MoU delivers Government substantial PBS savings

Substantial price cuts to medicines on the Pharmaceutical Benefits Scheme announced by the Government will yield taxpayers major savings that will keep the PBS affordable, while providing the Government with the capacity to list new medicines in the future.

The Government had agreed as part of the 2010 Memorandum of Understanding with Medicines Australia a new round of market-based price cuts to deliver an average price reduction for off-patent medicines of 23 per cent on 1 April 2012.

The price cuts follow this month’s Mid-Year Economic and Fiscal Outlook which forecast lower than expected PBS spending to the tune of $1.8 billion.

Medicines Australia chief executive Dr Brendan Shaw said the latest price cuts, coupled with MYEFO means the Government will book hundreds of millions of dollars in PBS savings in coming years.

“These additional savings, together with future price disclosure related cuts and the current low growth rate of expenditure all add up to a manageable PBS.

“It effectively removes the case for further PBS reform.”

Dr Shaw said the price cuts would cause significant commercial difficulty for many of the companies taking substantial price cuts.

“Some companies have taken price cuts of more than 70 per cent for a single medicine, and absorbing reductions of that magnitude is obviously challenging,” Dr Shaw said.

“But we have agreed to these reductions because Medicines Australia member companies recognise the importance of keeping the PBS sustainable.

“This creates the financial headroom that allows the Government to bring the latest medicines on to the PBS whilst keeping expenditure under control.

“The good news for patients is that as well as providing financial headroom for listing new medicines, the price reductions that will occur on 1 April should lead to price reductions on medicines for patients as well as the Government.”

The system of mandatory price disclosure was legislated as part of the MoU to drive savings through a competitive generics market and ensure PBS sustainability.

“The system requires companies to disclose the discounted price at which they are selling medicines in the market, allowing Government to adjust the price it pays to the price the medicine commands in a competitive market place,” Dr Shaw said.

The savings announced by the Government are provisional, pending a short period in which companies can ask for a review if they believe the price reduction has been incorrectly calculated


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