Saturday, 05 December 2015 13:46

A New Plan for PBS Pricing Negotiations

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An open letter to all members of Australian Cabinet

If current medication pricing trends are allowed to continue then, when we finally invent a cure for cancer, you can almost guarantee it will be too expensive for all but the super rich to afford.

Take the new Hepatitis C medication Sofosbuvir as an example. The sponsor – Gilead Sciences – is, according to Bloomberg, demanding $1000 a tablet for it, making the monthly price $30,000 and the total price $84,000 for a full 12 week course. With 233,000 Australians having Hepatitis C, a 95% cure rate, and an annual death rate three times that of cervical cancer,  there is little doubt securing affordable access is an important issue.

The Australian Pharmaceutical Benefits Scheme (PBS) is the system we have to make expensive medications affordable. It does this by paying a subsidy to the manufacturers so that the maximum patient monthly price is $37 even if that medication costs $30,000 a month. In a case like this the PBS would chip in $29,963 to assist a patient to pay the manufacturer’s eye watering price.

Gilead sell Sofosbuvir for $10 a tablet in Egypt, so we are being asked to pay 100 times more and pricing negotiations have been stalled since 2014. Gilead has already made over $10,000,0000,0000 in profits from a drug that is documented to have cost less than $375 million to develop and $1 a tablet to make.

The scale of the problem is staggering. Worldwide, although over 150 million people suffer from Hepatitis C, a mere ½ a million people have been treated. During this same time 1,500,000 people have died from lack of affordable access. In a tragedy of breathtaking proportions, by the time Gilead’s patent expires, 12 million people who could have been saved will be dead.

The PBS provides equitable access to medication for all Australians but the increasing prices being demanded by Big Pharma for new medications mean the PBS is rapidly becoming too expensive for us to afford. The TPP, if signed into law, may well entrench this problem permanently. For example to provide all  Australians needing Sofosbuvir with access would cost our country more than the entire current PBS budget.

I propose the PBS adopt a new model for setting the price at which it is willing to subsidise medications.

  1. First we find the lowest market price offered by the manufacturer in the world (eg $10 in Egypt for Sofosbuvir).
  2. Now we calculate a multiplier factor of four based on Australia’s per capita income ($40,000), divided by Egypt’s per capita income ($10,000).
  3. This multiplier is used to set the maximum price that the PBS will pay, so in this case that would be 4 x $10 = $40 – this directly represents our capacity to pay in a world market situation.
  4. Should the manufacturer not wish to accept this offer price Australia applies a Super Pharma Profits Tax of 100% to every dollar over the calculated fair market price leaving the manufacturer free to charge whatever they like, but clawing extortionate pricing back into consolidated revenue using an alternate mechanism.
  5. In addition we adopt New Zealand’s methodology of not seeking to list every medication on the PBS, instead only listing one or two solutions to the particular problem This simple strategy forces Big Pharma to compete on price to receive (and maintain) PBS listing.

We have plenty of scope to improve our negotiating. New Zealand pays 1/8 the price of Australia for our most common medications. Overall they pay less than half what we do while still enjoying similar health outcomes. It's already bad enough that the Kiwis beat us a rugby.....

It is time for Australia to take a firm and unequivocal stance on Pharmaceutical pricing and not allow sick Australians to be held to ransom by amoral corporations.

Currently we pay the 3rd highest prices for medications in the world.

We can, should, and need to do better.

Dr James Freeman


GP2U Telehealth

Footnote: You may be interested to know that the forecast when a cure for cancer has been invented it will be too expensive to afford has already come true. Gilead's new leukaemia/lymphoma drug (which like Sofosbuvir they simply purchased rather than developed) comes in with their trademark $84,000 price tag. 


Read 105759 times Last modified on Sunday, 06 December 2015 13:25

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