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Australian Journal of Pharmacy : November 2006
capital hill capital hill ment of Health and Pharmacy Guild of Australia negotiators dug in firmly in opposition over a number of issues embedded in the Departmental PBS reform agenda. So much so that despite an agenda being circulated prior to the Cabinet meeting on 24 October,which mentioned a draft proposal on PBS reform, it was decided that due to the absence of the Prime Minister (who was away getting a hard time at the Pacific Islands Forum at the time) no PBS reform proposals would be considered until the PM’s return. The Minister isn’t getting an easy ride Crunch time for PBS reforms T HE PBS reform hiatus was set to continue late last month as Depart- ing from 15 per cent to 2 per cent. All cuts would be reimbursed (by some unimagin- ably bureaucratic accounting system) on a cascading basis, either annually or inter- mittently. The price cuts would either kick in once only, just like the 12.5 per cent was applied—except the Minister has said that won’t happen. (Remember, he also said savings harvested from generics price cuts would be re-invested in the PBS too— but changed his mind later). Or they may be applied every 12 months. Nobody can work out, however, what would trigger this price cut. Would it be a new generic falling off the patent tree or would it be arbitrary? It gets worse. The Department says the on any of this. He has already abandoned several long-standing commitments to face a Cabinet meeting scheduled for 14 November armed with the Department’s submission. Thatmay well be for mention only as well, based on the sensitive level of current negotiations, according to Cabi- net sources, though pressure is now mounting for a fully blown submission. But what are the difficult issues—and is it true that PBS reform almost got derailed? The Department of Health claims it wants lower generic drug prices and the Government wants savings out of the PBS. Their new word is ‘sustainable’ price cuts. That is, ones that don’t slug Medicines Australia’s patented medicines too hard. At the same time they also want lower generics prices. Votes are important, par- ticularly when there is an election around the corner. The Guild understandably doesn’t want any change at all. After all, it signed the Fourth Community Pharmacy Agree- ment with the Government. If the Gov- ernment wanted to introduce a PBS reform package, it should have done so when it negotiated the Agereement. It can’t expect the Guild to go back to the negotiating table now. The Department talks about cuts rang- Government also wants transparency around trading terms between pharma- If the Government wanted to introduce a PBS reform package, it should have done so when it negotiated the Agereement ceutical companies and pharmacists. Trading terms exist in every business but because of some mischief making by a former member of the Generic Medi- cines Industry Association (GMIA), the whole issue has been taken out of context and overstated. It’s all very messy but the Government will not give up; it has its sights on those discounts. Taking shape underneath all the pos- turing, however, is real evidence of PBS reform. From the point of view of Big Pharma, these reforms, if implemented, would see a massive overhaul in the way therapeutic group pricing would be applied. Cost effectiveness might be rede- fined to include therapeutic equivalence at the patient level based on drugs which are neither interchangeable or substi- tutable. 14 ? THE AUSTRALIAN JOURNAL OF PHARMACY VOL.87 NOVEMBER 2006 Several informants close to the pro- ceedings— at Cabinet level and on the Hill as well as within the Department— say that these very basic reforms could be okayed by Cabinet. That is, provided that some face-saving form of announcement on generics savings to the PBS could be cobbled up, with some form of price dis- closure on trading terms. So, as this issue of the AJP headed for the printer, you can all ruminate on the following as things come to pass. First, there’s likely to be a radical shift in defining what actually constitutes a generic—something that will challenge both pharmacy and Medicines Australia. We might havewhat are termed F1 and F2 drugs in future. F1 is a category pro- posed to contain all non-substitutable medicines that have to be prescribed on a patient-by-patient basis and cannot be switched—and perhaps some other patented products. These would be delinked from generics in the F2 group (that is, generics price cuts triggered on whatever basis would not impact pricing of F1s). The F2 group would comprise both generics and so-called ‘me-too’ patented brands that can be regarded as substi- tutable medicines. They are now seen as the target for PBS reform. Strong rumours were sweeping the industry that a deal had been signed off between the Department and the Guild. This is not correct. Presently the situation has been described by sources within Cabinet as still on track but looking for a station. Delinking in the 2 per cent (considered best case) scenario is not being supported by everybody in the Department or the Minister’s office. In the end it will be continued page 37? The opinions expressed in this coluymn are not necessarily those of the AJP’s management or staff