The Turnbull government’s budget razor gang is set to consider changes to the $10 billion Pharmaceutical Benefits Scheme designed to bring down the price of medicines and kill off a potentially damaging fight with pharmacists.
Health Minister Greg Hunt is close to finalising a new strategic agreement with pharmaceutical industry body Medicines Australia that will underpin the changes to go before the expenditure review committee within days, Fairfax Media can reveal.
Well-placed sources in the medicines sector say that under the agreement the industry will bring down the cost of some drugs in exchange for price certainty and stability. The agreement will fill the void left after negotiations on an earlier agreement ended in acrimony in 2015.
The government is also set to extend an agreement with the generic medicines sector and reach a compromise with the powerful Pharmacy Guild of Australia, which has been laying the groundwork for a bruising public campaign over a funding dispute.
Mr Hunt has been in fresh talks with doctors’ groups this week, exploring ways to unwind the Medicare rebate freeze as he tries to reset the Coalition’s relationship with the sector in the wake of Labor’s “Mediscare” campaign.
It is unclear how much the reform package will save consumers or the government’s bottom line, but Mr Hunt has been telling stakeholders he wants to reinvest the money in the Pharmaceutical Benefits Scheme so more drugs can be listed.
The package would be Mr Hunt’s first big win in the portfolio after he took over from Sussan Ley in January.
Mr Hunt’s office would not confirm details of the package, saying only that negotiations were continuing.
“The government is having constructive discussions with a number of sectors, including Medicines Australia, aimed at improving access to doctors and reducing the cost of medicines,” a spokesman said.
“Our goal and our principles are protecting and supporting the long-term sustainability of Medicare and the PBS.”
Under the Pharmaceutical Benefits Scheme, the government subsidises the cost of medicine for most medical conditions. Patients pay a small co-payment – $38.80 for most PBS medicines and $6.30 for concession card holders – and the government pays the remaining cost.
The cost of the scheme goes up every year, reaching $10.8 billion in 2015-16.
The Coalition has promised to list all vital new drugs recommended by the independent Pharmaceutical Benefits Advisory Committee on the PBS, adding $5 billion worth of drugs since 2013.
The government already has an agreement with the Generic and Biosimilar Medicines Association, but that is likely to be extended so it aligns with the Medicines Australia agreement, likely to conclude in 2022.
Sources say the association has agreed to an increase in the mandatory price cuts triggered by the reimbursement of a second brand of an already listed medicine, delivering major savings.
Price disclosure policy has also been part of the negotiations, with the government prepared to make some concessions, sources say.
Sources in the pharmacy sector say they are increasingly confident of a deal with the government over what is known as “risk share”, a contested element of the government’s $18.9 billion funding deal with the guild and the 5500 community pharmacies it represents.
The risk share forecasts prescription volumes in each of the agreement’s five years. In the first year – last financial year – there was a 2.1 per cent shortfall in prescriptions, delivering the government a saving of up to $500 million.
That includes the cost of medicines that were not dispensed and therefore not paid for under the Pharmaceutical Benefits Scheme. But it also included an estimated $81 million of foregone dispensing revenue for pharmacies which the guild wants repaid.
It is not yet clear what sort compromise is likely, but the government is eager to prevent the guild launching a public campaign spearheaded by thousands of pharmacists.
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