Pharmaceutical CPI growth due to government policy

The Consumer Price Index (CPI) for the March quarter has shown growth in pharmaceutical prices due to the normal mechanics of the Pharmaceutical Benefits Scheme (PBS) safety net.

Medicines Australia Chief Executive, Dr Brendan Shaw, said today’s figures showing consumer pharmaceutical price growth should be considered in the context of the December 2013 CPI, when pharmaceutical prices fell 1.6% per cent.

“The fall of the pharmaceutical price index throughout the year to December 2013 quarter was largely due to patients reaching the PBS safety net threshold and paying either a reduced co-payment in the case of general patients, or no co-payment in the case of concession card holders,” Dr Shaw said.

“As each calendar year progresses, more people reach the PBS safety net threshold.

“On 1 January each year, the safety net is reset and consumers resume paying the normal PBS co-payments until they again reach the safety net threshold. That is why the pharmaceutical component of the index rises again in the first quarter of each calendar year.

“The apparent growth in pharmaceutical prices each March quarter is a product of Government policy rather than any change in pharmaceutical company pricing policy.

“In previous years this March quarter price growth has been incorrectly interpreted by some observers as a result of undue price rises by pharmaceutical companies.

“However, the apparent increase in consumer medicine prices in the first quarter of each year is due to the impact of Government policy related to PBS safety nets.

“What it shows is that the safety net is working.”

This explanation is provided by the Australian Bureau of Statistics itself in its own statistical release.

“These rises were a result of the cyclical reduction in the proportion of patients who qualify for subsidies under the Medicare Benefits Scheme and Pharmaceutical Benefits Scheme at the start of each calendar year,” the ABS report said.

“In fact, this year’s March quarter increase of 6.1% is the lowest March quarter increase in the pharmaceutical price index in 16 years,” Dr Shaw said.

“This may well reflect the impact of substantial PBS price cuts that have happened as a result of price disclosure over the last few years.

“Price disclosure has kept the PBS sustainable for government, taxpayers and consumers.”


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Alexia Vlahos
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