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New strategic agreement with Medicines Australia

By Xinyu Zhang

• 02 December 2021 • 6 min read
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We discuss the Australian Government’s new strategic agreement with Medicines Australia

In brief

The Australian Government and Medicines Australia, which leads the research-based medicines industry of Australia, entered into a new five-year strategic agreement on 6 September 2021 (MA Strategic Agreement).

The MA Strategic Agreement builds on the Pharmaceutical Benefits Scheme (PBS) New Medicines Funding Guarantee introduced in 2020, and contains a comprehensive package of reforms aimed at ensuring patients in Australia have more affordable and timely access to medicines, including early access to new and break-through medicines and treatments.

The MA Strategic Agreement will commence on 1 July 2022[1] once the existing strategic agreement with Medicines Australia expires. Many of the measures included in the MA Strategic Agreement are dependent on the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021 passing through the Parliament.[2]

The Government has also entered into a new five-year strategic agreement with Generic and Biosimilars Medicines Association. Please see our article on that agreement.

Key outcomes

An improved statutory pricing system

The current statutory price reductions, which were originally introduced in 2018 and would otherwise sunset on 30 June 2022, will continue from 1 July 2022 in a modified form with price reductions to continue to occur on the fifth (5%), tenth (5%) and fifteenth (26.1% increasing to 30% in 2027) anniversaries of listing. Catch up statutory price reductions up to a maximum of 36.82% will also be introduced for medicines that have been listed on the PBS for 15 years or more and have not taken a price disclosure based price reduction. Further, flow on price reductions, including for combination drugs, will no longer require a new price agreement being made.

It is expected that the new statutory pricing system will generate net savings of approximately $1.9 billion over the life of the MA Strategic Agreement, which will be reinvested in the PBS.[3]

Health Technology Assessment policy and method review

A key outcome of the MA Strategic Agreement for the innovative medicines sector is a commitment from the Government to support and resource a Health Technology Assessment (HTA) policy and method review, considering matters including:

  • selection of comparators
  • methods for evaluating medicines for rare diseases and new and emerging technologies
  • methods for evaluating all new medicines and vaccines
  • use of real world evidence and other sources of evidence other than randomised controlled trials
  • managing clinical, economic, financial and other uncertainty, and
  • examining feasibility of international work sharing for reimbursement submissions.

The review is targeted to complete by June 2023, with implementation of findings from the review by July 2024, subject to those findings being endorsed by the Pharmaceutical Benefits Advisory Committee (PBAC) and approved by the Government.

The Minister for Health will also ask the PBAC for advice on whether the current base case discount rate set out in the PBAC’s guidelines aligns with international best practice, with any recommended changes intended to be incorporated into the guidelines by July 2022.

Patient participation in medicine assessment process

The Government and Medicines Australia have also agreed to work with patient groups to co-design a process to elevate the patient voice in applications to list new PBS medicines – targeted for completion by June 2023. A goal of this co-designed process is to reduce the number of resubmissions to the PBAC through an earlier understanding of the potential implications of a new technology for Australian consumers.

Identification of breakthrough treatments

To ensure Australians have early access to breakthrough treatments, Medicines Australia has also committed to establish an annual Horizon Scanning Forum with industry to identify major therapeutic advances in future years, which may represent a significant disruption in the treatment paradigm or require innovation in health care system planning.

Other outcomes

In addition to the above key outcomes, the following measures were secured by Medicines Australia for the innovator medicines sector:

  • a recognition by the Government that HTA process improvement (beyond the HTA methods and policy review) will continue during the term of the MA Strategic Agreement
  • the ability for Medicines Australia to nominate (for the Minister’s approval) a representative on the Medical Services Advisory Committee
  • Government commitment to co-design a trial of information sharing between responsible persons and evaluators during a PBAC submission
  • an independent expert lead review of the PBS activity-based cost model
  • an acknowledgment that it is for the PBAC to determine whether a particular comparator is an alternate therapy, regardless of whether it is the lowest cost comparator
  • a commitment not to amend the criteria for special pricing arrangements without first consulting with Medicines Australia
  • a commitment to develop (through the Access to Medicines Working Group) a policy for risk sharing arrangements
  • a commitment by the Government to consult with Medicines Australia prior to pursing new price-based savings during the term of the MA Strategic Agreement from the innovator medicines sector, and
  • a commitment to not establish new therapeutic groups or change Government policy on new therapeutic groups during the term of the MA Strategic Agreement without first consulting with Medicines Australia.

Key takeaways

The funding commitment and other policy settings included in the MA Strategic Agreement are in addition to at least $2.8 billion expected from the New Medicines Funding Guarantee announced in October 2020, which should encourage research and investment in new medical discoveries and innovative treatments in Australia.

Innovative pharmaceutical companies wishing to contribute to the HTA methods and policy review should consider how they can contribute to that review, whether through Medicines Australia (which will nominate a member of the independently chaired reference committee for the review) or in response to any call for submissions. This will be an important opportunity for the innovative medicines sector to point to other approaches to funding medicines in comparable jurisdictions which are worth considering in the Australian context.

[1] Certain clauses in the MA Strategic Agreement relating to legislative reforms needed prior to 1 July 2022 commence upon signing, with the remainder not commencing until 1 July 2022.
[2] This Bill is before the Parliament and has been read a second time.
[3] https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/landmark-new-medicines-agreements-to-bring-significant-benefits-for-australian-patients

By Xinyu Zhang

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