New wholesaler mark-up on PBS medicines comes into force

The wholesale mark-up structure under the First Pharmaceutical Wholesaler Agreement (1PWA) will come into effect today, introducing a revised calculation method based on ex-manufacturer price for the pack quantity.

The reform marks a structural shift in how pharmaceutical wholesaler funding and obligations are set. For decades, these arrangements were embedded within successive Community Pharmacy Agreements (CPAs), bundled alongside broader community pharmacy pricing policy.

That framework changed in January 2025 with the commencement of the 1PWA between the Australian Government and the National Pharmaceutical Services Association (NPSA), whose members include API (Australian Pharmaceutical Industries), NPD (National Pharmacies Distribution), Sigma Healthcare and Symbion. The $4.2 billion five-year agreement established a standalone funding model for medicine wholesalers, separating it from the CPAs.

Under the 1PWA, overall funding increased by 34%, alongside an expansion of the Community Service Obligation (CSO) funding pool. The new wholesale mark-up structure will, for the first time, apply across both Section 85 and Section 100 PBS-listed medicines and vaccines.

The structural changes expand the upper limit of the percentage-based pricing tier. This adjustment is designed to improve wholesaler margins on higher-cost, novel biological and specialised medicines, while reinforcing wholesalers’ obligations to maintain rapid supply standards. This incentivises wholesalers to stock and deliver these medicines within 24 to 72 hours, ensuring continuity of access for patients, including those in regional and remote communities where supply chains are more complex.

NPSA CEO Elizabeth Cuming recently described the logistics of safely moving more than 2 million PBS medicines and healthcare products every day as a challenge of significant scale. She highlighted that the journey of a PBS medicine to outback Kununurra, for example, is roughly 3,000 km from Perth, a distance comparable to travelling from Paris to Moscow. This occurs under their care, temperature controlled if necessary, within a tight timeframe. However, she noted that the challenges are no longer solely geographical. There is a growing list of medicines in shortage, with these supply pressures being compounded by geopolitical instability.

For the pharmaceutical industry, the changes carry implications for pricing strategy and funding assumptions. Innovative medicine companies will need to factor the revised wholesale fee structures into financial modelling for PBAC submissions, reassess existing wholesaler supply arrangements, and account for financial caps embedded in current risk-sharing and special pricing agreements.

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