Little progress following latest meeting on rebate reform

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Several senior representatives of major pharmaceutical companies trekked to Canberra on Friday for another meeting with Department of Health officials over proposed changes designed to eliminate rebates paid under special price arrangements.

It is understood the discussions with the Department's 'taskforce' were high-level, partly because competition law constrains industry from endorsing or even agreeing a single position, but also because the proposed model is complex with significant unresolved questions about its operation.

Government cannot simply mandate the change to existing special price arrangements, under which companies rebate the difference between the PBS published price and the lower cost-effective price, because they are included in deeds of agreement.

The over 150 existing deeds of agreement cannot be varied without the mutual agreement of both government and the relevant company. This means, when it comes to the proposed change to special price arrangements, companies can just say no.

However, in a push to implement a trial of the new system by 1 July, officials are targeting companies with existing special price arrangements that might also be awaiting the PBS listing of an already recommended medicine.

The implication is unstated but, from the perspective of companies, very clear.

Many companies have no in-principle objection to the change but officials are yet to answer many questions surrounding its operation. Doubts over its operation, in addition to an absence of trust between officials and the relevant stakeholder groups, are behind the reluctance of companies to participate.

The proposed system, which will require legislative change before the planned 1 July implementation, will see significant reform of the supply chain.

Impacted medicines will go from manufacturer to wholesaler and pharmacy without money changing hands. The commonwealth will directly reimburse each component of the supply chain, ensuring the real cost-effective PBS price remains confidential, while remunerating wholesalers and pharmacy based on existing thresholds.

Yet companies continue to raise questions about the model's operation, including how it will differentiate PBS and private prescriptions, which will need to be tracked through the supply chain and managed differently. There is no current mechanism to track medicines in this way and, while one could emerge in the near future, it will not be in place by 1 July.

Companies question the push for implementation by mid-year given it will require the creation of an ad hoc and probably temporary process for tracking the impacted medicines through the supply chain. 

Wholesalers and pharmacy are understood to also have concerns about the proposed system and its impact on the supply chain.