How can drugmakers adjust to tighter price controls?

Cost pressure will persist as the government curbs healthcare spending.

Access to innovative medicines in Australia remains constrained by tight pricing rules, even as more treatments are added to the government’s drug subsidy programme, according to BMI Country Risk and Industry Analysis.

In a January report, the research firm said cost controls under the Pharmaceutical Benefits Scheme continue to limit how quickly and widely patients can receive newer therapies.

Whilst the government has expanded the list of subsidised medicines, drugmakers still face strong pressure to accept lower prices to secure coverage.

BMI said the Pharmaceutical Benefits Advisory Committee assesses medicines by comparing them with cheaper existing treatments. This makes it harder for patented drugs to get approval at higher prices, even when they work better.

The Australian government has said it plans to refine its health technology assessment process to improve transparency and patient access. BMI said the changes suggest prices would stay under pressure, with no easing of reimbursement rules.

Pricing pressure is expected to persist as the government works to rein in healthcare spending whilst managing the federal budget. Patient co-payments under the benefit programme will be capped at $17 (A$25) per prescription from Jan. 1, the lowest in more than two decades.

Despite these constraints, Australia’s patented drug market is forecast to grow. BMI expects the market to expand by an average of 6.6% a year to $15.6b by 2030 from $11.3b in 2025.

The government has reiterated that the benefit scheme would not be altered through trade negotiations. Health and Ageing Minister Mark Butler, in September, said foreign pressure would not influence its structure or pricing rules.

Demand for medicines is rising as the population ages and chronic illnesses become more common, according to a January report by Mordor Intelligence. These trends should support long-term growth in drug use even as prices stay under pressure.

Industry groups in the US have criticised Australia’s system. The Pharmaceutical Research and Manufacturers of America wrote to the US Trade Representative in March, saying the programme undervalues US medicines and threatens billions of dollars in sales.

The group urged the Trump administration to consider trade measures, though no public updates followed talks between US and Australian leaders late last year.

Australia has continued to add therapies to the benefit programme. In October, the government listed Truqap for metastatic breast cancer and Oxlumo for a rare genetic condition affecting the kidneys.

Oncology and immunology medicines account for the biggest share of spending under the programme, BMI said, a trend expected to continue as long-term illnesses become more common.

Hospitals remain the main distribution channel for complex treatments, whilst online pharmacies are expanding rapidly after the nationwide rollout of electronic prescriptions.

Questions to ponder