PBS Price cuts to save Government $1.9 Billion

A new round of price cuts for off-patent medicines on the Pharmaceutical Benefits Scheme, which comes into effect from today (1 April), will ensure PBS savings of at least $1.9 billion for the Government, as agreed in the 2010 MoU with Medicines Australia.

From 1 April, the price of 74 commonly used off-patent medicines on the PBS will be reduced by between 10 per cent and 82 per cent.

These cuts are over and above a 16 per cent price reduction that has already been applied to many off-patent medicines.

Medicines Australia chief executive Dr Brendan Shaw said the system of mandatory price disclosure, agreed as part of the MoU, will drive savings through a competitive off patent market and ensure the long-term sustainability of the PBS.

“These types of price reductions which capitalise on market competition provide the Government with the financial headroom to list new medicines whilst ensuring the PBS remains sustainable in the future,” Dr Shaw said.

“The system requires manufacturers to disclose the actual price at which they are selling medicines in the market, allowing Government to adjust the price it pays.

“These are enormous savings but effectively they will mean a better deal for taxpayers and a more sustainable PBS.

“And there should be more such price reduction rounds in the future as more medicines go off-patent and become subject to price disclosure. We expect more savings to accrue to the Government in years to come.

“Expenditure growth of the PBS is already well contained. Mandatory price disclosure will put further downward pressure on growth and negate the argument for further reform.

“The evidence to date strongly suggests that the MoU is working well and is on track to deliver the Government at least $1.9 billion in savings.

“At the same time, it is important to note that these price reductions will cause significant commercial difficulty for many of the companies taking substantial 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.

“But the MoU will ensure a stable business environment for manufacturers because it carries a Government commitment that industry will not be asked to bear any further price-related savings measures before 2014.”


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