Drug firms seek cure for price cut pain

The Weekend Australian - Travel - - Health - Adam Cress­well

DRUG man­u­fac­tur­ers are claim­ing they will have to take ‘‘ tough de­ci­sions’’ to re­main vi­able as they strug­gle to ab­sorb swing­ing gov­ern­ment-man­dated price cuts to some of Aus­tralia’s big­gest-sell­ing medicines.

Lead­ers of Aus­tralia’s drug man­u­fac­tur­ing in­dus­try — which em­ploys about 15,000 peo­ple and has a turnover of $7.8 bil­lion — are not yet pre­dict­ing job losses over the cuts, which cul­mi­nate next year un­der fed­eral Gov­ern­ment re­forms de­signed to keep the PBS af­ford­able and sus­tain­able.

But it is un­der­stood in­dus­try lead­ers are in­creas­ingly un­happy about the ef­fect of th­ese ex­pected cuts when com­bined with re­duc­tions trig­gered by com­pe­ti­tion from an over­seas generic drug-maker, Ran­baxy.

So far the lob­by­ing ap­pears to be fall­ing on deaf ears. Fed­eral Health Min­is­ter Tony Ab­bott has in­di­cated he has no plans to ease back on the cuts. At the cen­tre of the dis­pute is an across-the-board 25 per cent cut in the price paid by the Phar­ma­ceu­ti­cal Ben­e­fits Scheme that will be ap­plied to a spe­cific group of generic medicines from Au­gust 1 next year. The 25 per cent cut will make no dif­fer­ence to the co-pay­ments paid by pa­tients at the phar­macy counter, but it will also drag down the price the scheme pays for some brand-name medicines where th­ese are linked to the generic ver­sions un­der the PBS’s ref­er­ence pric­ing sys­tem.

What has got the brand-name and generic medicines in­dus­try so con­cerned is the com­pound ef­fect of an ad­di­tional 20 per cent cut trig­gered two months ago to the price the PBS pays for Aus­tralia’s big­gest sell­ing drug, the choles­terol-low­er­ing sim­vas­tatin.

The cut was trig­gered by the list­ing on Au­gust 1 of a generic sim­vas­tatin brand by the In­dian-based drug firm Ran­baxy. Un­der the fed­eral Gov­ern­ment’s ad-hoc PBS price cut pol­icy, any generic drug launched onto the mar­ket at a lower price than ex­ist­ing drugs will cre­ate a new bench­mark price — and the new lower price is then ex­tended to ri­val ver­sions.

To­gether, the two cuts will mean by next Au­gust the PBS will be pay­ing 45 per cent less for sim­vas­tatin than it was this July. As the PBS shelled out $275 mil­lion for sim­vas­tatin prod­ucts in 2006-07, the in­dus­try claims the losses to its rev­enue base will be too big to ab­sorb.

Pravas­tatin, an­other drug avail­able in mul­ti­ple branded and generic ver­sions, the price of which will also be af­fected by the cut to sim­vas­tatin, gen­er­ated an­other $80 mil­lion in PBS or­ders.

Ian Chalmers, chief ex­ec­u­tive of the branded drug-mak­ers’ peak body Medicines Aus­tralia, says Ran­baxy’s move to list a ver­sion of sim­vas­tatin at a price 20 per cent

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