Report Shows Pbs Reforms Are Working, But Not Whole Picture

Report shows PBS Reforms are working, but not whole Picture

The Pharmacy Guild of Australia has welcomed the findings of the Department of Health and Ageing's report to Parliament on the impact of Pharmaceutical Benefits Scheme (PBS) Reforms. The report provides a much more up-to-date picture of the impact of the reforms, building upon the originally stated $3 billion of savings over a decade announced by then Federal Minister for Health, Tony Abbott, in November 2006.

The report has identified an enormous range of potential savings that will be achieved by the reforms, from $3.6 billion to $5.8 billion over 10 years. The Guild believes that, due to the effects of price disclosure and the growing competitiveness of the generic medicines market in Australia, the savings captured will be at the upper levels of those predicted in the report.

"It is important to note that, community pharmacy will be delivering an extra $1 billion in savings to Government over five years through the Fifth Community Pharmacy Agreement," National President of the Pharmacy Guild, Kos Sclavos, said.

"With this in mind, it's vital that pharmacy owners understand the implications - now and into the future - of these reforms on their businesses. On top of the $1 billion hit to remuneration in the Agreement, the PBS Reforms will require major adjustments from community pharmacy businesses to ensure their ongoing viability," he said.

One of the contributing factors to why the Guild believes the PBS is now in good health and will be able to continue to deliver its benefits to the Australian community is that major pharmaceutical companies, such as Pfizer, are now committed to a significant generic medicines portfolio for the Australian market. Prior to the PBS Reforms, Pfizer were not engaged in generic medicines manufacturing. Both the Government and the taxpayer will greatly benefit from a more competitive environment in the pharmaceutical sector.

The Guild will be assessing the full report and will compare its findings with those in the Guild's own commissioned reports prepared by Access Economics and Illuminate Health Consulting.

The most recent Guild commissioned report, released by Illuminate Health Consulting in April 2009, concluded that the PBS Reforms will reduce Commonwealth Government expenditure by a total of almost $7.4 billion over 10 years. This report was based on detailed modelling of known price reductions, and estimates of future price reductions that will flow from patent expiries and the exposure of the F2T formulary to price disclosure after January 2011.

These findings were supported by a report into PBS Reforms commissioned by Medicines Australia and released by the Centre for Strategic Economic Studies in October 2009. While its estimate of $6 billion in savings was lower than the Illuminate Health Consulting estimate, it was still substantially greater than the original projection stated by Mr Abbott.

These reports confirm that the reforms are doing their job for taxpayers and for the Government, and that the PBS is sustainable long term. They have found that PBS growth is much lower than expected, and the savings to Government are significantly higher.

The report to Parliament states that the PBS will continue to grow despite the impact of the reforms. Much of this will be due to new medicines being added to the PBS, many of which are very expensive, specialised medicines that are not sold in the vast majority of community pharmacies. Those specialist hospital pharmacies that may dispense these medicines will receive very little remuneration. For example, if a PBS medicine costs $3000 per treatment, the remuneration for the pharmacy is a mere $70.

In the 12 months to December 2009, the top 10 fastest growing drugs (by increase in Government expenditure) contributed 64 per cent of the total growth in Government spending on the PBS.

Of the 10 fastest growing drugs:
* All 10 are single manufacturer drugs, so have not been affected by the PBS Reforms. However, once these drugs come off patent and are subject to generic competition, they will be subject to price disclosure, which will ensure that the Government achieves maximum savings from this competition.
* Five were first listed on the PBS within the previous three years.
* Four cost the Government in excess of $1750 per prescription dispensed. On these items, community pharmacy remuneration is between two per cent and four per cent of the total Government cost.

The total cost to Government of drugs with a price in excess of $1000 grew by more than 40 per cent in the 12 months to December 2009. Many drugs in this price range require special handling and are never dispensed by a typical community pharmacy. Of those that are dispensed occasionally in community pharmacies, the total remuneration received by the pharmacy is a very low proportion of the total cost - less than five per cent. Community pharmacy does not profit from growth in these drugs and is not responsible for the fast growth in this area of PBS expenditure.

For further information: Michael Pittman on 02 6270 1888.

SOURCE: The Pharmacy Guild of Australia