Health technology, old factories and the price of PBS savings

Health technology assessment (HTA) reform must balance the distinct needs of innovative medicines, generics and biosimilars, and medtech, while supporting sustainable access and investment.

A panel at the LifeSciences Australia Market Access Summit brought together Liz de Somer, CEO of Medicines Australia, Sylvain Vigneault Country Manager for Viatris Australia, and Warren Bingham Founder and Executive Chairman of MedTech International. The discussion was chaired by Oona Reardon from Pulse Economics.

Vigneault argued that the pharmaceutical sector had repeatedly demonstrated its ability to deliver efficiencies over the past decade or more, but argued that savings generated within the Pharmaceutical Benefits Scheme (PBS) had not been returned to the funding pot to support access to innovative medicines.

“The optimisation needs to be re-injected within the PBS,” said Vigneault. “Do not save money within the PBS for other parts of the economy.”

For de Somer, sustainable access to medicines ultimately requires a stronger and more explicit government commitment to investment in healthcare. Medicines Australia’s most recent report has called for a doubling of investment in innovative medicines over the next decade, drawing on a similar approach adopted by the UK.

But she cautioned that increased spending alone would not necessarily resolve the structural challenges facing the HTA and reimbursement systems. Instead, she said investment needed to be coupled with a focus on equity and a system capable of recognising the value of innovation at the point of assessment while ensuring patients could access those therapies.

“We see with all government decision making that it is a strategic choice. We make a strategic choice to spend $350 billion on submarines…yet we do not make the same strategic decisions around health. Health is as much a part of national security and our economy…,” emphasised de Somer.

The implications of Australia’s pricing and reimbursement settings, however, extend beyond domestic access. Referring to a recent Lancet report examining the potential impact of U.S. Most Favoured Nation (MFN) pricing, de Somer warned that pressure on pharmaceutical revenues in major markets will influence companies’ decisions about where to launch products and locate investment.

She said companies operating globally face commercial incentives to deprioritise markets with comparatively low prices, potentially affecting Australia’s ability to attract investment, clinical activity and pharmaceutical workforce opportunities. At the same time, Australian affiliates compete internally for investment and work from their of global headoffices, she said. If companies were unable to secure product submissions, registrations and reimbursement in Australia, decisions ultimately affect local employment and operations.

The consequences could extend beyond medicine availability, with Australia potentially losing pharmaceutical capabilities and seeing more functions shifted offshore to regional hubs such as Singapore.

Vigneault said delays affecting innovative medicine launches also have consequences for the generics and biosimilars sectors, creating a broader impact across the pharmaceutical product lifecycle. He argued that if innovative products were delayed or not launched in Australia, the future market for generic alternatives will also be weakened. Similar concerns applied to biologics and biosimilars, where Australia is lagging on policy implementation.

For the medtech sector, Bingham said delays in reimbursement have an even more immediate consequence.

“If it’s not funded then it’s just not used,” he said. Without clear funding pathways, companies do not consider Australia as a viable launch market.

Bingham warned that early-stage medtech companies could increasingly look overseas not only to sell their devices but also to design and manufacture them. While HTA and cost-containment measures might be intended to control healthcare expenditure, he argued that an overly restrictive approach has unintended consequences for Australia’s domestic manufacturing base. The consequences extend to employment, skills, capabilities and investment in an industry sector that already faces significant challenges.

Vigneault similarly criticised the disconnect between Australia’s existing manufacturing capacity and government procurement and reimbursement settings.

He pointed to Viatris’ manufacturing operations in Queensland, which continue to produce around 3.5 billion units of medicines annually, arguing that Australia should first understand and make greater use of the manufacturing capabilities already operating within the country.

Viatris manufactures around 35% of its products in Australia, yet Australia imports around 90% of its generic medicines. He argued that the lack of mechanisms recognising domestic manufacturing capacity meant products made locally are ultimately exported and then imported back into Australia.

He cited metformin as an example, describing a situation in which the Australian reimbursement price was below the cost of producing the medicine domestically. This meant the company had to import the product for the Australian market, even as China was insisting on purchasing metformin manufactured in Australia.

“The manufacturing capability is there. We need to see it and nurture it,” emphasised Vigneault.

De Somer said the challenge was broader than HTA alone, arguing that the interaction between HTA, procurement and cost-containment policies had progressively eroded the recognition of value within the system.

Australian manufacturers receive little recognition under existing procurement arrangements, which often compare medicines against the lowest-cost alternatives. At the hospital level, medicines are procured through tender processes, while PBS arrangements similarly compare products on cost. Such approaches fail to account for the structural cost base of manufacturing in Australia, including labour, energy and land costs. While Australia has a highly capable workforce, de Somer said the costs associated with maintaining that capability are not adequately reflected in procurement frameworks.

With the panel turning to the question of what governments should change over the next 12 months to improve sustainability across the medtech and pharmaceutical sectors, Bingham called for a more substantive dialogue between government and industry.

He said government and major stakeholders should work together to identify pathways for reforming HTA across different technologies and procedures, balancing government objectives with approaches that were workable from an industry perspective. Without such a commitment, Bingham warned, the sector risked confronting the same problems in five or 10 years. Restrictions embedded in HTA processes prevent some technologies from reaching the nation, ultimately limiting the benefits available to patients.

“Reinvest the saving made through the PBS within the PBS. Also capitalise on what is currently locally manufactured and leverage that capability,” stated Vigneault, sharing his final thoughts.

De Somer called for a more coordinated approach to healthcare investment.

“There should be a whole-of-government approach to strategic investment in healthcare. If there was a recognition of the broader impact and return of investing in innovative therapies, that would be a big step forward for this government,” commented de Somer.

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