Readers are invited to write in with their questions about decisions of the Pharmaceutical Benefits Advisory Committee (PBAC). Australian Prescriber publishes selected questions from readers, together with answers from the PBAC. Questions may address issues such as regulatory decisions, pharmaceutical benefits listings and withdrawals.
This exclusive arrangement helps Australian Prescriber readers understand how the contents of the Pharmaceutical Benefits Scheme (PBS, see www.pbs.gov.au) are determined.
Letters and responses are reviewed by the Editorial Executive Committee and may be edited before publication. It may not be possible to reply to all individual questions.
Your questions to the PBAC
A number of years ago, benchmark pricing was introduced to the Pharmaceutical Benefits Schedule, whereby a drug company would be allowed to introduce a brand surcharge for their particular product. My understanding of the operation of this scheme was that it would follow the guidelines of the Australian Competition and Consumer Commission with respect to collusive pricing and price fixing. This would not appear to be the case, as many products today are obviously manufactured by the same company, their logo and name appearing on both the generic and premium-priced product (despite having a `different' manufacturing code on the Pharmaceutical Benefits Schedule). An explanation of how brand price premiums are allowed, and calculated, would be appreciated.
Michael D. Rumpff
The Secretary of the Pharmaceutical Benefits Pricing Authority comments:
The Brand Premium Policy was introduced in December 1990 to reduce price controls where possible by allowing pharmaceutical suppliers to set their own price on multi-branded and therapeutically interchangeable brands listed on the Pharmaceutical Benefits Scheme, provided one brand was available at the subsidised price. This also encourages the development of the generic pharmaceutical industry in Australia.
Under the policy, suppliers of multi-branded items are able to set their own prices at a level they think the market will bear. At the same time, prescribers, pharmacists and patients can decide whether it is necessary to pay more for a particular brand when a cheaper equivalent and therapeutically interchangeable brand is available.
As the brand premium is not a government charge, it does not count towards a patient's safety net. The premium arises from the supplier's price setting and the majority of it goes to the supplier, with wholesalers and pharmacists receiving a percentage.
Under the competitive environment, it is up to the sponsor of the product to set the price at which it sells its brand. The government only sets the subsidised price. The pricing freedom that applies is similar to that of many other commodities such as food, clothing and cosmetics.
As of February 2000 there were 236 benefit items with a brand premium that could be therapeutically interchanged. The average brand premium was $1.45 and premiums ranged from $0.23 to $43.28.