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News & Trends - Pharmaceuticals

PBAC releases advice on discount rate but industry expectations don’t align

Health Industry Hub | November 21, 2022 |

Pharma News: In Australia, the 5% base-case discount rate has contributed to delays in accessing vital therapies, including vaccines for human papilloma virus (HPV), meningococcal disease, and medicines to treat hepatitis C and spinal muscular atrophy. The Pharmaceutical Benefits Advisory Committee (PBAC) has just released its advice recommending a lower than desired decrease in the discount rate and a long delay in the implementation process.

In January 2022, Medicines Australia lodged a submission to the Pharmaceutical Benefits Advisory Committee (PBAC) arguing that the base-case discount rate used in the PBAC Guidelines should be reduced from the current 5% to 1.5%, to match what it considered was ‘best practice’ in HTA countries such as Canada and England. Twenty-one (21) stakeholder submissions supported Medicines Australia’s position.

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).”

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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 is 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 welcomed PBAC’s recommendation as a step in the right direction, but questioned why the implementation should be delayed for two years.

CEO of Medicines Australia, Elizabeth de Somer, said medicines and vaccines that have long-term health benefits, such as childhood vaccines, are disadvantaged and delayed by a technical discount rate that is higher in Australia than other comparable countries.

“We see this announcement as acknowledgment by the PBAC that the discount rate should be changed,” Ms de Somer said.

“This inevitable change should not be caught up in the HTA Review as it cannot wait two years. The review of the discount rate was a ‘fast start’ commitment contained in our Strategic Agreement with the Commonwealth. We will continue to work with the Minister and his office to get this done as soon as possible. Our country is unnecessarily lagging behind which ultimately causes delays to patients accessing innovative medicines and vaccines.

“Australia has not changed its discount rate for more than 30 years and in that time, Canada, France, England, Germany, Ireland, the Netherlands and New Zealand have all reduced their discount rates. Failing to bring Australia’s discount rate into line with international best practice devalues the longer-term health of some of our youngest Australians and is a misalignment with the Government’s preventative health priorities,” she added.

Medicines Australia continues to urge the Government to apply a reduced discount rate as soon as possible. The change could come into effect with a simple adjustment to the PBAC Guidelines and be implemented in a matter of weeks.

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