Appendix 2: Pharmaceutical Benefits Pricing Authority Annual Report for the year ended 30 June 2012

prev page | TOC | next page

This is the twenty-fifth annual report of the Pharmaceutical Benefits Pricing Authority (PBPA) covering the operations of the PBPA for the year ended 30 June 2012.

Pharmaceutical Benefits Pricing Authority

The PBPA is an independent non-statutory body established in 1988 which is required to:

• review the prices of products supplied under the Pharmaceutical Benefits Scheme (PBS) and, since 2006, the vaccines on the National Immunisation Program (NIP); and
• recommend prices for new items that are recommended for listing on the PBS and the NIP.

The PBPA, along with the Pharmaceutical Benefits Advisory Committee (PBAC) and its sub-committees, evaluates all submissions from sponsors for the listing and pricing of drugs on the PBS. While the PBAC is a statutory committee that assesses the clinical benefit and cost-effectiveness of drugs, the PBPA is a non-statutory committee that recommends prices of drugs for PBS listing purposes.

The PBPA’s objective in reviewing prices of items listed under the PBS is to secure a reliable supply of pharmaceutical products at the most reasonable cost to Australian taxpayers and consumers, consistent with maintaining a sustainable pharmaceutical industry in Australia.

Under its terms of reference, the PBPA is required to recommend to the Minister for Health prices of items listed as pharmaceutical benefits or recommended by the PBAC for listing.

Final decisions on the listing of medicines and vaccines are made by the Government. Currently, all positive recommendations made by the PBAC and the PBPA which have a financial impact for the Commonwealth Budget are being considered by Cabinet.

Factors Considered by the PBPA

In reviewing the price of listed items and in considering the price of items recommended for listing, the PBPA takes account of the following factors:

1. PBAC comments on clinical and cost-effectiveness aspects of items;
2. the prices of alternative brands of a drug;
3. comparative prices of items containing drugs in the same Anatomical Therapeutic Classification (ATC) Group;
4. costs information, when provided by the Responsible Person or estimated by the PBPA;
5. prescription volumes, economies of scale and other factors such as expiry dates, storage requirements, product stability and special manufacturing requirements;
6. prices of items containing the drug in reasonably comparable overseas countries;
7. other relevant factors which the applicant company may wish the PBPA to consider; and
8. any directions of the Minister.

Membership

The PBPA’s membership for the 2011-12 financial year was:

Secretariat Support

The PBPA is serviced by a Secretariat staffed within the Pharmaceutical Evaluation Branch of the Department. The Secretariat is responsible for making logistical arrangements for PBPA meetings, preparing agenda papers, taking minutes of meetings and notifying affected parties of the outcomes of PBPA deliberations. The Secretariat also conducts negotiations with Responsible Persons, where necessary, on proposed prices.

Meetings

PBPA meetings are held three times a year and are coordinated with meetings of the PBAC so that the PBAC outcomes can be dealt with as soon as possible, consistent with the need to collect pricing information.

Establishing Prices for New Listings

For new or extended listings recommended by the PBAC, the PBPA may advise the price to be negotiated by the Department. The PBAC recommendation, based on economic evaluations considered by the Economics Sub-committee, is a major consideration in determining initial prices.

Increasingly, the PBPA considers deeds of agreement containing risk sharing arrangements to contain overall costs of drugs on the PBS and to manage the financial risks to the Government resulting from uncertainty about drugs utilisation.

At 30 June 2012 there were 76 deeds of agreement in place or in development.

A comprehensive overview of the different pricing methods used by the PBPA, including cost-plus method, reference pricing and different types of risk sharing arrangements, is provided in the PBPA’s Policies, Procedures and Methods manual. This manual is available on the Department’s website.

Reviewing Prices for Existing Items

The main mechanisms used by the PBPA for reviewing prices of pharmaceutical benefits supplied through the PBS are:

• reference pricing, i.e. comparing the prices of products that are considered by the PBAC to produce similar health benefits;
• on the basis of further cost-effectiveness justification by the Responsible Person to the PBAC; and/or
• a margin on the cost of manufacture, or landed cost.

These mechanisms are outlined in the PBPA Policies, Procedures and Methods manual on the Department’s website.

The PBPA may also request additional data from Responsible Persons, including drug utilisation data, so that relevant treatment costs can be independently calculated.

Therapeutic Relativities

The PBPA issues relativity sheets that identify the basis of pricing comparisons between therapeutically similar products. These are mainly based on advice from the PBAC. If necessary, clarification can be obtained from the Secretariat, and the relativities may be changed by the presentation of further data to the PBAC. The therapeutic relativity sheets can be found at www.pbs.gov.au.

Annual Scheduled Review of Anatomical Therapeutic Chemical (ATC) Groups

The PBPA reviews annually the price of each drug listed in the Schedule of Pharmaceutical Benefits by ATC groupings. Responsible Persons are asked to submit cost and other data that they wish the PBPA to consider in reviewing product prices.

The ATC groups reviewed in 2011-12 are as follows:

PBAC Recommendations Considered by PBPA

Estimated cost of price increases of existing items

The general price increases granted to Responsible Persons in 2011-12 are collectively estimated to add $25.17 million to the cost of the PBS and Repatriation Pharmaceutical Benefits Scheme over five years based on the latest available twelve months prescription volume for each item at the time of review.

Cost of the Pharmaceutical Benefits Scheme for 2011-12

1. PB Other contains diverse programs. The majority of data are collected by state and territory governments and script volume is unavailable.
2. Does not include Doctor’s Bag (0.32 million).
3. Script numbers do not apply to PBS revenue.

Note: For the general public, where a pharmaceutical benefit has a dispensed price below the general patient contribution (that is, below $35.40), the consumer pays the full amount. The above figures do not include these amounts.

Special Patient Contributions (SPC)

Special patient contributions may apply when a manufacturer and the Government cannot agree about the price of a product listed on the PBS. In these cases, the product continues to be listed on the PBS, but patients pay an amount in addition to the standard patient co-payment. These additional amounts are paid to the Responsible Person, not to the Government. There are three types of special patient contributions, which are discussed below.

The Brand Premium Policy operates where there are a number of clinically equivalent brands available. The Government subsidises each of the available brands to the level of the lowest priced brand. Responsible Persons of other brands are able to set a price higher than the price of the lowest priced brand. Patients then pay the difference between the price of the lowest priced brand and the price of the brand which is dispensed to them.

The Therapeutic Group Premium Policy applies within specifically defined groups of drugs which have similar safety and health outcomes. Within these groups, the drugs can be interchanged at the patient level. The Government subsidises all drugs within a group to the level of the lowest priced drug. The difference in price between the lowest priced drug and higher priced drugs within the group is called a therapeutic group premium (TGP). The TGP is paid by the patient and goes to the Responsible Person, not to the Government.

There are currently four drugs with special patient contributions other than brand or therapeutic group premiums listed on the PBS. Three of these (amoxycillin paediatric drops, naratriptan and zolmitriptan) have been introduced because the Responsible Persons and the Minister could not agree on a new price when a price reduction was required by the 12.5% price reduction policy. The fourth, bleomycin, has had a special patient contribution for a number of years. In order to ensure that patients will not be financially disadvantaged, the treating doctor can seek an authority from Department of Human Services to waive this type of special patient contribution where there is no clinically suitable alternative listed on the PBS at the benchmark price. Bleomycin is the only drug for which the SPC cannot be waived.

1. A brand is defined as a unique combination of ‘brand name’ and ‘form and strength’.
2. Weighted average brand premium is calculated by: scripts x premium = total premium value total premium value / total scripts = weighted average brand premium
3. Figures only include those scripts processed by Department of Human Services, so general scripts that fall under the co-payment are not included.

Weighted Average Monthly Treatment Cost (WAMTC)

The WAMTC methodology is a form of reference pricing which applies to groups of drugs that are considered to be therapeutically similar by the PBAC. Under the evidence-based approach used for the listing and pricing of drugs, it is the practice to price these at the same level. Each WAMTC group is reviewed annually in line with PBPA meetings and may be subject to ad hoc reviews if a price reduction is offered by a Responsible Person of a drug in a WAMTC group. Details of the WAMTC methodology are outlined in the WAMTC Manual which can be found on the Department’s website.

The WAMTC groups reviewed in 2011-12 are as follows:

On 1 April 2012, a number of drugs were removed from their Therapeutic Group as a result of price reductions under the first main cycle of Expanded and Accelerated Price Disclosure.

As a consequence, further WAMTC reviews of the Angiotensin Converting Enzyme (ACE) inhibitors, Calcium Channel Blockers (CCB), and HMG Coenzyme A reductase inhibitors (Statins) will not take place after 1 April 2012.

WAMTC reviews of the H2 Receptor Antagonists (H2RAs) group were also suspended in late 2011 at the recommendation of the PBPA, based on evidence of stable prescribing patterns and treatment costs over the past three years. The next review of this group will take place when a ‘trigger event’ occurs which may have an impact on prescribing patterns or treatment costs; for example, the listing or de-listing of a drug or strength of drug within the group.

Further Information

A detailed analysis of PBS expenditure and prescriptions for the twelve months to 30 June 2012 can be found by following the link to ‘PBS statistics’ on the Department’s website (www.health.gov.au/pbs), or by following the link under ‘useful statistics’ on the PBS website (www.pbs.gov.au), when this data becomes available. The data will include the following tables which were replicated in PBPA Annual Reports prior to 2011:

• ATC main group comparison (summary version of information provided in Table 1 of PBPA reports prior to 2011);
• PBS prescription volume, government cost and average government cost per script (Table 2 in PBPA reports prior to 2011);
• highest cost PBS drugs and highest volume PBS drugs (Table 3 in PBPA reports prior to 2011);
• top 20 Responsible Persons by total cost and by market share (Tables 4 and 5 in PBPA reports prior to 2011);
• significant drug groups by highest government cost and highest volume (Tables 6a and 6b in PBPA reports prior to 2011); and
• significant drugs by highest change to government cost and highest volume change (Tables 7a and 7b in PBPA reports prior to 2011).

1. Includes all new or extensions to listings of drugs with nil or some cost to Government – does not include new brand listings for existing items.
2. Differences between ‘number of drugs recommended for listing’ and ‘number of drugs listed’ may be partially or wholly due to listing taking place in the financial year following a recommendation.
3. Values reported for 2010-11 and 2011-12 are the estimated net cost to Government over five years. For previous years, the reporting period is the financial year, or part thereof, in which the listing took place.

prev page | TOC | next page