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Monday, May 15, 2017

Pharmaceuticals and the budget – An interesting compromise, particularly for biosimilars

by Ric Morgan, Special Counsel

As part of the budget deluge, the agreement between Medicines Australia and the Commonwealth was released.  It seems designed to strike a balance between the commercial interests of pharmaceutical manufacturers who will or have brought new medicines to Australia, the Commonwealth's concerns about the cost of the pharmaceutical benefits scheme, and the other players in the sector.

Pharmaceutical manufacturers are agreeing to significant price cuts.  The agreement explicitly limits the increased price cuts to the period of the agreement. Theoretically, this means that the system could revert to the current price cut regime from 1 July 2022.  However, this seems unlikely in practice. The fact that a new agreement must be negotiated in the last year of the current agreement provides significant leverage for the Commonwealth to maintain the accelerated price cuts in this agreement.  The legislation necessary to implement these might provide clarification by including time limited changes or sunset clauses.  However, even if it does the Commonwealth can always amend that legislation later..

In return, pharmaceutical manufacturers are getting significant certainty on the way the scheme will work. It provides a framework for the exercise of Ministerial discretion. The discretion will remain, maintaining the Commonwealth's strong negotiating position, Medicines Australia will be hoping that the Minister's actions will be more predictable.  Some have reported that it represents that industry "is no longer naïve about the potential for governments to do whatever they like despite agreements" [Pharma-in-Focus, 10 May 2017, 'Latest industry agreement shows lessons learned'].  Only time, and enacted legislative changes, will tell whether this reliance on the Commonwealth keeping its side of the agreement is justified.

The more important rewards for pharmaceutical manufacturers are likely to be in the promised improved processes for getting medicines listed.  These have two primary aims—reducing the time to listing, and reducing the impact on new listings of some of the price cuts that have occurred to any drug used as a cost minimisation comparator for that new listing. The latter applies whether the new listings are new indications or new drugs. There are also commitments to reduce the impact of some statutory price cuts on other drugs that are reference priced to drug taking the price cut.

Interestingly, in recognition of the place of generic (implicitly) and biosimilars (explicitly) as beneficial to the access medicines in a cost effective way, the agreement cautiously accepts a move away from brand name prescribing.  However, the e-prescribing systems being considered, while moving to default of generic drug names, are explicit in "preserving prescriber choice".  This suggests the systems must nonetheless continue to allow prescribing by brand.

The generic name system to be employed is the international non-proprietary name (INN) as published by the World Health Organisation.  This is relevant to the biosimilar space despite not being included in the biosimilar section of the agreement.  For biosimilars, the WHO has recommended the use of biosimilar qualifiers as part of the INN. If Australia adopts this approach, each biosimilar would be separately named in the e-prescribing scheme.

The specific section of the agreement addressing biosimilars provides clear benefits to those marketing biosimilars.  This is likely to be recognition of the different dynamic of who is bringing biosimilars to market. Notably it is Medicines Australia's members, and not the Generic and Biosimilar Medicines Association's (GBMA) members, who have been key players so far.  The agreement provides significant scope for biosimilar manufacturers to market their products by brand and to differentiate their products from the reference biologic medicine.

In particular the agreement allows for biosimilars to have different, and lower, prescriber authority requirements.  This means that it will be open for the biosimilar manufacturer to convince the PBAC that access to the biosimilar should be easier for patients and doctors.  It also allows the PBAC to recommend that for new (treatment naïve) patients, the biosimilar should be preferred.  By explicitly recognising physician choice, it does not seem to go as far as some other countries where prescribing of the biosimilar is mandated for such patients.

Curiously, there is a suggestion that these changes to what the PBAC can recommend do not involve a change in function for the PBAC. Unless the biosimilar can be shown to have a difference to the effectiveness and cost of therapy of the reference biological, these new options for PBAC recommendations may in fact conflict with the statutory mandate of the PBAC.

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