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Pricing arrangements for generic medicines.



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Media Release

The Hon Tony Abbott MHR Minister for Health and Ageing

Pricing arrangements for generic medicines The government today considered implementation of the election commitment for 12.5% reduction for new brands of already-listed medicines on the PBS and has decided that the reduction would only occur once in any group of price related drugs.

7 February 2005 ABB009/05

In October 2004, the Commonwealth Government announced that listing of generic versions of existing PBS medicines would be subject to an automatic 12.5 per cent reduction in the government benchmark price with such price reductions also applying to all brands in related therapeutic categories under usual reference pricing arrangements.

The government today considered implementation of the election commitment for 12.5% reduction for new brands of already-listed medicines on the PBS and has decided that the reduction would only occur once in any group of price related drugs.

A price reduction will occur when a new brand of an already listed PBS medicine is added to the PBS. This price reduction will flow to other brands of the same drug and to other drugs in the same price related groups. For example, when the first new generic brand of one of the 'statins' (a therapeutic group of drugs for the treatment of high cholesterol levels) comes forward after the start date, it will need to offer at least a 12.5% price reduction or more, and the new benchmark price will flow to the other statin drugs.

Each price related group of drugs would only be subject to the 12.5% reduction once. The flow-on reductions will apply to both patented and non-patented medicines.

The government has consulted widely on the implementation of this measure, including with Medicines Australia, the Generic Medicines Industry Association, the Pharmacy Guild of Australia and the National Pharmaceutical Services Association (pharmaceutical wholesalers) and Consumers’ Health Forum of Australia.

The industry has put out different savings estimates for this measure. It is very difficult to estimate savings accurately as they are sensitive to a number of factors including the number and timing of new brand entries to the PBS. Consultation with industry has provided new information that the government has now taken into account. The savings will be broadly consistent with those announced in the Charter of Budget Honesty ($740 million over the four years to 2007-08).

Currently, the prices paid for generic medicines in Australia are high in comparison with other similar countries. Many new brands of existing PBS listed drugs are added to the list without any price reduction. This measure ensures that taxpayers receive even better value for the medicines subsidised by the PBS.

Media contact: Kate Miranda, 0417 425 227