Bills Digest no. 121 2014–15
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WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Alex Grove
Social Policy Section
16 June 2015
Contents
Purpose
of the Bill
Structure of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Other provisions
Concluding comments
Date introduced: 27
May 2015
House: House of
Representatives
Portfolio: Health
Commencement: Sections
1–3 on the day the Act receives Royal Assent. Schedule 1 commences on the day
after the Act receives Royal Assent. Schedule 2 commences on 1 November 2015
and Schedule 3 commences on 1 January 2016.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
The purpose of the National Health Amendment
(Pharmaceutical Benefits) Bill 2015 (the Bill)[1]
is to amend the National Health Act 1953 (the Act)[2]
to:
- reform
pricing arrangements to reduce the cost of some Pharmaceutical Benefits Scheme
(PBS) medicines
- allow
pharmacists to discount the co-payment for PBS medicines
- extend
the sunset provisions for pharmacy location rules until 2020 and
- revise
membership arrangements for the Pharmaceutical Benefits Advisory Committee
(PBAC).
The Bill also makes a number of minor and technical
amendments to support the intended operation of the Act.
The measures contained in the Bill are part of a wider Pharmaceutical
Benefits Scheme Access and Sustainability Package (the Package) which is
outlined in the Background section of this Bills Digest.
The Bill is divided into three schedules:
- Schedule
1 contains amendments commencing the day after Royal Assent. Key measures in
Schedule 1 include a five per cent price reduction for F1 (patented) medicines,
further tightening of price disclosure to close the combination drug loophole
and remove the originator brand from price calculations, and the extension of
sunset provisions for pharmacy location rules until 30 June 2020
- Schedule
2 contains amendments commencing on 1 November 2015, which allow the Minister
to determine that brands of medicines (including biosimilars) are equivalent
for the purpose of substitution by a pharmacist and
- Schedule
3 contains amendments commencing on 1 January 2016. The key measure in this
Schedule allows pharmacists to discount a patient’s co-payment by up to $1.
About the PBS
The Pharmaceutical Benefits Scheme (PBS) provides subsided
access to necessary medicines for Australians. Most of the listed medicines on
the PBS are dispensed by pharmacists and used by patients at home. Patients pay
a co-payment of $6.10 (for concession card holders) or up to $37.70 (for
general patients) towards the cost of each PBS medicine, with the Australian
Government paying any remaining cost.[3]
Families who spend more than their Safety Net amount on co-payments in a year
receive further prescriptions for that year for free (if they hold a concession
card) or for the concessional co-payment of $6.10 (if they do not).[4]
The listing of medicines on the PBS is subject to an
assessment of clinical benefit and cost effectiveness by the independent Pharmaceutical
Benefits Advisory Committee (PBAC), as well as pricing negotiations with the
Health Minister or delegate. The decision to subsidise an item is also
considered by Cabinet if the net cost to the PBS is greater than $20 million
per year.[5]
Cost of the PBS
The total cost of the PBS is uncapped, and can therefore
increase as new drugs are added and demand grows.[6]
Total PBS expenditure grew at an average annual rate of 4.9 per cent from
2005–06 to 2013–14, although growth was slower towards the end of this period,
and PBS expenditure actually contracted by 2.2 per cent in 2012–13.[7]
Government spending on pharmaceutical benefits and services is forecast to
increase by 2.5 per cent in real terms between 2014–15 and 2015–16, mostly as a
result of new and amended drug listings on the PBS.[8]
The PBS is predicted to cost $9.77 billion in 2015–16, although this figure
excludes expected savings from the PBS Access and Sustainability Package (the
Package), which is outlined below.[9]
Price disclosure
One mechanism that the Government has used to contain PBS
costs in recent years is known as price disclosure. Price disclosure requires
the suppliers of certain PBS listed brands of medicines to disclose information
to the Department of Health (the Department) relating to the price at which
their brands are sold. The Government uses this information to move the price paid
by the Government under the PBS closer to the price at which the medicines are
supplied in the market.[10]
Price disclosure arrangements were introduced in 2007 to allow the Government
to reap the savings from generic medicines being offered to pharmacists at
discounted prices.[11]
The arrangements were expanded in 2010 and again in 2014.[12]
Under section 85AB of the Act, most PBS listed drugs are
assigned to one of two formularies: F1 or F2. F1 is for single brand drugs (generally
innovative medicines that are still on patent) and F2 is for drugs that have
multiple brands listed on the PBS (typically the off patent originator medicine
and its generic competitors). There is also an administrative ‘Combination
Drugs List’ for drugs that are not allocated to either formulary.[13]
Current price disclosure arrangements apply to all drugs on the F2 formulary
(unless they are exempt).[14]
Reducing the approved price for F2 medicines via price
disclosure has delivered significant savings to the Government, estimated at
almost $2.1 billion in 2014–15.[15]
Pharmaceutical Benefits Scheme
Access and Sustainability Package
On 27 May 2015, the Government announced a Package of
pharmaceutical reforms to deliver ‘cheaper medicines, a more competitive
pharmacy sector and greater investment in new medicines and patient support
services’.[16]
The five year (to 2020) Package comprises:
-
$18.9 billion Sixth Community pharmacy Agreement.
-
A Strategic Agreement with Generic Medicines industry Association
(GMiA).
-
$6.6 billion worth of proposed efficiencies throughout the PBS
supply chain.
-
$2.8 billion additional direct investment across the pharmacy
sector
-
Note: This $2.8 billion investment is in addition to PBS
investment that will occur over the next five years, including the $2.5 billion
worth of new drugs currently being considered by the Government for listing.
-
An in-principle Strategic Agreement with Medicines Australia is
also being progressed.[17]
The Package aims to reduce the price that the Government
(and in some cases consumers) pay for many PBS medicines, in order to keep the
PBS sustainable and support the listing of new drugs into the future. The
Package seeks significant savings across the pharmaceutical supply chain and
provides additional funding for pharmacies.[18]
For this reason the Package has been described as ‘a huge victory for the
Pharmacy Guild at the cost of manufacturers’.[19]
The Package has more than 20 measures in total. Key
components are:
-
new PBS pricing policies to reduce costs for innovative (F1) and
generic (F2) medicines
-
increasing pharmacy competition by allowing pharmacies to
discount the co-payment
-
removing some over-the counter medicines from the PBS
-
changing the structure of pharmacy remuneration to remove the
link to PBS prices, and
-
providing for pharmacies to expand their role in the community.[20]
A summary of measures contained in the Package is
available on the PBS website.[21]
The focus of this Bills Digest is on elements of the Package which require
amendments to the Act. Of the five key components listed above, only the PBS
pricing policies and allowing pharmacies to discount the co-payment require
amendments to the Act.[22]
Measures that are in the Package but not contained in the Bill are outside the
scope of this Bills Digest, although key measures contained in the Sixth
Community Pharmacy Agreement (6CPA) and the Strategic Agreement with
the Generic Medicines Industry Association (the GMiA Agreement) are briefly
outlined below.
The Sixth Community Pharmacy
Agreement
Beginning in 1990, the Australian Government and the
Pharmacy Guild of Australia (the Guild) have signed a succession of five year
agreements known as community pharmacy agreements.[23]
The agreements set out remuneration for pharmacists to dispense PBS medicines,
as well as other matters:
While the main purpose of the agreements has been to set out
remuneration arrangements for the owners of retail pharmacies that dispense PBS
prescriptions, the scope of agreements has progressively broadened to establish
a range of government funded professional programs (such as medication
reviews), and a funding pool for pharmaceutical wholesalers that meet the
requirements of the Community Service Obligation (CSO), which generally
requires participating wholesalers to be able to supply PBS items to any retail
pharmacy in Australia within 24 hours. Community pharmacy agreements have also
referenced the Australian Government’s Pharmacy Location Rules (Location
Rules), which regulate where new pharmacies that dispense PBS prescriptions may
open and where existing pharmacies may relocate.[24]
The current agreement, the Fifth Community Pharmacy
Agreement (the 5CPA), expires on 30 June 2015 and has delivered an estimated
$15.6 billion in funding over five years for the above purposes.[25]
The Australian National Audit Office (ANAO) audited the administration of the
5CPA and identified ‘shortcomings in 5CPA costings, performance reporting and
the evaluation framework’ with the result that the Department ‘is not well
positioned to assess whether the Commonwealth is receiving value for money from
the agreement overall, or performance against the six principles and
objectives.’[26]
The Department has indicated that it has addressed the recommendations from the
ANAO in the preparation of the new agreement, the 6CPA.[27]
The 6CPA was signed on 24 May 2015 and provides for an
additional $3.2 billion in remuneration and funding to community pharmacies and
wholesalers over and above 5CPA levels.[28]
Key measures in the 6CPA that do not require changes to the Act include:
- the
replacement of the pharmacy mark-up with a flatter Administration, Handling and
Infrastructure fee (AHI fee). This is intended to de-link pharmacy remuneration
from medicine pricing and insulate the community pharmacy sector from the
effects of PBS reforms to medicine prices[29]
- a
doubling of funding for pharmacy professional programs to $1.26 billion over
five years, with all programs to be evaluated for clinical and cost
effectiveness and
- an
independent review of pharmacy location rules and remuneration.[30]
Analysis of these measures is outside the scope of this Bills
Digest.
Key measures in the 6CPA that do require changes to
the Act include allowing pharmacists to discount the PBS patient co-payment by
$1 and continuing the operation of pharmacy location rules until 30 June 2020.[31]
The rules are outlined below and both measures are discussed in the Key issues
and provisions section of this Bills Digest.
Pharmacy location rules
Pharmacy location rules place restrictions on where
pharmacies can be located.[32]
The current rules, as agreed in the 5CPA, are made by a Ministerial
Determination under subsection 99L(1) of the Act.[33]
The rules are intended to support the equal distribution of pharmacies across
the country. The rules are complex, but the basic principle is that a pharmacy
will not be approved to supply medicines on the PBS if it is within 1.5
kilometres of an existing pharmacy.[34]
The rules also prevent a pharmacy from opening within a supermarket.[35]
Critics of the rules have argued that they are ‘anti-competitive, limit access and choice in rural and remote areas and
prevent young pharmacists from owning their own business as a result of the
high cost.’[36]
The Minister has acknowledged criticisms of the rules, as well as a number of
recent reports that have recommended the revision or removal of the rules:
There has also been frequent criticism of
the existence of Pharmacy Location Rules. Most recently, the National
Commission of Audit, the Competition Policy Review by Professor Ian Harper, and
the Productivity Commission Research Paper: Efficiency in Health have
all suggested that the location rules affect competition and that they should
be revised or removed.[37]
As discussed above, the 6CPA provides for
an independent review of pharmacy location rules, but also agrees to
continue the rules in their current form until 30 June 2020.[38]
The GMiA Agreement
The GMiA Agreement is the first such agreement between the
Government and GMiA, the representative body of generic medicine suppliers in
Australia.[39]
Signed on 24 May 2015, key measures in the GMiA Agreement include:
- changing
price disclosure arrangements to remove the originator brand from the price
calculation
- measures
to encourage uptake of biosimilar medicines through the PBS and
- $20
million over three years for a national campaign to increase awareness and
uptake of biosimilar medicines.[40]
The Bill implements the first measure, and also contains
amendments to support the second measure. These two measures are discussed in
the Key issues and provisions section of this Bills Digest.
Senate Standing Committee for the
Scrutiny of Bills
At the time of writing this Bills Digest, the Senate
Standing Committee for the Scrutiny of Bills had not considered the Bill.[41]
Parliamentary Joint Committee on
Human Rights
At the time of writing this Bills Digest, the Parliamentary
Joint Committee on Human Rights had not published any comments in relation to
the Bill.
Australian Labor Party
At the time of writing this Bills Digest, it was reported
that the Australian Labor Party was yet to publicly declare its position on the
Bill.[42]
A spokesperson for Catherine King, the Shadow Minister for Health, told a
pharmaceutical industry publication that Labor’s position would be disclosed
when the Shadow Minister spoke during the second reading debate on the Bill.[43]
However, the Shadow Minister has publicly stated that Labor will support the
existing pharmacy location rules.[44]
Australian Greens
At the time of writing, it was reported that the Australian
Greens were yet to publicly declare their position on the Bill.[45]
When the ANAO report into the 5CPA was released, the Greens called for a public
inquiry into the 5CPA negotiations and a ‘more robust and transparent process’ for
6CPA negotiations.[46]
The Joint Committee of Public Accounts and Audit has subsequently resolved to
review the ANAO report, but the inquiry ‘does not include a
review of pharmacy location rules or pharmacy remuneration.’[47]
Medicines Australia
Medicines Australia (MA) is the peak body for the
innovative pharmaceutical industry in Australia.[48]
MA has expressed concerns that ‘arbitrary funding cuts’ to the PBS will
jeopardise the listing of new medicines on the PBS in the future, making it
harder for patients to access these medicines. They are also concerned that the
cuts will impact on pharmaceutical companies and their ability to invest in
future medical research.[49]
Despite these concerns, MA has signed a ‘Letter of Intent’
for a five year agreement with the Government. MA CEO Tim James has stated that
MA has ‘agreed to meet all of the Government’s savings targets’, and that in
return for providing the majority of the $6.6 billion in savings, member
companies have been given a number of concessions regarding future
price-related savings for the life of the agreement.[50]
Pharmacy Guild of Australia
Despite initially asking for an investment of more than
$21 billion under the 6CPA, the Guild appears largely content with the $18.9
billion that they have secured.[51]
National President of the Guild, George Tambassis, has
welcomed the AHI fee because it will insulate pharmacies from the impact of
price disclosure measures such as those contained in the Bill. He has also
hailed the extension of the pharmacy location rules for ‘ensuring
that community pharmacies are highly accessible and well-distributed throughout
Australia. ’The Guild notes that the extension will also provide five
years of certainty for community pharmacies.[52]
More broadly, the Guild has indicated that it supports the
wider PBS Package with the exception of the optional $1
co-payment discount to be absorbed by pharmacists, which it calls ‘a matter for
Government’.[53]
Generic Medicines Industry
Association
GMiA also appears pleased with the agreement that it has
signed with the Government. It has acknowledged that ‘GMiA and the Government
have a common interest in the ongoing and reliable access to affordable generic
medicines and biosimilars’. If there are any unintended consequences from the
savings measures in the Bill, particularly in regard to the reliable supply of
medicines, the GMiA Agreement states that the Department and GMiA will work
together to identify and resolve the issues.[54]
Consumers Health Forum of Australia
The Consumers Health Forum of Australia (CHF) is the peak
body representing the interests of Australian healthcare consumers.[55]
The CHF has evaluated the 6CPA and the wider Package, and believes that
pharmacy and the Government are bigger winners than consumers.[56]
With regard to specific measures in the Bill, the CHF has
welcomed the potential for some medicines to be cheaper for consumers as a
result of the five per cent price reduction for F1 medicines and the changes to
price disclosure. It has also welcomed the optional $1 co-payment discount, but
expressed concern that pharmacists may only offer the discount in areas of high
pharmacy concentration where there is intense competition. The CHF has also
expressed concern that pharmacy location rules are not to be changed before
2020, despite the proposed review of location rules and pharmacy remuneration being
scheduled to conclude in 2017.[57]
The Explanatory Memorandum states that the Bill will
enable net savings to the Government from the broader Package of more than $3.7
billion over five years.[58]
Specific measures in the Bill are forecast to deliver the following savings
over five years:
- $2
billion from removing originator brands from pricing calculations
- more
than $360 million from allowing pharmacists to discount the PBS co-payment
- $880
million from the increasing use of biosimilar medicines
- $1
billion from the five per cent price reduction for single brand drugs
- $610
million from closing the combination drug pricing loophole and
- $475
million from extending early supply rules.[59]
The savings itemised above sum to more than $3.7 billion,
as there are other saving and spending measures in the Package that are not
contained in the Bill.[60]
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[61]
PBS Pricing Reform
Five per cent price reduction for
single brand drugs
As discussed, PBS price reform in recent years has focused on
price reductions for multiple brand (F2) medicines. For the first time, the
Government is proposing statutory price reductions for single brand innovative
(F1) medicines. The Government argues that F1 medicines are the fastest growing
part of the PBS by cost, and that it is reasonable for these medicines to take
a small price reduction after five years on the PBS, in order to support the
listing of new (and often expensive) F1 medicines.[62]
Item 25 in Schedule 1 inserts new section
99ACHA which provides that if an F1 drug has been listed on the PBS for
more than five years, there will be a one-off five percent reduction in the
approved ex-manufacturer price (AEMP) of the drug on the reduction day.[63]
Reduction days are scheduled every 1 April from 2016 to 2020, but each drug
will only take the five per cent reduction once.
Phillip Clarke, Melbourne University professor of health
economics, notes that once prices for F1 drugs are negotiated, there tends to
be very little subsequent change in price. He does not believe that the five
per cent discount after five years would lead to significant job losses for
pharmaceutical companies, as long as the savings from the measure are
reinvested in future PBS listings of innovative medicines.[64]
Removal of originator brand from
price disclosure calculations
The Government is proposing to make further savings from
price disclosure by removing originator brands of drugs from price calculations
after three years on the F2 formulary.
Originator drugs move from F1 to F2 once they come off
patent and at least one generic competitor brand of the same drug is listed on
the PBS.[65]
Currently, all brands that contain the same F2 drug with the same manner of
administration are included in the calculation of price disclosure outcomes.[66]
The weighted average disclosed price (WADP) of each brand forms the basis for
any reduction in price.[67]
Originator brands tend to maintain higher market prices than their generic
competitors, which has the effect of holding the WADP up and reducing the size
of any reduction in price.[68]
Currently, subsection 99ADB(4) of the Act allows the
Minister to determine the WADP of a brand of a pharmaceutical item in
accordance with the National Health (Pharmaceutical Benefits) Regulations 1960
(the Regulations).[69]
Subsection 99ADB(6) of the Act states that the Regulations may prescribe a
method or formula for calculating the WADP, and that the method or formula
prescribed may take into account information that has been provided under price
disclosure requirements. The WADP then feeds into Section 99ADH which provides
for price reductions based on price disclosure information.
Item 27 in Schedule 1 inserts new
subsections 99ADB(6A) to (6D). Proposed subsection 99ADB(6A)
provides that the Regulations regarding the WADP calculation may also prescribe
information that may not be included, such as information relating to
originator brands. Proposed subsections 99ADB(6B) to (6D) deal with the
determination of an originator brand by the Minister. Exclusion of the
originator brand from price disclosure calculations after three years on F2
will also require amendments to the Regulations:
It is proposed that the regulations would provide that any
weighted average disclosed price calculated by a method which excludes the
originator brand would not be determined until the drug has been on the F2
formulary for three years. In addition, there will be safeguards in the
regulations such as including the originator brand in the calculations if there
is no other brand, and if inclusion of the originator results in a greater
price reduction.[70]
Subitem 40(1) in Schedule 1 provides that the
originator brand measure applies to price disclosure data collection periods
ending on or after 31 March 2016. This means that the first price reductions under
the measure would take place on 1 October 2016.[71]
The Government is expecting significant savings from this
measure, as some of the affected F2 drugs are frequently prescribed and have a
high total cost to the PBS.[72]
For example, the two section 85 PBS drugs with the highest cost to the
Government in 2013–14 were the cholesterol-lowering drugs rosuvastatin ($287.9
million) and atorvastatin ($279.2 million).[73]
It was reported in June 2013 that the originator brand of atorvastatin,
Lipitor, was being sold into pharmacies at $39 compared to $9 for the generic
brands of the same drug.[74]
Lipitor has been subject to further price reduction from price disclosure since
that time, but removing Lipitor’s price from the WADP calculation could cause
it to fall further.[75]
The Government believes that the cost of prescriptions for some F2 drugs could
fall by up to 50 per cent by 2017 when the measure is fully implemented.[76]
This would benefit general patients in cases where the new lower price was
below the general co-payment.
Flowing on price disclosure
reductions for combination medicines
The Bill also changes the way that combination medicines are
treated under price disclosure. The measure is intended to address the current
inconsistency between the pricing of combination medicines and their component
drugs by ‘ensuring appropriate price reductions are applied to combination
items on the PBS’ and ‘that the PBS pays the right amount for the same drug
treatment’.[77]
A combination product contains more than one active drug.
The initial approved price for combination products on the PBS is usually based
on the sum of the prices of the individual component drugs. As previously
discussed, a single brand combination product is not included on F1 or F2, but
rather is set out in the administrative Combination Drug List (CDL). Price
changes to one or more component drugs are generally ‘flowed on’ to the price
of the combination drug on the CDL. However, if a second brand of the
combination product is PBS listed, the original and competitor combination
products move to F2, and component drug price changes are no longer flowed on
to the combination products.[78]
The insulation of combination products on F2 from changes in
their component drug prices has been described by Philip Clarke as ‘one of the
greatest loopholes of all time’.[79]
In 2014, he estimated that the cost of listing diabetes and cardiovascular
combination therapies was around $120 million more per year, compared to the
total cost of their individual component drugs. He cited the example of the
anti-clotting medicine clopidogrel plus aspirin, which was initially PBS listed
for one cent less than the cost of clopidogrel alone. One month before the PBS
subsidy for clopidogrel was due to reduce by 18 per cent due to price
disclosure, the manufacturer of clopidogrel plus aspirin introduced a new brand
of the combination product, causing it to move to F2 and avoid the price cut
taken by clopidogrel alone.[80]
Section 99ACC of the current Act provides for the flow on of
statutory price reductions from component drugs to single brand (CDL)
combination items.
Item 28 inserts a new section 99ADHB which
provides for the flow on of statutory price reductions from component drugs to
multi brand (F2) combination items. It is possible that a combination drug
might qualify for two statutory price reduction on the same day: one under proposed
section 99ADHB and one under the existing provision in subsection
99ADH(3) relating to price disclosure for F2 medicines. In this case, proposed
subsection 99ADHB(4) provides that the price reduction must be at least as
great as it would have been under subsection 99ADH(3), but that subsection 99ADH(3)
does not apply. This has the effect of applying whichever price reduction would
have been greater.
Subitem 40(2) in Schedule 1 has the effect
of making the first price reduction day under the measure 1 April 2016. Proposed
subsections 99ADHB(10), (11) and (12) also provide for a back-capture day on
1 October 2016 to allow price reductions in component drugs that occurred prior
to 1 April 2016 to be flowed on to the combination product.
As well as producing savings for the PBS, the measure is
expected to make some combination products cheaper for general consumers.[81]
Allowing pharmacists to discount
the PBS patient co-payment
As discussed above, patients currently pay a co-payment of
$6.10 (for concession card holders) or up to $37.70 (for general patients) for
PBS medicines, until they reach their safety net for the year.[82]
Allowing pharmacists to discount this co-payment is intended to increase
competition between pharmacies and reduce out-of-pocket costs for patients.[83]
Subsection 87(2) of the current Act specifies the co-payment
amounts that an approved pharmacist or dispensing doctor may charge a general
or concessional patient.
Items 7 and 8 in Schedule 3 amend subsection
87(2) to insert the words ‘(less any allowable discount)’ after each specified amount.
Item 9 of Schedule 3 inserts new subsection 87(2AAAA)
which defines an allowable discount as an amount of not more than
$1. Together, these items permit an approved pharmacist or dispensing doctor to
discount the patient’s co-payment by up to $1.
Paragraph 99(2)(b) of the Act provides that an approved
pharmacist is entitled to be paid, by the Commonwealth, the difference between
the Commonwealth price of the item and the co-payment charged.
Item 11 in Schedule 3 amends paragraph
99(2)(b) to ensure that the pharmacist cannot recover the allowable discount from
the Commonwealth, but must absorb the cost.
The measure is expected to deliver savings to the Government
because it will increase the time (but not the out-of-pocket costs) for
concessional patients to reach their safety net threshold for the year (after
which they receive PBS medicines for free). The majority of concessional
patients do not reach the threshold under the current system, and the discount
would represent a direct saving to them.[84]
However, the extent to which pharmacists will offer the discount is not clear.
The Guild has stated that it supports the wider PBS Package ‘with
the exception of the discounted co-payment which is a matter for Government’.[85] The
Minister has also admitted that pharmacies in rural and regional areas may not
be well placed to offer the discount due to higher costs.[86]
Extending sunset provisions for
pharmacy location rules to 30 June 2020
The Bill implements the agreement in the 6CPA that the
current pharmacy location rules (discussed in the Background section of this Bills
Digest) be continued until 30 June 2020.[87]
The 6CPA also sets out the terms of an independent review of the location rules
and pharmacy remuneration, but the review is not provided for in the Bill.[88]
Section 90 of the current Act deals with the application
process for pharmacists to be approved to supply PBS medicines at a particular
premises. With certain exceptions, subsection 90(3A) requires the Secretary to
refer applications to the Australian Community Pharmacy Authority (ACPA).
Subsection 90(3B) requires a positive recommendation from the ACPA before the
Secretary can approve an application. Subsection 90(3C) provides that all
subsections from 90(3A) to 90(3B) sunset on 30 June 2015. Division 4B of the
Act, which establishes and provides for the operation of the ACPA, and compels
the Minister to determine the rules that the ACPA must follow in making
recommendations, also sunsets on 30 June 2015 (section 99Y).
Item 5 in Schedule 1 amends subsection
90(3C) to allow the referral of applications to the ACPA to continue until 30
June 2020. Item 32 in Schedule 1 amends section 99Y to continue
the operation of the ACPA and the Minister’s power to determine the rules until
30 June 2020.
Commentators have criticised the continuation of the
pharmacy location rules, questioning ‘the need for another long review and five
more years of anti-competitive regulation’, as well as the ‘closed-shop’
arrangement that will prevent ‘pharmacies opening in supermarkets until at
least 2020’.[89]
Amendments relating to biosimilars
The GMiA Agreement includes ‘the substitution of biosimilar
medicines at the pharmacy level based on clinical recommendations of the PBAC’ on
its list of Package measures, but not on its list of measures that are
contingent on the passage of this Bill. [90]
Despite this, the Bill contains amendments that appear to support the
substitution of biosimilar medicines by pharmacists, as well as amendments to
support the application of statutory price reductions to biological medicines
and their biosimilar competitors. These amendments are outlined below.
Biological medicines are derived from living organisms using
biotechnology. They are usually larger and more complex than traditional,
small-molecule medicines made through chemical processes. Examples include
insulin to treat diabetes and blood coagulation factors to treat haemophilia.
Biological medicines are expensive, accounting for 15 per cent of PBS
expenditure in 2013. When a biological medicine comes off-patent, other
companies can develop competitor products known as ‘biosimilars’.[91]
Measures to encourage the use of biosimilars in place of branded biological
medicines can reduce the financial burden of these medicines. [92]
Biosimilar regulation is a complex and emerging area. The
Therapeutic Goods Administration (TGA) Guideline on biosimilars (which is
itself under review) stresses that biosimilars are not generic biological
medicines:
By their nature biotechnological products are not composed of
a single, pure substance, but are invariably complex, microheterogeneous
mixtures of isoforms of the desired substance.
While biosimilars have some conceptual parallels with generic
versions of medicines containing chemically-derived small molecules as the
active substances, this complexity and microheterogeneity mean that the
principles relevant to the evaluation and use of generic medicines cannot be
simply extrapolated to biosimilars.[93]
Following a request from the Minister, the PBAC has recently
stated that its default position will be to recommend biosimilars as ‘suitable
for substitution at the pharmacy level, where the data are supportive of this
conclusion’.[94]
The Department has advised that this is in keeping with the treatment of
biosimilars in some other countries:
Use of biosimilars as substitutes for brand name biological medicines is becoming established in a number of markets around the world. The decision whether to substitute may rest with either the prescriber or, in some countries, with the pharmacist. Both France and the United States have recently introduced measures to permit pharmacists to substitute a biosimilar in place of the branded product (the 'originator'). In all cases where substitution of a biological is permitted by the pharmacists, a doctor may still mark the prescription as not for substitution. This is the same as current rules around small molecule medicines prescribing in Australia.[95]
Subsection 103(2A) of the current Act allows pharmacists
to substitute the prescribed brand for another brand, so long as the brands are
listed as equivalent on the Schedule of Pharmaceutical Benefits, and the
prescriber has not stipulated that a particular brand be used. This ‘Schedule
equivalence’ is the basis of brand substitution at the pharmacy level.[96]
Item 1 in Schedule 2 inserts new
subsections 85(6A), (6B) and (6C) which provide for the Minister to
determine (having regard to any advice from the PBAC) that brands are Schedule
equivalent for the purposes of substitution at the pharmacy level. The
Explanatory Memorandum notes that in addition to advice from the PBAC, the
Minister may also consider information provided by the TGA, such as submissions
supporting bioequivalence or biosimilarity between products.[97]
This amendment appears to support biosimilar substitution at the pharmacy
level, where it has been recommended by the PBAC.
The Bill also contains a technical amendment that is
relevant to the pricing of biological medicines.
The statutory price reductions in Division 3A of the Act and
the price disclosure reductions in Division 3B of the Act are triggered by
competing brands on the PBS which have the same drug and the same manner of
administration as the listed brand.[98]
Item 3 in Schedule 1 inserts new subsection
85(9) which provides that a brand of pharmaceutical item which is
bioequivalent or biosimilar to a listed brand is taken to have the same drug as
the listed brand. The amendment supports the application of existing PBS price
reduction mechanisms to biologic medicines and their biosimilar competitors.[99]
The Government expects significant savings from the
increased use of biosimilar medicines on the PBS.[100]
Questions have been raised about patient safety if biosimilar substitution by
pharmacists is permitted.[101]
The Department has provided assurances that the TGA will continue to assess biosimilars
for safety and similarity, and that the PBAC will also take patient safety
information into account (if provided by the pharmaceutical company) when
assessing biosimilars for substitutability on the PBS.[102]
The Bill also:
-
makes changes to the membership of the PBAC
-
extends early supply rules and
-
amends the Act to recognise pricing deeds.[103]
These measures are adequately described in the Explanatory
Memorandum.
Most of the key measures in the Bill are designed to increase
price competition and deliver significant PBS savings to the Government. In
some cases they should also result in cheaper medicines for consumers. However,
the Bill also continues the operation of the highly criticised pharmacy
location rules for another five years, which could be considered an
anti-competitive measure. The measures in the Bill and the wider Package appear
largely positive for pharmacies and the generic medicines industry, more
negative for the innovative medicines industry, and somewhere in between for
consumers.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Parliament
of Australia, ‘National
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[2]. National Health Act 1953,
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[3]. Department
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[4]. The
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$1,453.90 for all other patients. Ibid.
[5]. DoH,
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[6]. DoH,
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[12]. DoH,
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[13]. DoH,
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[14]. DoH,
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[15]. Australian Government, Portfolio budget statements 2015–16: Health Portfolio, op. cit., p. 60.
[16]. S
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[17]. Ibid.
[18]. Ibid.
[19]. The
Pharmacy Guild is the national peak body representing community pharmacy
owners. L Tingle and T Binsted, ‘Patients
pay for guild’s win’, The Australian Financial Review, 28 May 2015,
p. 7, accessed 3 June 2015.
[20]. S
Ley, ‘Second
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2015.
[21]. DoH,
PBS
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[22]. Explanatory
Memorandum, National
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2015.
[23]. Australian
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of the Fifth Community Pharmacy Agreement, ANAO report no. 25,
2014–15, ANAO, Canberra, March 2015, p. 35, accessed 3 June 2015.
[24]. Ibid.,
pp. 35–36.
[25]. Ibid.,
pp. 16, 37.
[26]. Ibid.,
pp. 24–25.
[27]. F
McNeill (First Assistant Secretary, Pharmaceutical Benefits Division, DoH),
Senate Community Affairs Legislation Committee, Official
Committee Hansard, [proof copy], 2 June 2015, p. 4, accessed 11 June
2015.
[28]. DoH,
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Community Pharmacy Agreement, DoH, Canberra, 24 May 2015, p. 7,
accessed 3 June 2015.
[29]. Ibid.,
pp. 9, 11.
[30]. S
Ley (Minister for Health), Consumers
big winners from medicines deals, media release, 27 May 2015, accessed
4 June 2015.
[31]. DoH,
Sixth
Community Pharmacy Agreement, op. cit., pp. 8, 17.
[32]. L Buckmaster, Fourth
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[33]. National Health (Australian
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[34]. L
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accessed 4 June 2015.
[35]. National Health (Australian
Community Pharmacy Authority Rules) Determination 2011, op. cit., item
211(d) of Schedule 3.
[36]. R
de Boer, ‘Pharmaceuticals
and pharmacy’, Budget
review 2010–11, Research paper series, 2009–10,
Parliamentary Library, Canberra, 2010, accessed 15 June 2015.
[37]. S
Ley, ‘Second
reading speech: National Health Amendment (Pharmaceutical Benefits) Bill 2015’,
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[38]. DoH,
Sixth
Community Pharmacy Agreement, op. cit., pp. 17, 20.
[39]. M
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Pharmacy (AJP) website, 27 May 2015, accessed 4 June 2015; Generic Medicines
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[40]. Australian
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[41]. Standing
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[42]. PharmaDispatch,
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[43]. PharmaDispatch,
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[44]. C
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[45]. PharmaDispatch,
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[46]. R
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[47]. Joint
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[48]. Medicines
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[49]. MA,
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[50]. MA,
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[51]. F
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[52]. Pharmacy
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[53]. Ibid.
[54]. GMiA,
Strategic agreement recognises the important role of generic and
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[55]. Consumers
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accessed 11 June 2015.
[56]. CHF,
‘CHF
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[57]. Ibid.
[58]. Explanatory
Memorandum, National
Health Amendment (Pharmaceutical Benefits) Bill 2015, op. cit., p. 3.
[59]. S
Ley, Pharmaceutical
Benefits Scheme to be reformed, op. cit.
[60]. Ibid.
[61]. The
Statement of Compatibility with Human Rights can be found at page 5 of the Explanatory
Memorandum to the Bill.
[62]. S
Ley, ‘Second
reading speech: National Health Amendment (Pharmaceutical Benefits) Bill 2015’,
op. cit., p. 7.
[63]. The
approved ex-manufacturer price (AEMP) is negotiated between the Pricing Section
of the DoH and the supplier of the drug at the time of listing on the PBS. DoH,
‘Fact
sheet – Setting an approved ex-manufacturer price for new or extended listings’,
PBS website, accessed 4 June 2015.
[64]. J
Lambert, ‘Big
Pharma vital to health savings goal’, Medical Observer Weekly, 22
May 2015, pp. 2–3, accessed 15 June 2015.
[65]. Section
85AB of the National
Health Act 1953, op. cit.
[66]. DoH,
Pharmaceutical
Benefits Scheme Price Disclosure Arrangements: Procedural and Operational
Guidelines, op. cit., p. 9.
[67]. Ibid.,
p. 17.
[68]. Explanatory
Memorandum, National
Health Amendment (Pharmaceutical Benefits) Bill 2015, op. cit., p. 2.
[69]. National Health
(Pharmaceutical Benefits) Regulations 1960, accessed 9 June 2015.
[70]. Explanatory
Memorandum, National
Health Amendment (Pharmaceutical Benefits) Bill 2015, op. cit., p. 11.
[71]. Ibid.,
p. 16.
[72]. A
Probyn and A Tillett, ‘Cheap
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[73]. DoH,
Expenditure
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[74]. S
Dunlevy, ‘Patients
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[75]. D
Quilty, ‘Price
disclosure impact confirmed’, Forefront, 4(23), 25 June 2014,
accessed 9 June 2015; S Dunlevy, ‘Patients
hit on drug cost’, op. cit.
[76]. A
Probyn and A Tillett, ‘Cheap
drugs: big savings expected for cholesterol, depression and reflux pills’,
op. cit.
[77]. S
Ley, ‘Second
reading speech: National Health Amendment (Pharmaceutical Benefits) Bill 2015’,
op. cit., p. 8.
[78]. DoH,
‘Fact
sheet – Setting an approved ex-manufacturer price for new or extended listings’,
op. cit.
[79]. S
Dunlevy, ‘$200m
pill rort crushed’, The Daily Telegraph, 6 May 2015, p. 15, accessed
9 June 2015.
[80]. P
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[81]. S
Dunlevy, ‘$200m
pill rort crushed’, op. cit.
[82]. DoH,
‘About the PBS’, op.
cit.
[83]. S
Ley, ‘Second
reading speech: National Health Amendment (Pharmaceutical Benefits) Bill 2015’,
op. cit., p. 9.
[84]. F
McNeill, Senate Community Affairs Legislation Committee, Official
Committee Hansard, op. cit., p. 17.
[85]. Ibid.;
Pharmacy Guild of Australia, Sixth
Community Pharmacy Agreement delivers for patients, op. cit.
[86]. L
Tingle, ‘Pharmacy
plans may hit the bush’, The Australian Financial Review, 29 April
2015, p. 7, accessed 15 June 2015.
[87]. DoH,
Sixth
Community Pharmacy Agreement, op. cit., p. 17.
[88]. Ibid.,
pp. 20–21.
[89]. A
Mitchell, ‘Supermarkets
offer prescription for pharmacy pain’, AFR Weekend, 23 May 2015, p.
22, accessed 9 June 2015; P Syvret, ‘Closed-shop
guild agreements prove a bitter pill to swallow’, The Courier Mail,
9 June 2015, p. 20, accessed 9 June 2015.
[90]. Australian
Government, Strategic
Agreement, op. cit., pp. 5–6.
[91]. GMiA,
Guide
to Biosimilars, GMiA, Canberra, February 2015, pp. 2–3, accessed 9 June
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[92]. PharmaDispatch,
‘Department
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accessed 10 June 2015.
[93]. DoH,
‘Evaluation of
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[94]. DoH,
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[95]. PharmaDispatch,
‘Department
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[96]. Explanatory
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[97]. Ibid.,
pp. 17–18.
[98]. See
for example subsections 99ACB(1)(c)(iii) and 99ADB(6)(c) of the National Health Act 1953,
op. cit.
[99]. Explanatory
Memorandum, National
Health Amendment (Pharmaceutical Benefits) Bill 2015, op. cit., p. 7.
[100]. F
McNeill, Senate Community Affairs Legislation Committee, Official
Committee Hansard, op. cit., p. 26.
[101]. C
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[102]. F
McNeill, Senate Community Affairs Legislation Committee, Official
Committee Hansard, op. cit., pp. 26–28.
[103]. Explanatory
Memorandum, National
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