Drug-makers fight to keep prices
lower than anyone else’s was a predatory pricing measure’’.
Although the industry has been ‘‘ geared up’’ to cope with the expected 25 per cent cut next year, the additional 20 per cent cut — a total cut of 45 per cent — was ‘‘ beyond what most companies can absorb’’ without significant changes to their cost base.
‘‘ I expect there’s going to be some tough decisions taken in the short term as a result of this case,’’ Chalmers said. ‘‘ The bottom line is . . . I’m expecting that the total net loss of revenue to existing Australian companies will be about $130 million.’’
He called on the Government to allow the Ranbaxy-prompted 20 per cent cut to be counted towards next year’s 25 per cent — meaning only a 5 per cent next year.
WeekendHealth approached Ranbaxy, but the company was unable to comment.
The Indian-based drug maker incensed Australian rivals last year when it listed four
‘‘ highly generic drugs on the PBS from August 1 2006 — causing the price the PBS paid for rival versions to fall by 12.5 per cent — but was then unable to supply any of its new drugs until earlier this year. Chalmers says Australian companies ended up losing up to $3 million to $4 million for August to December, for which no compensation was paid.
The generics industry is also concerned at the combined price cuts. Mark Hurley, executive director of generic maker Alphapharm and chairman of the Generic Medicines Industry Association, says the GMIA was disappointed at Ranbaxy’s move and the 20 per cent cut was ‘‘ a particularly large one’’: ‘‘ They (Ranbaxy) have very little volume and very little stake in this market, and yet they have been able to significantly affect the price everybody else gets.’’
An independent industry expert says industry objections had to be taken ‘‘ with a grain of salt’’, because next year’s PBS reforms incorporated significant measures that would insulate patented drugs from further price cuts triggered by new generic rivals.
‘‘ These changes (to insulate patented drugs) are really what the branded industry has been asking for,’’ said doctor Hans Lofgren, senior lecturer in the school of international and political studies at Deakin University. ‘‘ They would like more, but what they have been given in exchange for the low prices on generics will, over time, bring much more significant benefits for the prices of patented drugs.’’
A spokeswoman for Tony Abbott says the federal health department was ‘‘ satisfied’’ Ranbaxy would not experience further supply problems, and defended the Government’s right to buy PBS drugs as inexpensively as possible: ‘‘ The Government has a responsibility to taxpayers that drugs listed on the PBS can be purchased at the lowest possible price. At the end of the day, our chief concern is that Australian patients have access to the drugs they need at the lowest possible price.’’
Price setter: When Ranbaxy undercut the generic medicines market, their price became the benchmark for all drug-makers