Australia added To Rx Price Index

Black Swan Analysis are delighted to announce that Australia becomes the 32nd country to be included in the ever-growing RxPriceIndex™. Longitudinal data from June 2015 gives users a substantial insight into the pricing landscape in the most significant pacific nation. Each record includes price points from ex-manufacturer, to the wholesale, pharmacy and retail value based on mark-ups and margins specific to the island nation.  At Black Swan Analysis we offer you with a robust, transparent and easy-to-use pricing database to help you understand the pricing landscape by seamlessly searching for and comparing pharmaceutical products across the European, American and Japanese markets.

Overview of Australian Healthcare

Residents of Australia are covered by a universal healthcare system, Medicare, which itself covers a range of medical assistance programs. One of these, the Pharmaceutical Benefit Scheme (PBS), assists with the costs of prescription medicines dispensed in the community and private hospitals and some pharmaceuticals dispensed to public hospital outpatients and in public hospital emergency departments (Pharmaceutical Benefits Scheme (PBS) | About the PBS, 2020). The PBS exists in Part VII of the National Health Act (1953) and has extended its coverage over the years building a formulary of essential medicines. The formulary can be split into two parts, F1 and F2 (Paris and Belloni, 2014). F1 drugs are medicines which currently only have one brand on the market, while F2 consists of drugs with two or more brands each. Drugs move from F1 to F2 once a brand with the same active substance is introduced into the reimbursement market. An additional program is the Life Saving Drugs Program (LSDP). This is separate from the PBS and involves the reimbursement of high cost therapies which treat rare diseases. As these therapies do not usually meet the standard cost-effectiveness thresholds of more typical medicines, individual commercial agreements are established between the payer and manufacturers.

Who pays for prescription medicines?

The PBS is the major prescription medicine scheme in Australia and reimbursement of medicines is covered mostly by the Australian Government. Co-payments are used to share the financial load and these may vary depending on the status of the patient. As of Jan 1st, 2020 the maximum co-payment for a prescription would be $41.00 and $6.00 for those with concession cards (Pharmaceutical Benefits Scheme (PBS) | About the PBS, 2020). Concession cards are issued to seniors, pensioners and veterans. Co-payments are altered every year on the 1st of January in line with the Consumer Price Index (CPI). Under PBS prescriptions, a safety net exists to prevent excessive spending for patients in a calendar year. If a patient spends beyond $390.00 within 12 months their following co-payments are lowered to concession rates. If someone who already receives concession rates spends over $316.00 in a year, they receive the following prescriptions at no extra charge. Price premiums are charged when in rare cases an alternative and more expensive brand is prescribed. Patients will have to pay the difference directly to the manufacturer.

How do medicines receive reimbursement status?

Eligibility for a medicine to be considered for reimbursement must be approved by the Australian Register of Therapeutic Goods (ARTG). The Department of Health and Minister for Health set out which medicines are reimbursed by the government under the PBS scheme. This is supported by the Pharmaceutical Benefits Advisory Committee (PBAC) which gives recommendations on whether drugs should be subsidised or not. The PBAC lays out five main criteria which affect reimbursement decision:

  • Magnitude and importance of clinical effects
  • Comparative cost-effectiveness of the therapy, including healthcare resources not directly related to the drug
  • Affordability of the drug if not reimbursed under the PBS
  • Budget impact analysis on PBS
  • Budget impact analysis on Australian Government health budget.

How are drug prices set in Australia?

A positive recommendation is required by the PBAC in order to be placed on the national formulary. It therefore acts as an incentive to drug manufacturers not to set the proposed price too high. Both the manufacturer and department must agree with the price before reimbursement approval. How the price point is reached, or how the drug will be funded may be dependent on the class of drug, i.e. innovator, generic, orphan etc. For example, factors such as costs of manufacturing are considered when determining margins between price points. Drugs may also be subject to being priced to the cheapest available therapeutically similar product as a reference price. Some therapeutic drug classes such as angiotensin II receptor antagonists have their prices changed monthly to reflect changes in sales volume (Weighted Monthly Treatment Cost, WAMTC).

Additionally some drugs, such as high cost novel therapies, may be subsidised under a managed access scheme where the Department of Health and the manufacturer must agree to terms of a risk sharing arrangement. These agreements may include price reductions or rebates if sales breach a forecasted budget. It may also include pricing values determined by agreed performance targets.

Drugs which have market authorisation who are rejected from the PBS or who do not apply for reimbursement may set their price freely without regulation.

How can we help?

With RxPriceIndex™ we aim to help you make your business decisions clear by offering;

  • International pharmaceutical market overview
  • An intuitive user interface
  • Longitudinal data
  • Robust and transparent data
  • Price types including Ex-factory, wholesaler, pharmacy and retailer prices
  • Monthly updates and continuous analyst support.

The RxPriceIndex™ covers 32 EU markets along with USA, Australia and Japan with plans for further developments.  To request a customised report or a bespoke service, please get in touch with our team of expert analysts at sales@blackswan-analysis.co.uk

Written by Ethan Smith, Healthcare Analyst, Rx PricingIndex

Reference List

Paris, V. and Belloni, A., 2014. VALUE IN PHARMACEUTICAL PRICING COUNTRY PROFILE: AUSTRALIA. [ebook] OECD. Available at: <https://www.oecd.org/health/Value-in-Pharmaceutical-Pricing-Australia.pdf> [Accessed 14 April 2020].

Pbs.gov.au. 2020. Pharmaceutical Benefits Scheme (PBS) | About The PBS. [online] Available at: <http://www.pbs.gov.au/info/about-the-pbs> [Accessed 14 April 2020].