market, such as simvastatin which has 17 brands already, it would seem unlikely that a new brand would list on the PBS in the near future, and thereby become subject to price disclosure under the 2007 reforms. Simvastatin has a PBS listed price for a 40 milligram tablet of around $38.00 compared to a UK price of around $2.85.

The 2010 PBS reforms will widen the number of medicines subject to price disclosure and condense the period for a price disclosure cycle from two years to 18 months. Approximately 220 drugs will be subject to the expanded and accelerated price disclosure program as there is no new brand trigger required for existing F2 listings.

Consumers pay no more for their medicines under these new arrangements, and some may pay less as prices of some medicines fall below the level of the general patient co-payment (currently $34.20). The additional direct savings to consumers from the new measures under this legislation has been independently estimated to average almost $3.00 per prescription for general patients over a ten year period.