As US Drug Prices Increase, Australia's "PBS" Keeps Drug Costs Manageable
Will trade policy cause prices hikes?
Will trade policy cause prices hikes?
An Australian government law effective April 1, 2012 will slash prices on 1000 brands of 60 popular prescription medicines by up to $14 a script. Not only will thousands of families pay less for prescription drugs, but taxpayers who subsidize the cost of the life-saving medicines through the national government's Pharmaceutical Benefits Scheme (PBS) will also save $1.9 billion over five years. The Sydney Morning Herald reports "Millions of patients will pocket average savings of $3 a pack on essential drugs to treat high blood pressure, cholesterol, diabetes, epilepsy, depression and pain. Sixty commonly prescribed drugs will be cheaper for patients, while taxpayers will save $1.9 billion - freeing up funds to subsidies new drugs for leukemia, arthritis and HIV for the first time."
Drug prices in Australia are already very low in comparison to in the US
because of the role of the Australian government in both subsidizing drug costs for its citizens and also establishing reference pricing under the national PBS. For example, 300 patients a year who are newly diagnosed with chronic myeloid leukemia will no longer face bills of $30,000 a year to buy the drugs dasatinib and nilotinib.
because of the role of the Australian government in both subsidizing drug costs for its citizens and also establishing reference pricing under the national PBS. For example, 300 patients a year who are newly diagnosed with chronic myeloid leukemia will no longer face bills of $30,000 a year to buy the drugs dasatinib and nilotinib.
According to an article in the Courier Mail/Sunday Mail, "Drug companies hope those savings will also help the Government list new drugs on the taxpayer-funded PBS, with a swag of new treatments for cancer, arthritis and kidney failure set to join the taxpayer-subsidized medicines scheme."
The paper reports, "Because the price of the drugs will now fall below the co-payment for prescription medicine of $35.40, patients will secure big savings and pharmacists can compete on price. Pensioners and concession card holders will continue to pay $5.80 a script."
Such drug costs are almost shockingly low even without the price cuts from a US standpoint. A recent AARP report found that the retail price of the 514 drugs most widely used by Medicare recipients rose approximately 26% between 2005 and 2009. Although the price of generics decreased 31% during this same time period, brands increased 41% and specialty drugs increased more than 48%. Read the AARP report.
According to the Sunday mail article "The vast majority of prescription medicines are purchased by patients with concession cards who will continue to pay $5.80 a script,'' Pharmacy Guild of Australia spokesman Greg Turnbull said. "The average cost of the thousands of medicines on the PBS is about $48. So every time you pay $5.80 you are getting a massive saving.''
The price cuts also apply to super-expensive cancer and specialty drugs. For example, 300 Australian patients a year who are newly diagnosed with chronic myeloid leukaemia will no longer face bills of $30,000 a year to buy the drugs dasatinib and nilotinib.
Compare this to what Americans face. An April 2 article on US prices in FiercePharma reported that new cancer drugs are "more expensive than ever. Just look at some of the recently approved products in the category: Dendreon's prostate drug Provenge at $93,000; Pfizer's targeted lung-cancer treatment Xalkori at $115,000 a year; Bristol-Myers Squibb's melanoma drug Yervoy at $120,000 per year; and Roche's targeted melanoma med Zelboraf at $56,400 for a 6-month course."
Reuters reports on the implications of these high costs for developed and developing countries alike: "Cancer is a leading cause of death worldwide, accounting for 7.6 million deaths in 2008 and predicted to top 13 million in 2030, according to the World Health Organization. Some 70 percent of deaths occur in low- and middle-income countries.
For drugmakers, the disease is a rich seam of sales and profits. Cancer medicines overtook cholesterol fighters as the biggest-selling selling prescription drug class five years ago and sales are set to hit $85 billion in 2016, up from $58 billion last year and a mere $8 billion in 2000, according to consensus forecasts compiled by Thomson Reuters Pharma."
The Reuters article acknowledges that in the United States, "some cancer patients have abandoned medical care because of their bills or else face a significant risk of bankruptcy, according to studies presented at the American Society of Clinical Oncology last year."
Capping specialty drug costs. No wonder some states are rebelling, and putting limits on what insurance companies can charge for specialty drugs such as these new cancer drugs, with Maine recently enacting a $3500 annual out of pocket limit for specialty drugs. Link to LD 1691 The federal Affordable Care Act will also require prescription drug costs to be included within the overall deductible for medical costs in insurance policies beginning January 1, 2014. Read more.
Trade policy implications. Of course, this does little to address the underlying prices of these drugs, and there is widespread concern among NGOs concerned with access to medicines, academics, and US states that recent trade agreements with Korea and under negotiation with Pacific Rim countries (the Trans-Pacific Partnership or TPP) will lead to locking in these high "market-based" prices. In Australia, concerns have been raised that the TPP will interfere with the successful pricing strategies of the PBS. For more on this trade and pharmaceutical pricing, read about trade policy on the NLARx website.
