Department of Health review reveals mixed results on minimum stockholding policy

Pharma News: The Department of Health has concluded a 12-month review of the Minimum Stockholding Requirements (MSR) policy, assessing its implementation and early outcomes. Conducted in collaboration with the pharmaceutical industry, the review provides a mixed outlook on the policy’s impact and highlights areas that require further scrutiny.

Compared to larger markets like the US and the EU, Australia’s pharmaceutical market is relatively small. During global shortages, pharmaceutical companies prioritise larger markets to maximise their sales and impact, delaying supplies to smaller markets like Australia.

The Department of Health reported positive early outcomes from the MSR policy. Pharmaceutical companies have responded by increasing stock levels, leading to a reduction in shortages of designated brands. However, the Department emphasised that a more comprehensive 24-month review is needed to fully assess the MSR’s effectiveness, its influence on medicine shortages, and its regulatory impact on the industry.

Nevertheless, the review surfaced several concerns from stakeholders. These include the need for clearer guidance on Ministerial determinations, breach notifications, the calculation of usual demand, and the department’s approach to non-compliance. Furthermore, there was criticism regarding the limited stakeholder engagement during the MSR’s development, which was largely confined to Medicines Australia (MA) and the Generic and Biosimilar Medicines Association (GBMA). Many stakeholders argued that consultation should have encompassed broader supply issues.

A major point of contention was the 12-month lead time provided for the MSR’s implementation, which many industry stakeholders deemed insufficient. Feedback strongly suggested that an 18-24 month period would have been more appropriate to allow companies adequate time to build up necessary stock levels.

In a joint submission to the MSR review, Medicines Australia and the Generic and Biosimilar Medicines Association stated, “This policy was designed to collaboratively create buffers to better protect Australians against global disruptions. At its core is an exchange of information between the regulators, industry, patient advocacy groups, and healthcare professionals to support the supply chain.

“If the increased stockholding policy worked as intended, it would significantly lessen the impact of avoidable medicine shortages on Australians. The additional buffer provided by the stockholding guarantee would help compensate for any shortfalls and support continuity of supply for patients through brand substitution.

“It is therefore crucial that any assessment of its effectiveness focus on the intent of the policy rather than the binary of compliance and non-compliance. In the event of a shortage, the supply of the same medicine by an alternative sponsor can fill this void. In this scenario, the alternative sponsor should not be considered in breach/non-compliant, or penalised if they fall below MSRs as a result of fulfilling that shortfall, as this is the policy working as intended.”

The review report revealed that only 45% of companies were fully compliant with stockholding requirements throughout the full nine-month period. Nonetheless, when stock quantities across all brands were aggregated, there was a 5% increase in the total volume of stock held in Australia since the policy’s inception.

Supply chain issues contributing to non-compliance with the MSR were identified, including manufacturing capacity constraints, supply disruptions such as batch failures and quality issues, input shortages, and logistical challenges.

While the number of medicine shortages decreased, with a 13% reduction in shortages of designated brands between 2022-23 and 2023-24, the Department noted a 57% increase in longer-term shortages (those lasting over 200 days). On the other hand, shortages lasting under four months dropped by 24%.

The review also highlighted that the costs associated with these changes may have been significant for many stakeholders, but the Department was unable to obtain “consistent data” to accurately estimate these costs. As a result, a full evaluation of the regulatory burden was not possible at this stage.

The Department plans to improve data collection and conduct a more detailed cost analysis in the next review.

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