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How will the new Strategic Agreements impact your business?

Medicines Australia and Generic and Biosimilars Association have secured new 5 year agreements with the Commonwealth for timely access to and reimbursement of medicines and policy settings that recognise the value of innovative and generic medicines to patients and the community.  These changes will impact all industry stakeholders.

Both agreements are now aligned to commence on 1 July 2022 and run for 5 years.

Medicines Australia Agreement

The MA agreement focuses on prioritising the value of F1 medicines and timely access, while securing $2.8 billion in new investment, a review of Health Technology Assessment (HTA) and other policy reforms including a new framework for Risk Share Agreements (RSA).

Key provisions secured for the innovator industry include:

  • Comparators: A confirmation that the PBAC is the appropriate decision-making body as to the appropriate comparator (regardless of whether it is the lowest cost comparator) (subject to further work in HTA Review)
  • Discount rate: priority review to take place immediately to align with international best practice and to commence in July 2022
  • Savings reinvested: savings made through reforms will be reinvested into new medicines on the PBS
  • Removal of the cost offsets policy:  agreed in 2020 but secured now in this Strategic Agreement as part of the New Medicines Funding Guarantee of at least $2.8bn.
  • Confirmation/ no change to criteria for special pricing arrangements
  • Policy reforms aimed at faster access:  conditional listing to be considered, enhanced consumer access, more balanced policy framework for RSAs that will enable sponsors to make decisions and negotiate arrangements for their products/patients.

A HTA Review (to be implemented by July 2024) will focus on key issue areas including:

  • Selection of comparators
  • Methods for evaluating medicines for rare diseases/cell and gene therapies/precision medicines for reimbursement/alternative funding pathways/suitability of existing pathways
  • Methods for evaluating all new medicines and vaccines
  • Use of real world evidence and other sources of evidence other than randomised controlled trials
  • Managing clinical, economic, financial and other uncertainty
  • Examining feasibility of international work sharing for reimbursement submissions

Generic and Biosimilar Medicines Association Agreement

The GBMA Strategic Agreement focuses on a package of policy settings and incentives, including floor prices and stockholding requirements, for companies to maintain sufficient stock of their broad portfolios of medicines in Australia. GBMA are also looking at policy initiatives to enhance repurposing of medicines to expand patient access and further uptake drivers for the increased use of biosimilars.

Key new provisions relevant to generic and biosimilar medicines sponsors are:

  • Single branded drug discounts removed: The Commonwealth will seek to negotiate outcomes at an individual sponsor level to remove the ability of single branded drugs (that should be interchangeable with multi-branded drugs) to sell at discounted prices below their Approved Ex- Manufacturer Price (AEMP) or with incentives, in competition with multi-branded drugs. 
  • Early removal of originator brand from price disclosure calculations: where no price reduction for first three price disclosure cycles, originator brand will be removed from Weighted Average Disclosure Price from the 4th cycle (ie, after 18 months instead of current 30 months). Inclusion of public hospital pricing will also be introduced to Price Disclosure calculations for the first time.
  • 30% price disclosure continues, but modified: threshold reached after later of 7 price disclosure cycles after drug is on F2 or 5 cycles after first price disclosure reduction
  • Floor price (minimum ex-manufacturer price) applied for low cost listed brands and not subject to further price disclosure reductions

*some conditions apply where AEMP >$4, further details to be provided.

  • Stockholding requirement to be implemented by 1 July 2023: companies will need to hold default supply (4-6 months) of Listed Brands that have a Floor Price.
  • Significant penalties relating to listed brands with floor prices: risk of revocation of PBS listing if pass on discounts or incentives for these products and for low stock levels/ failure to supply
  • Temporary PBS listing options for s 19A medicines

Statutory Price Reductions  

All sponsors should be aware of key changes to pricing mechanisms:

  • Savings measures: $1.9 billion in savings will be delivered over the course of the agreement through mechanisms including adjustments to the Statutory Price Reduction mechanisms
  • Changes to price reductions:
Statutory Price Reduction
  • Catch up reductions for anniversaries falling in 2021/2022 to take effect on 1 April 2023.
  • Price reduction mechanisms will also apply for combination drugs where one of the listed drugs is subject to price reduction.

How can Commercial Eyes help?

Market Access and Pricing: Given these important changes to pricing for PBS medicines in the new Medicines Australia and GBMA agreements, Commercial Eyes offers a portfolio pricing review service should you require an understanding of the implications of the pricing components on your portfolio. This leverages our MAP Insights database, which holds an extensive history of all PBS item pricing.

Market Insights: New strategic agreements provide important insights into the direction of the industry and the changing landscape for medicines policy and access.  Commercial Eyes offers all our clients landscape assessments, market feasibilities and strategic insights to assess your future needs in this context. 

Stakeholder engagement: Commercial Eyes can provide advice and support for your stakeholder engagement objectives.  We can also support you to understand and inform your global teams of the terms of these agreements and the implications for the next 5 years and beyond in the context of the broader landscape.

As a member of both Medicines Australia and GBMA, Commercial Eyes will continue to follow and take an active role in the implementation of these Agreements.

For more information, please contact us at [email protected]

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