For many Eye Spy readers, hearing no price related changes to the PBS was the best possible outcome of the 2013 Budget. Just days before the Budget was handed down, rumours abounded that there would be a shortening of the price disclosure cycle or an increase to the statutory PBS price reduction upon market entry of the first generic, or both.
It was therefore no surprise that both the Generic Medicines Industry Association and Medicines Australia welcomed the Budget figures, applauding the government for responsible management of the PBS and using the opportunity to demonstrate that the MOU is working. A momentary sigh of relief, but upon closer inspection we see that the operating environment for medicines is changing in Australia despite repeated calls for certainly and predictability.
Over the last week, several analysts have shown us that there is an overall downgrading of PBS expenditure over the forward estimates to the tune of around $5billion compared to estimates made in the 2012 Budget. While we see that the actual dollar value that DoHA has to ‘hand over’ in order to pay for the PBS continues to rise, it is now projected to grow at an average annual rate of 4.5%, much less than the 7% projected in 2012.
So, why has the government reduced its forecast? Does it tell us the government expects more savings through some post MOU price negotiations? Does this tell us the government expects a slower increase in expenditure to come from the listing of fewer new medicines, or will there be more pressure on new medicine pricing? Good questions to ask DoHA. While the savings might include projections based on known price cuts, industry is yet to receive a clear answer regarding the source of future savings.
The overarching outcome for the PBS from this Budget is that the operating environment is changing and the medicines industry probably isn’t out of the woods yet. If we are to believe the opinion polls, we will probably see a Coalition government in September, closely followed by the Final Budget Outcome (2012-13), a 100 day plan and the new government’s mini-budget by Christmas. This could see PBS expenditure again on the chopping block and could place further pressure on industry’s ability to bring new and generic medicines to the Australian market.
The successful execution of market access strategies has never been more critical. Contact Andrew Manton at Commercial Eyes for advice on navigating your market access strategy through this changing environment.