New deal raises questions over the need for rebate pilot

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The government has targeted specific companies in its efforts to secure participants in its proposed pilot of changes to the supply chain for medicines covered by special pricing arrangements.

The companies, who were brought together to meet health minister Greg Hunt on 19 March, are the ones people would most expect. For the most part, their medicines are high-cost, currently listed with special pricing arrangements, and combined make a significant contribution to the rebates paid by industry.

Their support of the pilot has been considered crucial to achieving the change the government so desperately wants. 

Some of the companies have come under enormous pressure to participate in the pilot since last year.

Some of those companies are sympathetic to the government's position. They may have even actively worked to convince other companies to back the change on the basis the government plans to proceed regardless of industry support.

Others believe the proposed change is not a good idea, believing it undermines the PBS, entrenches the requirement for industry to fund its own listings, and takes Australia further down the path of New Zealand's PHARMAC.

Some in the industry have argued for alternative solutions to the proposed supply chain reform since late last year. These efforts have been largely rebuffed by the government, until recently.

It is understood at least one major company has recently negotiated to reduce the published price of a number of its PBS-listed medicines covered by special pricing arrangements. The company is a staunch opponent of the supply chain change and resisted pressure to participate. The negotiated alternative will reduce the magnitude of rebates paid under special pricing arrangements, helping the government to achieve its policy objective. It remains unclear whether the government is negotiating similar agreements with other companies.

The government has struggled to secure participants in its pilot. The Department of Health has denied offering companies inducements. However, one company secured the listing of a medicine, with a special pricing arrangement not recommended by the Pharmaceutical Benefits Advisory Committee, in return for it being a potential candidate in the pilot. The medicine is listed at a published price almost twice that of its comparators.

Medicines Australia member company managing directors have been invited to attend a conference call this afternoon