As 2017 approaches the pharmaceutical sector looks to end a year characterised by a mixed bag of outcomes. In the first of a two-part series, PharmaDispatch discusses the year for the two main representative organisations of the sector's manufacturers.
It is almost impossible to consider the current year without acknowledging the performance of the Generic and Biosimilar Medicines Association. Just two years ago any review of the sector would not have included the association in any discussion involving Medicines Australia.
The organisation led by Belinda Wood has a budget of just over $500,000 and 1.6 headcount - one full-time and one part-time employee. Yet in the past two years it has gone from virtually irrelevant to a genuine force in pharmaceutical policy.
It signed its first ever strategic agreement with government in 2015 on the back of the multi-billion dollar PBS Access and Sustainability Package.
It took a risk - a leap of faith with government that its long-term strategic challenges were best addressed within the formal structures of an agreement.
It was mocked by many in the sector. According to some, its member companies were unhappy and policy-makers would never act on pricing concerns impacting the viability and sustainability of supply.
How wrong they have been.
Processes negotiated by the GBMA through its working group with government secured price increases on dozens of generic medicines from 1 December, thought to be worth around $50 million, and stopped further price reductions on potentially dozens more. An association with an annual budget of just over half a million dollars has delivered its members, and non-members for that matter, a direct injection of $50 million while preventing further reductions worth millions more.
Then biosimilars. Time will tell but all the speculation suggests the GBMA is going to deliver big-time on uptake drivers in 2017.
There is no magic or mystery to what the GBMA has done. It mimicked the previous approach taken by its research-based counterpart, Medicines Australia - purchase through agreed savings a formal agreement with government to secure medium-term policy certainty, creating structures, time and goodwill to address long-term strategic challenges.
The 2010 memorandum of understanding (MoU) signed by Medicines Australia delivered this for Medicines Australia. It was a huge commercial success for its member companies, primarily because it delayed the introduction of further changes to price disclosure. Simplified Price Disclosure, implemented the day after the MoU expired, was budgeted to generate savings of $835 million. The MoU clearly delayed its introduction, delivering industry hundreds of millions in revenue it would otherwise have lost.
The GBMA learnt from this - agreements with government are not really about what you can get from government but what you can delay, creating time and space to influence the long-term direction of policy while resolving wider strategic issues.
For evidence of this, simply look to the price disclosure policy - the first of its multiple iterations was announced in 2006. It has been reformed and refined over ten years, initially based on formal discussions and agreements with Medicines Australia.
Compare this to biosimilars policy.
It was first discussed as part of the MoU - by implication, at that time Medicines Australia was positioned, as it was on price disclosure, to lead the discussion. Last year changed everything. It was out-manoeuvred by the GBMA, with changes focussed on 'a-flagging', and the smaller association is now in 'poll position' to lead the policy discussion over the next few years.
The GBMA has recognised the long-term incremental nature of reform and decided to position itself to influence its direction and outcome.
The association agreed to reforms in 2015 that imposed further price reductions and worked with policy-makers to create a formal structure to ameliorate their impact.
Medicines Australia also agreed to the reforms - through a letter of intent signed in May 2015 - but decided against taking up the formal structures and benefits provided in an agreement. Even as a decision based on principle it made zero sense, a reality now widely understood.
The GBMA's structured framework has been complemented by its 'human' approach to government and other stakeholders - its leadership is humble, consistent and courteous. Speak to anyone in a policy-making or political role and they will tell you how much they enjoy dealing with the GBMA.
It is remarkable that some still talk down the GBMA's achievements. It could be jealousy or just an inability to recognise success, or both. Regardless, it is arrogant and embarrassing, reflecting very poorly on those who continue to perpetuate that view.
The GBMA has managed the past two years with virtually no assistance - limited use of consultants, no independent directors or advisory councils. The argument its membership is small with a limited number of shared interests is simply nonsense designed to undermine perceptions of its success. It has kept things simple, focussing on the sector's wider strategic interests rather than company-specific issues. The inability of others to match this approach is not the fault of the GBMA.
The fact is, at this point in time, based on outcomes arguably the GBMA has become the most influential advocacy group for Australian-based pharmaceutical manufacturers. The question is whether that position can be sustained beyond 2020? In the short-term, the GBMA and the performance of its CEO remain a significant strategic threat to Medicines Australia.
For Medicines Australia, 2016 will be remembered as a year of consolidation. It has worked to rebuild its relationships with government under the leadership of its Chair and hard-working staff but has a long way to go given it is dealing with the consequences of walking away from its own strategic agreement in 2015.
There was a finalised agreement but in late June 2015 the association formally communicated to government its decision not to sign over of all things biosimilars.
Many in the research-based sector lament the continued focus on 2015. Yet it is very hard to forget given the negative implications of a decision that will be felt for years. The decision not to sign an agreement that clearly provided policy certainty until 2020 will probably be remembered as the worst by any organisation in the pharmaceutical sector's history.
It has to be discussed and dissected to ensure it does not happen again - because this is recognised as one of Australia's greatest industries.
There are a myriad of reasons why Medicines Australia found itself in the position of even contemplating not signing an agreement - not least a mind set going all the way back to 2014 when it essentially decided against seriously pursuing a follow-on to the MoU - but by the time its Board intervened in last year's negotiations, largely at the urging of policy-makers, it may have been irretrievable. That said, its situation was the culmination of several years during which its approach to the policy environment reflected a fundamental misunderstanding of its relationship with government. It should have signed the agreement last year as it was, even if it had inclusions it found disagreeable. A full understanding of the consequences of not doing so would have made for a very easy and quick decision.
It is now dealing with what it faced pre-MoU - every year brings terrible uncertainty and its own crises. It has no time, space, goodwill or effective formal structures to address its serious strategic challenges.
It might get another chance. It will need to be realistic, keep things simple and demonstrate some humility to take advantage of whatever comes in early 2017. It also has to hope the central agencies set aside their instinctive opposition to giving the sector certainty.
Next year will also show whether the association's significant focus on its own organisation and governance was the correct diagnosis. Will anything really be different with an independent director and an external advisory council? Maybe, but only if it means an enhanced understanding of the realities of its relationship with government. Time will tell but it probably needs to prepare for the reality of more wins for the GBMA in 2017.
In the second part of the series, PharmaDispatch will consider 2016 for pharmacy, wholesalers and government.
