Drug firms seek cure for price cut pain
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