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The MoU Waiting Room

Five months ago the Federal Government and Medicines Australia signed their historic Memorandum of Understanding (MoU), which will outline PBS policy initiatives and savings measures to 30 June 2014.

The MoU’s aim is to provide the pharma industry with business certainty through policy stability. But the legislation has been delayed. First, the Senate referred it to the Community Affairs Legislative Committee for further review, and then the Government called a Federal Election, halting the legislation’s progress through Parliament. The Gillard Government, however, kept its election commitment, and in late September reintroduced the legislation, known as the National Health Amendment (Pharmaceutical Benefit Scheme) Bill 2010.

These delays have given companies more time to prepare and implement changes to their procedures and systems to comply with the new mandatory price disclosure arrangements.

Time and cycles

The reintroduced MoU legislation has only minor changes. The proposed mandatory price reductions (two per cent for F2A medicines and five per cent for F2T medicines) remain scheduled for 1 February 2011. The increase from 12.5 per cent to 16 per cent on the entry of a new brand of an existing listed medicine will commence on the same date.

However, due to the delay in passing the legislation, there have been some changes to the timelines for the introduction of the new price disclosure arrangements. These include:

  • deferring their commencement from 1 October 2010 to 1 December 2010; and
  • a consequential reduction in this collection cycle. The new cycle will start on 1 December 2010 and cease on 30 September 2011. Therefore, calculations of the price disclosure price reductions for this cycle are based on only 10 months of data.

Besides the above, the Government has made no further changes to the new price disclosure arrangements. In addition, it has maintained the 23 per cent minimum price reduction guarantee. The timing of the price disclosure price reductions for this cycle will still occur on 1 April 2012.

It will soon come to pass

As mentioned, the Senate in September referred the MoU legislation to the Community Affairs Legislative Committee for detailed analysis. The Committee is scheduled to provide its report to the Senate on 16 November.

The Committee will consider submissions received during the previous inquiry and will also consider new material (stakeholders will need to provide their submissions to the Committee by 20 October 2010). The report will be tabled during the second last sitting week of the year, so the Senate should have ample time to consider and debate the findings.

Both the Coalition and the Greens have announced they will reserve their decision on whether to support the legislation until they have considered the Committee’s findings.

Industry in waiting room

Industry will have to wait until after 16 November 2010 for the outcome of the Senate’s deliberations. Should the Senate pass the legislation this year, the initiatives should start as outlined in the updated MoU. But if the legislation is not passed this year, the new price disclosure arrangements will be delayed, along with the initiatives scheduled to start on 1 February 2011.

If this were to occur, companies with F2 medicines would enjoy a reprieve from price reductions until Parliament passed the legislation. The delay would, however, result in reduced savings to Government for the five-year Budget reporting period.

All affected companies should keep abreast of the MoU legislation’s progress and ensure that their industry organisation(s) provide relevant updates. They should also continue to plan and prepare themselves to comply with the initiatives and timelines as outlined in the revised MoU. Finally, companies should familiarise themselves with the latest version of the MoU, which Medicines Australia has on its website.

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