The Tamesis
As governments limit health care spending, cost pressures will persist.
Access to Australia’s innovative medicines remains restricted by strict pricing rules, despite more treatments being added to the government’s drug subsidy scheme, according to BMI country risk and industry analysis.
The research firm said in a report in January that cost controls under the Pharmaceutical Benefits Scheme continued to limit the speed and scope of new treatments available to patients.
Even as the government expands the list of subsidized drugs, drugmakers remain under intense pressure to accept lower prices to ensure coverage.
The Pharmaceutical Benefits Advisory Committee evaluates drugs by comparing them to cheaper existing treatments, BMI said. This makes it harder for patented drugs to be approved at higher prices, even if they work better.
The Australian government says it plans to improve its health technology assessment process to improve transparency and patient access. BMI said the changes indicated continued pressure on prices and no relaxation in reimbursement rules.
Pricing pressure is expected to persist as the government works to rein in health care spending while managing the federal budget. From January 1, patient co-payments under the benefit scheme will be capped at $17 (AU$25) per prescription, the lowest level in more than two decades.
Despite these constraints, Australia’s patent medicine market is expected to grow. BMI expects the market to expand at an average annual rate of 6.6%, from $1.13 billion in 2025 to $1.56 billion in 2030.
The government reiterated that welfare programs would not change through trade talks. Health and Aging Minister Mark Butler said in September that foreign pressure would not affect its structure or pricing rules.
Demand for pharmaceuticals is increasing as the population ages and chronic diseases become more common, according to a January report from Mordor Intelligence. These trends should support long-term growth in drug use, even if prices remain under pressure.
Industry groups in the United States have criticized Australia’s system. The Pharmaceutical Research and Manufacturers of America wrote to the U.S. Trade Representative in March saying the plan undervalued U.S. drugs and threatened billions of dollars in sales.
The group has urged the Trump administration to consider trade measures, but there has been no public update following talks between U.S. and Australian leaders late last year.
Australia continues to add treatments to its welfare programs. In October, the government listed Truqap as a treatment for metastatic breast cancer and Oxlumo as a treatment for a rare genetic disorder that affects the kidneys.
Oncology and immunology drugs account for the largest share of the program’s spending, a trend expected to continue as long-term conditions become more common, BMI said.
Hospitals remain the main distribution channel for complex treatments, while online pharmacies are expanding rapidly following the nationwide rollout of electronic prescribing.
Questions to think about
- Under what circumstances would price controls make it unfeasible for a manufacturer to bring a drug to market?
- What can drugmakers do to combat price pressure?
