In brief

After more than 12 months of negotiation, the Australian Government and the representative body of generic and biosimilar medicine suppliers in Australia, the Generic and Biosimilars Medicines Association (GBMA), entered into a new five-year strategic agreement on 6 September 2021 (GBMA Strategic Agreement).

The GBMA Strategic Agreement focuses on a package of policy settings and incentives, including floor prices and stockholding requirements, which should bolster the supply of medicines available through the Pharmaceutical Benefit Scheme (PBS).

The GBMA Strategic Agreement commences upon signing. The implementation of certain measures included in the agreement will be subject to the passage of the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021 through Parliament.

The Government also entered into a new five-year strategic agreement with Medicines Australia on the same day. Please see our article on that agreement.

Key outcomes

Price disclosure and price competition reform

The existing 30% price disclosure threshold (which would have otherwise ended on 30 June 2022) will now continue on a modified basis so that it ceases after the latter of seven price disclosure cycles after the drug is on the F2 formulary or five price disclosure cycles after the first price disclosure reduction.

Where there has been no price reduction for the first three price disclosure cycles, the originator brand will be removed from Weighted Average Disclosure Price (WADP) from the fourth cycle (that is, after 18 months instead of the current 30 months).

For multi-branded drugs, information for supplies to public hospitals will be taken into account to calculate the WADP after the seventh price disclosure cycle.

To address discounting practices for single-branded drugs that are interchangeable with multi-branded drugs, the Government will also seek to negotiate an outcome with the responsible person for such single-branded drugs, so that these single-branded drugs are not sold at discounted prices below their Approved Ex-Manufacturer Price (AEMP), or with incentives, in competition with the interchangeable multi-branded drugs.

Price increase for low cost listed brands and floor price

On 1 October 2022 for listed brands with an AEMP:

• below $2, the AEMP will be increased to $2.50, and
• between $2 and $3.50, the AEMP will be increased by $0.50 up to a maximum AEMP of $3.50.

The increases in the AEMP of low cost listed brands will be achieved through reinvestment of price disclosure savings, with corresponding stockholding requirements being imposed (see below for further details). The increases in the AEMP of listed brands are not to be passed on as discounts or incentives.

Further, for listed brands with an AEMP on 1 August 2022 of $4 or less, the floor price will be the AEMP on 1 August 2022 or after any subsequent price increase.

Stockholding requirement

To bolster medicine supply and better protect patients against supply chain volatility, a new medicine supply security guarantee will be implemented, whereby companies will be required to hold additional onshore stock of critical medicines of between four to six months. These stockholdings will be required by 1 July 2023, nine months after the price increases described above. There are reporting obligations and consequences being incorporated into the National Health Act 1953 to ensure the Commonwealth’s investment in these increased prices achieves the desired continuity of supply.

Other outcomes

The GBMA Strategic Agreement also contains the following measures:

• a commitment to consult regularly during the term of the GBMA Strategic Agreement for further uptake drives that may be implemented by the Government to increase the dispensing of biosimilar brands as more are included in the PBS
• GBMA to work with the Government to advance potential regulatory and reimbursement policy options to enhance the repurposing of medicines to expand patient access, and
• the establishment of a joint oversight committee to monitor the operation of the GBMA Strategic Agreement.

Key takeaways

The generic and biosimilar medicines industry has worked closely with the Government to secure an outcome that benefits patients, the industry and seeks PBS sustainability. Key to these reforms is the continuation of the 30% price disclosure threshold, which protects generic and biosimilar medicines from price disclosure price reductions due to aggressive discounting in any price disclosure cycle.

Responsible persons for generic and biosimilar medicines will need to ensure they are familiar with the new price disclosure arrangements and stockholding requirements, so they are ready for the reforms.