Supply Chain Arrangements

Today’s Budget Estimates 2018-19 Public Hearing of the Senate Community Affairs Legislation Committee on Outcome 4.3 Pharmaceutical Benefits (11.15 am – 1.15 pm) provided a few more details about the new pricing arrangements that are to be piloted from 1 July 2019.

The Department of Health is currently in discussion with a number of companies who have agreed to participate in the trial. Negotiation of changes to Special Pricing Agreement clauses have been underway since the start of 2018. There are currently 162 active Deeds of Agreement.

One of the four supply chain options being considered was described as having two flows of payments for PBS medicines from the Government. One, based on the effective price, being paid directly to the manufacturer. The other, paid directly to the pharmacy, based on eligible fees (dispensing & Administration Handling Infrastructure) including the wholesaler mark-up (per 6CPA, either 7.52% of ex-manufacturer price or a flat fee of approximately $70 depending on the medicine price to pharmacy). The pharmacy would then reimburse the wholesaler.

From 1 July 2018, three products will have changes to their published prices such that the cash flow issue for the Department of Finance and pharmacies will be ameliorated. An interesting consequence of rebates has been the impact on commercial rents where these are linked to business turnover. It is widely speculated that the 3 products treat Hepatitis C and the price reductions are possible due to decreases in company mandated global floor prices.

On the $1 billion provision for new PBS listings, an important question was taken on notice by the Department: will the medicines with positive PBAC recommendations being listed using the contingency funds require Cabinet approval?

Australian PBS Supply Chain

The supply chain for Australian Pharmaceutical Benefits Scheme (PBS) medicines has come sharply into focus during the changes to rebate arrangements recently pursued by the Federal Government, and whose introduction has subsequently been delayed until July 2019.

Supply chain refers to the specialised pharmaceutical wholesalers and pharmacies (community and hospital) that provide distribution, dispensing and patient care services associated with each listed medicine beyond the manufacturer’s door. This is not necessarily a straight forward endeavour in a sparely populated large country like Australia, and considering the cold-chain and other storage and handling requirements for some medicines.

While the PBS debate has been about time to and funding of new listings, as well as overall investment in the scheme, protagonists of the supply chain have been efficiently taking steps to secure, and even grow their proportion of the PBS ‘pie’. Current estimates put supply chain costs, after removal of rebates, as representing up to as much as 40% of Government expenditure on the PBS.

To put this in context, the proportion is comparable to the 41% reported for the sector in the USA, although the supply chain there includes the additional players in Pharmacy Benefit Managers and Insurers to be compensated.

The details of Government payments for provision of universal access to PBS medicines for Australians, no matter where they live within 24-hours, are contained in a series of, usually 5-year, agreements between supplier associations and the Commonwealth Government.

The content of some these agreements will be reviewed in the next few articles.

Cancer Screening Programs

Monitoring reports for two of Australia’s government-funded, population-based national cancer screening programs were recently released by the Australian Institute of Health and Welfare (AIHW).

The report on the National Cervical Screening Program (NCSP) for women aged 20-69, measured incidence and mortality at 9–10 new cases, and 2 deaths, per 100,000 women, respectively. These rates have remained steady since halving between the introduction of the program in 1991 and 2002. The 2015-2016 report card however, shows two measures trending in the wrong direction over the past 3-5 years, with participation rates falling from 58% to 56%, and pap tests with no endocervical cells rising from 21 to 24%.

The impact of the National Human Papillomavirus (HPV) Vaccination Program is in evidence with a decline in the rate of detection of high-grade abnormalities for women under 30 as girls who were vaccinated against HPV move into the screening cohort.

Following a review of the NCSP by the Medical Services Advisory Committee (MSAC Application 1276) in 2014 an alternate Cervical Screening Test and pathway were recommended. The new NCSP commenced on 1 December 2017 with a five-yearly HPV test replacing the two-yearly Pap test. More than 99% of cervical cancers are caused by HPV, which includes squamous cell and adenocarcinoma. Neither the Pap nor the HPV test effectively detect the remaining <1% of neuroendocrine or small cell cervical cancers.
HPV vaccinated women are still at risk of cervical cancer from the 30% of oncogenic HPV types other than 16/18 (covered by the vaccine) known to cause cancer and hence, also need to participate in regular cervical screening.

Between January 2015 and December 2016, the participation rate in the National Bowel Cancer Screening Program was 41% of the eligible target population aged 50-74 years, which was slightly higher than the 39% recorded in the previous 2-year rolling period (2015-16). Of those who had participated in an earlier round, those returning for subsequent screening was 77%.

In 2016, approximately 8% of those screened returned a positive screening test. Of those who received a positive test, 68% had reported a follow-up diagnostic assessment.
Since the program commenced in 2006, data available for participants who have undergone a diagnostic assessment, reveal 1 in 30 have been diagnosed with a confirmed or suspected cancer, and 1 in 7 have had an adenoma detected.

The roll-out of biennial screening for those in the target group is expected to be completed by 2020.

Screening programs are funded by Federal and State Governments. In 2015-16, this amounted to $84 million for the cervical program and $56m for bowel. The reports may be downloaded from the AIHW website.

Remember the 10% MBS-PBS dataset?


The final report of the Productivity Commission inquiry into Data Availability and Use has been released. One of the Government’s responses is to create an Office of the National Data Commissioner, whose role is designed to implement an efficient data sharing framework within government.

Back on 1 August 2016, the Department of Health published information on the Australian Government’s central catalogue of public data,, for a 10% sample of individuals who had made a claim for payment of Medicare Benefits since 1984, or Pharmaceutical Benefits since 2003. This was for research purposes in the public interest, and followed recommendations made by the May 2016 Senate Select Committee on Health’s Sixth Interim Report (Big Health Data: Australia’s Big Potential). The required precautions were considered to have been taken with regard to de-identification and privacy at the time.

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