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So the Government wants to get serious about cutting PBS spending? Here’s how…

The Federal Government has drawn widespread criticism for its decision to defer PBS listing of medicines approved by the Pharmaceutical Benefits Advisory Committee

But there are other ways it could save money on the PBS. And the Government can’t say it hasn’t been told about these (although those urging spending cuts are rarely as vocal or influential as those pushing for more spending).

Croakey has previously reported on a study, published in the Medical Journal of Australia, suggesting that Australia is spending many millions of dollars more than comparable countries on the generic versions of cholesterol-lowering drugs called statins.

More recently, an MJA editorial, summarised by its authors below, has drawn attention to savings that could be made by enabling use of a cheaper but equally effective treatment for macular degeneration.

***

A call for Government action on “indefensible” spending

Ken Harvey, Richard Day, Willie Campbell, and Wendy Lipworth write:

Health Minister Nicola Roxon recently met with an alliance of consumer, industry and other stakeholders to justify the Government’s plan to delay indefinitely the listing of seven new medicines on the Pharmaceutical Benefits Scheme (PBS).

Roxon argued that, after considering the advice of the Pharmaceutical Benefits Advisory Committee (PBAC), it was the Government’s responsibility to decide whether or not to list a new drug, taking into account other priorities across the health portfolio and current fiscal circumstances.

Clearly the cost of the PBS must be sustainable. However, there is a difference between simply saving money and ensuring cost-effectiveness. The treatment of macular degeneration provides a compelling example.

Age-related Macular Degeneration (AMD) is responsible for almost half of all cases of blindness in Australia. In one type of AMD, “wet” AMD, vision loss results from the abnormal growth and leakage of blood vessels in the retina.

Ranibizumab (Lucentis), developed by Genentech and marketed by Novartis in Australia, is currently the only drug approved by the Therapeutic Goods Administration (TGA) and available on the PBS to treat this kind of AMD. It is administered over several years as a series of injections, each of which costs the PBS $1967.00 (with a total cost to taxpayers of $237 million in 2010).

But ranibizumab is not the only drug that works for wet AMD.

Bevacizumab (Avastin), also developed by Genentech and marketed by Roche in Australia, has a similar mechanism of action. It has been approved by TGA for the systemic treatment of certain cancers and, prior to the PBS listing of ranibizumab, had been used “off-label” successfully for the treatment of wet AMD.

Importantly, therapy with bevacizumab was relatively cheap, at a cost of approximately $50.00 per dose.

While the listing of ranibizumab might have made sense at the time, given that there had been no clinical trials of bevacizumab for wet AMD, a recent study published in the New England Journal of Medicine by the US National Eye Institute, has raised the question of whether use of ranibizumab can be justified economically.

The study, which was the first head-to-head comparison of bevacizumab and ranibizumab for the treatment of wet AMD, found no significant differences in efficacy and no conclusive evidence of differences in side-effects between the two drugs.

In light of this new information, it might seem obvious that the PBAC should either list (the much cheaper) Bevacizumab for use in wet AMD, or insist that the cost to taxpayers of ranibizumab be reduced.

But this is unlikely to happen without a change to the system of drug approval and reimbursement.

In the current system, there is little incentive for the sponsor of ranibizumab (Novartis) to reduce its price, or for the sponsors of bevacizumab (Roche) to seek a new indication (wet AMD) for this drug, first from the TGA and then from PBAC, because of the substantial costs involved and the doubtful rewards. (In this regard it is important to note that Roche “owns” Genetech—so it is unlikely to be motivated to create competition between the two products).

And the PBAC is unlikely to take on the listing of bevacizumab itself, because it usually depends upon payment from a pharmaceutical company to recover its costs, and because it would be legally liable for any adverse events.

Although the challenges of achieving an equitable solution to this problem are considerable, the economic significance of this issue means that it simply cannot be ignored.

We would argue that the Government needs to take the lead and, rather than simply cutting costs indiscriminately, focus its efforts on 1) negotiating with the companies concerned to either reduce the cost of ranibizumab or have bevacizumab approved and listed for use in AMD and 2) asking the TGA and PBAC to list bevacizumab for MD in the public interest, with the government accepting any liability that may accrue.

Whatever course of action is chosen, the cost differential now obvious in light of the NEJM study can no longer be defended.

• Dr Ken J Harvey is Adjunct Senior Lecturer, School of Public Health, La Trobe University
Professor Richard Day is Director,Clinical Pharmacology and Toxicology, St Vincent’s Hospital and University of New South Wales
Dr William Campbell is a Retinal Specialist in Melbourne
Dr Wendy Lipworth, is Postdoctoral Fellow, Australian Institute of Health Innovation, University of New South Wale

Declaration of interests:  Ken Harvey represented the Chronic Illness Alliance at the Consumers Health Forum PBS Summit. Richard Day is a member of the Ad Hoc Advisory Committee on Drugs in Development for Novartis Australia.

Comments 2

  1. Altakoi says:

    I generally agree with the point about encouraging competetive listings on the PBS, however there are a few devils in the detail.

    1. The TGA can’t ‘choose’ to list anything. The legislation is written to require a company to make a submission, and the legislation requires the company to pay a fee. Lest this be another game of hunt the bureaucrat, I think it is necessary to point out that those are absolute legal constraints.

    2. Whether or not a supportive study has been published in the literature someone actually has to critique all the available evidence and prepare it in a form the PBAC can assess. As I am sure the author knows, that kind of review is time consuming and labour intensive. That is why TGA and the PBAC require fees, because it pays for that process.

    This is, I think, essentially an argument about whether a regulatory and funding system based on a user pays fee structure supported by the industry can ever work in the public interest. I don’t think it can and the only reason it ever looked like it could was that in the ‘boom’ days of the 90s there were an awful lot ‘blockbuster’ new chemical entities coming to market which companies were willing to pay to have assessed. It doesn’t work for niche medicines, it never can.

    So the answer, I think, is to look at the funding model and either the government has to underwrite the operating costs of the evaluation system or, and this would be my preference, it has to move entirely to a non-application based impost on industry. That could take the form of a levy on sales and this would, I note, have the additional advantage that it could be applied across all sectors including the very large and lucrative OTC and complementary markets.

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