The Government was told consumers would face higher out-of-pocket costs for Panadol Osteo more than six months before it was removed from the PBS.
The popular painkiller was one of dozens of medicines also available over the counter removed from the PBS on the first day of 2016. Their removal was a measure included in the multi-billion dollar PBS Access and Sustainability Package that is budgeted to save $500 million over the years to 2020.
Health Minister Sussan Ley asked the ACCC to investigate GSK's decision to increase the ex-manufacturer price of Panadol Osteo after it was removed from the PBS on 1 January.
"There are no obvious market changes that justify such a substantial increase," said the Minister.
However, both GSK and the Pharmacy Guild warned the Government in the first half 2015 that consumers would face higher out-of-pocket costs for Pandaol Osteo as a result of its removal from the PBS.
The Pharmacy Guild has been a vocal critic of the decision on Panadol Osteo. It raised concerns over the potential impact on consumers during the first half of 2015, but for reasons unrelated to the recent price rise.
The Guild has consistently pointed out that the PBS maximum quantity of Panadol Osteo has never been available over the counter at a price cheaper than the concessional co-payment.
The ex-manufacturer price of the PBS maximum quantity for one month's supply of Panadol Osteo, which is two packs including 96 tablets each, was already higher than the PBS concessional co-payment before it was removed and the price rose.
In other words, regardless of the increase in the ex-manufacturer price consumers were always going to pay more for prescription Panadol Osteo after its removal from the PBS on 1 January.
The Guild said in a recent statement that it wrote to the PBAC on 17 December asking for a review of the delisting. It expressed concern that the PBAC may have mistakenly compared the ex-manufacturer price of one pack rather than two.
On its decision to increase the ex-manufacturer price, GSK said in response to Ms Ley that it told the Government consumers would face higher out-of-pockets costs for Panadol Osteo in advance of the decision to remove it from the PBS.
The company would not comment on specifics but PharmaDispatch understands it advised the PBAC of the likely price rise during the consultation process in advance of its July meeting.
Analysis
The Guild might be right in thinking the PBAC made an error when it came to considering the removal of Panadol Osteo from the PBS. Setting that aside, when it comes to drug pricing it appears the Government wants it both ways - it boasts about its ability to suppress prices through the PBS and then complains when it delists a product and the price rises.
Health Minister Sussan Ley took the PBAC's advice to remove Panadal Osteo from the PBS. Why wouldn't she? It is the independent committee and, for right or wrong, their advice has an almost biblical status. However, once it accepted the advice to remove Panadol Osteo from the PBS the Government essentially abdicated any right to influence or set its price in the market - to wholesalers or consumers. Frankly, it also abdicated any right to complain, particularly given it was told in advance that its removal would result in a price rise.
The reference to the ACCC was an understandable political defence but it is odd the Government would claim, as it did, that there are "no obvious market changes that justify such a substantial increase".
Well, how about the Government removing its immense purchasing power from the Panadol Osteo market?
The Minister's reference to the ACCC was a political defence but the statement does not read like a Government with a solid understanding of how markets operate, especially one over which it exerts such immense power.
The price rise was a more obvious consequence of the delisting - it was entirely predictable because of the likely negative impact on the volume of prescription Panadol Osteo and, of course, the absence of the Government's purchasing power.
