In the final PharmaDispatch for 2017, we discuss the year ahead, the challenges, the changes, and the sector's only course of action to address the fundamental risk to PBS sustainability.
The PBS will celebrate its 70th year in 2018. It is a very significant milestone for a public health program facing serious challenges to the extent survival in its current form must be in doubt.
Successive rounds of reform have seen tens of billions taken from the scheme, and not returned, with no growth in the current decade. The question of how the PBS will be allowed to grow needs to be answered or the fundamental tenets underpinning the seven decade old system will be lost, potentially within months not years, and probably forever.
Wind the clock back to this time last year. Who can honestly say they were predicting the sector would negotiate another $1.8 billion in savings and Medicines Australia would secure its own strategic agreement?
The point is that, as we go into 2018, people should expect the unexpected. This is the way it has always been. Just as 2017 featured many surprises for the sector, some good, others less so, next year will be no different.
We know at least two of the sector's representative groups, the GBMA and PSA, will have new leadership in 2018. Other changes in the sector's leadership are absolutely certain.
A raft of new PBS savings measures in next year's Budget is unlikely, surely?
Yet maybe the sector needs to carefully consider the risks, particularly around deeds of agreement and special price arrangements, given the changes pushed by government in the middle of this year. What was presented as a minor accounting change essentially sought to turn rebates into forward payments. You have to question where it came from and whether the central agencies really are happy to see so many billions paid out to industry to mask the very low prices paid for medicines in Australia. Are they truly convinced companies would not otherwise list medicines on the PBS? Maybe the more important question is do they even care?
Importantly, and regardless of the rebate issue, the circumstances that drove reforms in 2015 and earlier this year prevail and are getting even worse - chronic underfunding of the PBS.
The sector might make it through next year's Budget but, without addressing this major strategic risk, it must anticipate more savings driven reforms sooner rather than later.
The current situation is utterly ridiculous, getting worse, and completely confused.
It has been exposed in the 2016-17 PBS Expenditure and Prescriptions report, released yesterday, which starts by claiming spending on the scheme grew by 11.2 per cent.
However, look a little deeper, and it actually reveals PBS spending fell by a staggering $1.35 billion - 13.3 per cent. In other words, there was a 27 per cent variation between the top line and actual PBS spend.
Actual spending on the scheme in 2016-17 was at the same level it was in 2010-11.
Government might argue the top line is actual spend, with rebates going to Treasury as consolidated revenue, but that is simply an accounting charade.
The PBS Expenditure and Prescriptions report, which used to be the seminal annual document on the scheme, is now greatly diminished because of the transformational impact of rebates. The officials working on the report must be as frustrated as anyone.
Its list of top 10 medicines by spending is utterly useless as a genuine guide because of rebates. Gilead's HARVONI, listed as the highest cost medicine on the PBS at $753 million, may not even be in the top 10 once rebates are taken into account.
This is not to say rebates for individual products should be published - that would defeat the entire purpose - just that accounting for government spending on the PBS is now very confused and unfortunately blurring public debate on the scheme.
The announcement of new listings is always welcome but in recent years they have been masking the unsustainable redistribution of money within the scheme - the proverbial robbing Peter to pay Paul - and surely it cannot go on forever.
To make matters worse, successive governments have been short-changing the PBS for years, projecting growth and leaving plenty of room for new medicines, only to take it back. Now, for the first time in history, the PBS is forecast to decline every year to the end of this decade.
This represents a huge strategic risk for the sector, which is already under pressure, let alone patients and clinicians wanting access to the latest biopharmaceutical innovations. How is Australia going to pay for new medicines, immunotherapies or even gene therapies, without actual new investment in the PBS?
The system has to grow.
Australia is sliding towards PHARMAC, a shocking system that puts budgetary caps before patient need, and something needs to happen before it is too late - the evidence of New Zealand shows once it is gone, it is gone, and there is no getting it back.
The current lack of investment would be a scandal in any other public health program so where are the public health and consumer groups? Has anyone actually told them? Do they even care? Sometimes you cannot help think the dislike some have of industry, even those giving strategic advice to the research-based sector, exceeds their desire to help patients. Maybe those with a fondness for PHARMAC could spend a few years in New Zealand and live a system that has institutionalised rationing.
The situation is so perverse Australia's major political parties argue over who should take credit for the current state of the PBS.
Something must be done.
Medicines Australia has clearly indicated its intention to pursue the need for more investment in the PBS in its pre-Budget submission.
All the sector's representative groups should unite in this push because arguably every single one of the issues their members face is due to the unsustainable level of PBS funding. The sector also has a fundamental responsibility to take a leadership position in defence of a system that could not exist without it - this is putting patients first.
Take the recent trend towards companies moving their medicines into exclusive direct distribution arrangements. This is undoubtedly a direct consequence of companies feeling the financial pinch of price reforms. You do not have to be Warren Buffet to know companies will do whatever they can to mitigate the impact of $8.4 billion in price cuts. For some, that means direct distribution, while for others it will mean something else. Regulating against the response will only force them to find other ways.
Direct distribution is just the start and who knows what else might emerge in 2018 as companies under pressure look to protect their businesses.
The sector's representative groups can wait for these issues to emerge, take them on one at a time, tactically, or unite to address their real cause.
Calling for a wholesale review of National Medicines Policy, as proposed by PBAC chair Professor Andrew Wilson, is a small but good start. It is a platform to make the case for new investment. The current argument for additional investment, a pre-Budget submission, is an important start but is really akin to writing a pre-Christmas letter to Santa.
Those arguing against a review, on the basis of 'be careful what you wish for', appear to be in denial about the realities of the truly dreadful status quo.
The PBS as we know it is 'dying a death of a thousand cuts' and now is not the time for timidity or looking the other way.
An open and transparent review would enable the sector to make its case, engage wider stakeholder groups, and frankly 'flush out' the agendas of policy-makers. At present, central agencies are running amok behind the bureaucratic veil deconstructing a core plank of Australia's public health system, effectively and cleverly using its arcane technical processes and budget rules to constantly raise the bar for access.
Successive governments and ministers are either oblivious to the fact, or blithely complicit in, the policy incrementalism killing the PBS.
If Australian governments and policy-makers want a diminished PBS, along the lines of PHARMAC, then the sector should force them to say it and hold them accountable for the consequences. If, on the other hand, they want to maintain a world-class system that provides universal access to the latest medicines, a review of National Medicines Policy would confirm that and be one vehicle to secure positive change.
What has the sector really got to lose?