Discount rate focus of Medicines Australia’s Pre-Budget Submission

Pharma News: In its 2023-24 Pre-Budget Submission, Medicines Australia has urged the Government to take action in lowering the discount rate for vaccines and medicines.

Last year, the Pharmaceutical Benefits Advisory Committee (PBAC) acknowledged Australia’s discount rate* could be reduced for medicines and vaccines. The medicines industry is calling on the Government to implement the reduction now.

In its review, the PBAC noted that adoption of a 1.5% base-case discount rate for all medicines “would make it an outlier, as 1.5% is the lowest discount rate used in all countries surveyed by both Medicines Australia and CHERE and is only used as a standard discount rate by one other country (Canada).”

The independent report from Centre for Health Economics Research and Evaluation (CHERE) concluded that “there may nonetheless be a case for reducing the PBAC’s base-case discount rate in line with economic theory and international practice. However, any change to the PBAC’s base-case discount rate should be informed by an empirical analysis of the estimated cost to Government, price impacts, cost-effectiveness thresholds, approval and displacement of therapies, and a range of knock-on policy impacts likely to result across the health sector.”

The PBAC’s advice was that the discount rate should be no lower than 3.5% – 4% per year “should the Government make a broader policy decision to change the standard base-case discount rate for economic evaluations of health interventions after considering cross-portfolio implications and the HTA Review“.

Medicines Australia CEO, Elizabeth de Somer, said Australia’s discount rate has not been adjusted since it was set in the 1990s and needs to be reduced to meet today’s international standards.

Under Medicines Australia’s Strategic Agreement with the Government, a reduction to the discount rate should have been implemented by July 2022. Medicines Australia is calling on the Government to reduce the discount rate from 5% to 1.5% for vaccines and 3% for other medicines from 1 July 2023.

“This would allow both the Government and the medicines industry to focus on implementing bold HTA reforms via the independent HTA Policy and Methods Review,” the submission said.

“Medicines, vaccines and treatments help Australians live longer, healthier lives. They keep people out of hospitals, in the workforce and contributing to our economy. For example, a recent peer-reviewed study shows the COVID-19 vaccines reduced the pandemic’s economic toll in Australia by an estimated $214 billion,” Ms de Somer said.

“Left unchanged, there is a risk that Australia’s high discount rate will contribute to a lag in patient access to cutting edge therapies and impact the long-term health of future generations.”

“The Government and the medicines industry share the goal to reduce the time it takes for a patient to access the medicines they need on the PBS. A reduced discount rate is an opportunity to move closer to achieving this goal,” Ms de Somer said.

*A discount rate is a technical correction applied to medicines and vaccines that values immediate health effects higher than long-term health benefits, such as childhood vaccines. This means preventative and curative vaccines and treatments are disadvantaged and delayed by a rate that is higher in Australia than other comparable countries.

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