TMI?

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While the internet is fantastic for providing access to information on any topic at any time of the day, sometimes, particularly when it comes to health issues, knowing a trustworthy source is invaluable. For Australians, healthdirect aims to be this resource.

Established by the Council of Australian Governments (COAG) in 2006 and jointly funded by the Commonwealth and State/Territory governments, healthdirect Australia is a national, not-for-profit organisation that provides approved health information to Australian consumers.

The infographic below from the 2016-2017 Annual Report would attest that the site is achieving its aim.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In addition to site visits for medicines information, the second most common reason for calls to the healthdirect helpline (1800 022 222) was to ask a medication question.

The medicines information provided is sourced from the Therapeutic Goods Administration (TGA), Pharmaceutical Benefits Scheme (PBS) and Guildlink and updated monthly, although a pilot of real-time distribution is underway for some components.

For those around the industry in 1991, the Baume report recommended, among other major changes to the regulatory process, that pharmaceutical companies provide a Consumer Medicines Information (CMI) leaflet in the primary pack, or by other means, for prescription products. To avoid the issue of frequent revisions, Guildlink evolved from a collaboration with members of Medicines Australia.  Electronic distribution of CMIs commenced in 1995, via the website medicines.org.au and now via multiple other channels.

The next logical step will be personalised distribution via My Health Record.

Same bed, fewer different dreams?

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Tackling a burgeoning inbox always reveals a few gems, such as the article by Ting Wang et al. published last month in ISPOR’s journal Value in Health (2018;21:707-714).

Wang and colleagues developed separate surveys for international innovative pharmaceutical companies (n=19 companies with 29 respondents) and Regulatory (n=7; 13 respondents) & Health Technology Assessment agencies (n=8; 12 respondents) from Australia, Canada, and Europe. Questions referred to the past 5 years and alignment of regulatory and HTA evidence requirements and synergy of processes.

The findings are not surprising to those working in the HTA space for more than 5 years. In particular, with regard to the increasing need for HTA requirements to be included earlier in drug development with unanimous responses from the three key stakeholders (Figure 1, bottom statement). The high drop-out rate of molecules as they move along the development continuum and associated sunk costs mean that early studies focus on efficacy and safety variables. Collection of variables for economic evaluations (e.g. Quality of Life at specific time points, resource use, follow-up beyond primary efficacy parameter, subsequent treatments, etc.) to demonstrate cost-effectiveness is usually left to Phase III and too late for fast-track/priority reviews based on Phase II data. Once a medicine is registered, the opportunity to collect comparative data disappears, and often with it the ability to demonstrate the real value of the new medicine over existing treatments to a healthcare system.

Figure 1: Company respondents’ views on the regulatory and HTA requirements

 

 

 

 

 

 

 

 

 

 

 

Abbreviations: HEOR Health Economics, Outcomes and Research

Figure 1 also shows that the potential negative impacts on innovation by HTA are recognised across the stakeholder groups as incremental gains are considered not to be rewarded by current HTA processes. Further education around HTA may drive policy changes that recognise and stimulate innovation in the sector.

Surprisingly, HTA agencies appear less concerned than their regulatory counterparts of the pressures to speed time to access to new medicines (as shown in Figure 2). The value of sharing of information to reduce duplication is also mismatched. This may be a consequence of the lack of clarity in differences in data requirements for the evaluations, which is alluded to by the higher response rate from HTA agencies on the need to align scientific requirements for the two processes. HTA evaluations are based on comparative efficacy and safety as applies to local clinical practice, whereas regulatory agencies focus on overall risk : benefit. The comparator is usually the currently most prescribed product used for treatment in a market, and costs are based on local circumstances. As such, there is considerable variability between HTA evaluations between countries, whereas the Common Technical Document (CTD) is generally acceptable with local modifications to all regulatory jurisdictions.

Figure 2: Main drivers for regulatory and HTA agency collaboration

 

 

 

 

 

 

 

 

 

 

 

 

The article also includes further findings, more detail in supplement materials and a comprehensive set of recommendations on how to improve synergy between agencies. Pop this publication on your reading list as you travel to your next meeting with a regulator or reimbursement agency.

Source of main photo: ‘Same Bed, Different Dreams’ South Korean TV show aired in Australia by SBS

CSO perspectives & direct distribution

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Feedback on my recent post about the Community Service Obligation (CSO) has provided some alternate viewpoints:

(1) Like Australia’s population, 80% of PBS items are distributed in urban areas. Hence, irrespective of the per item delivery cost, the business of distribution in major cities and larger regional centres will be profitable due to economies of scale, and the ability to offset transport costs with multiple other deliveries, particularly if not solely distributing pharmaceuticals. It is only the 20% of rural and remote deliveries that require Government subsidisation to ensure timely equitable access to PBS medicines for patients.

(2) Apparently, the counter-intuitive is the case. In urban and regional centres, distributors own and operate their own delivery infrastructure and twice a day (at least) deliveries and special orders are guaranteed as part of service agreements. However, rural and remote distribution is generally via existing transport networks. Delivery schedules are less frequent and only cost when an order is made. Consequently, the average distribution cost per item may actually be less for deliveries to rural and remote pharmacies.

(3) An economist perspective, as provided by Dan Swain (Swain Health Economics), regarding the need for a CSO funding pool. On one hand, the annual CSO cost of approximately $200 million to ensure timely delivery of any PBS item anywhere in Australia, may be considered a good investment in the context of the $10 billion annual Government expenditure on the PBS.

On the other hand, the need for a subsidy may be a signal that the pharmaceuticals distribution market is in need of restructure. That is, the CSO may be propping up an unsustainable business model instead of permitting market forces to operate as they would in a less regulated environment.

This standpoint is supported by the decision of 13 companies to date, led by Pfizer in early 2011, to adopt a direct distribution model to community pharmacies across Australia for some or all of their products. They have chosen to by-pass the full-line wholesalers completely or opted to distribute directly in addition to the existing channel.

In the case of Pfizer, this covers all PBS product lines, includes a dedicated field force and a single logistics provider (the DHL direct-to-pharmacy distribution service is known as ‘Pfizer Direct’). In this case, the aim of direct distribution was and is to protect sales of Pfizer brands from generic competition, in particular as a number of its highest volume products lose patent protection.

At the recent PharmaDispatch Conference, the reasons given by Liz Chatwin, Country President AstraZeneca, for last year’s decision to go direct for nine high cost products included, in addition to the financial savings, improved data collection leading to a better understanding of patients and how products are being used, without compromising service standards.

An overarching assumption is that the cost to distribute directly via DHL is less than the 6CPA mandated distribution costs (7.52% of ex-man cost <$930, or $70). DHL distribution occurs independent of CSO funding, however the impact on CSO distributors is immediate as they are compensated monthly in arrears based on items supplied.

Opponents to the the direct distribution model note the increased administrative burden placed on pharmacies, and an increase in medicine shortages as more companies have gone direct. The Pharmacy Guild and National Pharmaceutical Services Association are concerned that exclusive monopoly supply arrangements put the first objective of the National Medicines Policy at risk, namely ‘Timely access to the medicines that Australians need, at a cost individuals and the community can afford’.

Submissions to the current Government review of the CSO will undoubtedly present detailed arguments and evidence supporting  these divergent opinions.

The CSO because <5% of PBS medicines are profitable to distribute

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During evaluation of the third Community Pharmacy Agreement (2000-2005), gaps in the pharmacy network that didn’t meet the ‘reasonable access to PBS medicines regardless of place of residence’ (National Medicines Policy) test were recognised. At the same time, the Federal Government was also concerned about long term PBS growth and identified pharmacy distribution as a potential area to reduce expenditure.

These two issues were ultimately solved in the fourth CPA (2005-2010) with a reduction of the wholesale price mark-up from 11.1% to 7.52%, and the establishment of a Community Service Obligation (CSO) Funding Pool (AU$150 million per year, indexed annually, paid monthly in arrears) for direct payments to those pharmaceutical wholesalers who supply the full PBS range of medicines and distribute in a timely manner anywhere in Australia.

The CSO was continued in the fifth and sixth CPAs providing approximately $200 million per year in direct financial support to the five eligible pharmaceutical wholesalers for any additional costs incurred in providing the full PBS range. However, as Mark Hooper, Chair of the peak body for CSO distributors, the National Pharmaceutical Services Association (NPSA) showed in his 2016 APP presentation, the combined impact of patent losses, price disclosure and changes in fee structure, to flat fees rather than percent of value, are also at play. The result being that over the course of the 6CPA, wholesalers revenue will decrease by at least $400 million.

Modelling commissioned by the NPSA shows that sustainable funding, such as provided by the CSO, is even more critical to retaining service standards as the proportion of low costs drugs by PBS prescription volume increases.  By 2020 approximately 84% of PBS medicines will cost less than $15 (AEMP) while the range of PBS medicines will increase by up to 50% due to generics. In other words, over time wholesalers will continue to be delivering more and more units for less cost.

The CSO came under scrutiny during the independent King Review (a 6CPA commitment) with the final report recommending a comprehensive analysis of the entire pharmaceutical supply chain. The Department of Health is currently undertaking a targeted consultation of the CSO.

Interestingly, the King Review also recommends that ‘the Australian Government should ensure that the regulation and remuneration of wholesaling of PBS-listed medicines should not form part of future Community Pharmacy Agreements.’ Time for wholesalers to step out of the Pharmacy Guild shadow and negotiate for themselves.

Community Pharmacy Agreements

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Community Pharmacy Agreements (CPAs) take the form of 5-year ‘contracts’ between the Commonwealth Government and the Pharmacy Guild of Australia. These determine the remuneration paid to pharmacists for dispensing pharmaceutical benefits and to perform other functions required under that agreement. An interesting nuance is that the agreements also include wholesaler compensation. Why wouldn’t the National Pharmaceutical Services Association (NPSA), who does represent the wholesalers, as well as other relevant stakeholder groups, also be in the negotiation room and part of the agreement?

An independent statutory body, the Pharmaceutical Benefits Remuneration Tribunal (PBRT) was established in 1981 under section 98A of the National Health Act 1953 (the Act) to determine compensation levels. Immediately prior to 1990, remuneration consisted of a dispensing fee and a 25% mark-up on PBS listed items.

In the late 1980s, there was a dispute between the Commonwealth Government and the Pharmacy Guild around the issue of whether the price paid for dispensing PBS drugs should be based on the average cost of dispensing across all pharmacies, or the cost of dispensing in an ‘efficient pharmacy’. No agreement on calculating the price on an efficient pharmacy basis could be reached.

This period of unrest ended after the 1990 election, and since 1990, section 98BAA requires the Commonwealth to enter into successive five-year agreements with the Guild, ‘or another pharmacists’ organisation that represents a majority of approved pharmacists’ approved to supply PBS subsidised medicines in Australia.

The first Community Pharmacy Agreement was negotiated and covered the period 1991-95. A new approach to dispensing fees was introduced with a combination mark-up and flat dollar amount based on the value of the PBS item. Financial incentives to close and amalgamate pharmacies were included to stimulate rationalisation of the distribution of pharmacy services. The intent being that lower pharmacy numbers would encourage economies of scale greater and profitability. From 1991-95, this program resulted in 630 pharmacy closures and 64 amalgamations, at a cost to Government of $52 million.

Other clauses restricted where a pharmacy could relocate its existing PBS approval, and imposing strict restrictions on approving a new pharmacy. Additional financial support was provided to community pharmacies in rural and remote areas, and by the end of the first Agreement, just over 400 pharmacies were receiving an Essential Pharmacy Allowance.

The second Community Pharmacy Agreement 1995-2000 consolidated the gains made by the 1CPA initiatives. It also included a fee for service to accredited pharmacists conducting limited medication reviews for nursing home residents. This expansion into payment for services will be further seen in future CPAs (in the next article).

Supply Chain Arrangements

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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

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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

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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.

Is this service Bulk Billed?

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The status of out-of-pocket (OOP) costs paid by Australian patients for healthcare continues to be an enigma. On one hand, regular media releases, reports & inquiries suggest it is an issue; while on the other, Australian Institute of Health & Welfare figures support a conclusion of limited growth in this component of healthcare spend, although somewhat blurred between public and private settings.

Clinician fees are one place where precise data, incorporating both public and privately provided services, are available, courtesy of the Department of Human Services Medicare payment system. Medicare bulk billing is at the discretion of the health professional. Patients assign their right to the Medicare benefit amount to the health professional, meaning the patient pays nothing and the health professional accepts the Medicare scheduled fee as full payment for provision of the service.

The Australia-wide Medicare schedule fee observance statistics for 2016-17 (see graph) show that the majority (over 80%) of doctor visits are bulk billed. However, removing the impact of the relatively higher volume of GP visits, reveals that approximately 65% of specialist visits did require an out-of-pocket payment by the patient during that period.

In defence of clinicians, the MBS rebate indexation freeze, first introduced for nine months by Labor in 2013, and a further 4-years from July 2014 by the Coalition, is considered a key factor contributing to the increasing gap (OOPs) between patient’s Medicare rebates and medical fees. The decision to extend the freeze for a further two years in 2016 was partially wound back in the 2017-18 Budget, with the provision of $1.0 billion to reintroduce indexation for certain items on the MBS.

‘Rebate gate’ (Part 2 of 2) – Potential Consequences

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Will the real price be revealed?

As described in Part 1, the Australian Federal Government wants to eliminate an existing process whereby certain PBS medicines are reimbursed through the supply chain at ‘published (list) prices’, even though a lower price, known as the ‘effective price’ has been agreed. At a latter date, sponsor companies repay (rebate) the difference between these two prices to the Government. For medicines where this applies, the real price paid is kept confidential for international reference pricing purposes, with the trade-off being subsidised access for Australian patients.

The schematic shows a simplified version of the current flow of money and product through the supply chain from manufacturer to patient based on the published price in the PBS schedule. Note that as mark-ups and fees are calculated on the published price, relevant adjustments are made and also repaid by sponsor companies as part of rebate amounts.

Who pays and when?

The Government is proposing that instead of one Medicare payment being made to a pharmacy on submission of an eligible claim for a dispensed PBS item, for those products to which a rebate applies, the Government will directly pay each step in the supply chain the relevant amount based on the effective price.

Two potential consequences become clear:

1.      Loss of confidentiality of the ‘effective price’. This should be of concern, as it means Australia may be moved to the end of the list of countries provided with the registration dossier for a new medicine. This will add years to the wait for innovative medicines before the TGA or the PBAC even get to consider the value offered to the Australia public.

It is the perfect storm as local affiliates will be forced to sacrifice access for Australian patients for markets that reference to PBS prices. This is a very real phenomenon, and decisions not to launch, or withdraw products have already been made locally by companies due to international reference pricing concerns.

You don’t need to look far to appreciate what the future may look like.

2.      Business mayhem. What happens to well-established terms of trade and legalities around ownership of goods and responsibility for product condition (cold chain continuance, breakages, delivery failures, etc.) with a move to agent status on the basis of ‘phantom’ invoices? The payment of GST as required at the various steps in the process will also need new systems and processes to ensure that obligations to the Australian Tax Office continue to be met (watch this week’s abc Four Corners program).

A way forward?

Without compromise, it is unlikely that change of such magnitude will be in place by the arbitrary time frame of 1 July 2018. Retaining the current arrangements with tweaks seems most sensible. What about tighter (such as, monthly) time frames around repayments to the Government? This would require a quicker turnaround of invoices than has currently been the case. Another option is for companies to pay rebates (monthly or quarterly) in advance based on Deed agreed utilisation estimates. Perhaps you have a better idea?