Government moves to legislate to increase generic and biosimilar medicine uptake and cut medicine prices

By Jane Owen, Rebecca Currey


Australia has long lagged behind the USA and UK in its use of generic pharmaceuticals – only around 58% of medicines dispensed in Australia are the generic versus up to 80% in the USA and UK.

Announcements by the Australia Government in May 2017 herald an increase in generic and biosimilar usage by changing the way that doctors prescribe medications, and also cut the cost of medicines in Australia by changing some of the pricing mechanics of the Pharmaceutical Benefits Scheme (PBS).

What is the PBS?

The PBS is an Australian Government initiative that provides Australian citizens with subsidised access to certain medicines.

Australians that are prescribed a PBS listed medication, can purchase that medication by paying the “co-payment” price (up to AUD $38.80), and the Australian Government pays the remainder of the cost of the medicine to the supplier.

In certain circumstances, a brand can be substituted with another brand that is bioequivalent (known as being ‘a flagged’).

Under the current regime, substitution will occur when a patient with a prescription agrees to being dispensed with the cheaper equivalent by a pharmacist, provided that the prescribing doctor has said that brand substitution cannot take place on the patient’s prescription.

If the patient takes the branded product where there is a cheaper alternative, the consumer will have to pay extra for that product.

Changes to the prescribing landscape

The planned changes to prescribing will see modifications made to the doctor's prescribing software so that a generic medicine will be prescribed by default (the doctor would have to actively select to prescribe the brand).

The change is intended to increase the take up of generic medicines in Australia, and thereby free up funding for the listing of more medicines on the PBS.

However, the proposal has not been received without criticism. It is seen by many as taking away prescribing control from doctors, even though a doctor can still prescribe the brand by actively nominating the brand in the software.

Changes to price mechanics

Relevant to originators, under the planned changes, the Australian Government also intends to slash the cost of prescription medicines that are patent protected.

Proposed changes to the pricing mechanics include:

  • medicines under patent incurring a 5% price cut when they have been on the PBS for five years, a further 10% after 10 years and a further 5% at 15 years; and
  • an increase in the mandatory price reduction when a medicine comes off patent from 16% to 25%.

What's next?

The legislation to implement these measures is to be tabled in parliament on 6 June 2017, and if passed through both houses of parliament, can be expected to be enacted to take effect during 2018.