Media Releases > Press Articles 2002

No go for Viagra – where to now with the PBS?

National HealthCare Journal, February 2002, p49

by Denys Correll, National Executive Director, Council on the Ageing (Australia)

The Government has not approved Viagra for inclusion in the Pharmaceutical Benefits Scheme (PBS). What is happening to this Scheme that provides subsidies to over 650 drugs? The consumer needs to be concerned about the future of the program for subsidised pharmaceuticals in Australia. The PBS is under pressure from many sides.

Pharmaceutical manufacturers know that even if they obtain approval to distribute a new drug in Australia, it only has a limited market if it is not listed on the PBS. The battle for Viagra listing must have cost Pfizer a bomb. It is worth tracing what happened.

Prior to the Pharmaceutical Benefits Advisory Committee's recent recommendation to the Government to list Viagra on the PBS, the Committee had twice rejected the application. Prior to this recent recommendation that it be approved, Pfizer mounted a massive media campaign to let men know that there was a drug available to "treat your erection problems". The full colour, multi page advertisements encouraged men to "Restore your sex life" by talking "to your doctor today". The problem was that when men fronted their doctors they found it was going to cost a lot of dough to solve their erection problems.

It is hard to imagine the unfortunate men not feeling aggrieved and contacting their local MPs to find out why Viagra was not on the PBS. So the pressure mounts for listing. So, what is wrong with this?

The PBS is under financial considerable stress. The cost of the Scheme is about four billion dollars per year and the cost has been rising way above inflation. New drugs such as Celebrex were estimated to cost $50 million a year but cost the Scheme $100 million in the first five months. No wonder the Government is nervous about new listings. Predictions of sales for some recent listings have been way below the actuals. Maybe Pfizer did themselves a disservice with their heavy advertising.

Industry advertising

Drug companies are supposedly restricted in their advertising of drugs in Australia. I wondered when I saw the rash of Pfizer advertisements if Pfizer was in breach of advertising guidelines. There was no mention of Viagra in the advertisements but not much intellectual firepower was needed to trace the thread to the wonder drug. I went to the web site of the industry body – the Australian Pharmaceutical Manufactures Association to see what their code of ethics had to say. I was bemused to find that it was 124 pages and as about consumer friendly as the instructions to fly an F18. Guidelines for complaints do not appear until page 108.

Controlling drug costs

The PBS is invaluable to Australians and particularly to older Australians. It needs to be protected from being overextended and thus causing restrictions that harm the consumer. A few years ago, one method of controlling cost blowouts was to delist commonly used drugs and make them available "over the counter". Two problems arose. First, the cost of the drug rose for concession cardholders. Second, many people are unaware that there are price differences for over the counter drugs from pharmacy to pharmacy. So, the customer does not know to shop around.

The loss of PBS status matters a lot if you are on the pension. Every dollar counts. Drugs taken off the PBS were in the groups commonly used by older people - dermatological creams and inhalers.

Price/volume agreements

A major tool the Government has to control blow outs in the PBS costs are price/volume agreements. New drugs have fixed costs such as the development costs. On top of the fixed cost is the variable cost such as the price of manufacture. The price the Government pays the company is dependent on the costs for an anticipated volume. If the volume of sales is higher than anticipated, the profit goes up as there are no changes to the fixed costs. In these cases there needs to be a review of the price paid by the Government with a subsequent lowering of the subsidy.

The Solutions

What then are some solutions to the problems of price escalation of the PBS?

The Government needs to maintain the efficacy of the structures it has in place for the approval of drugs and the setting of the price the Government is prepared to pay. The Pharmaceutical Benefits Advisory Committee must maintain its competence and ability to comment without fear or favour on the clinical and cost effectiveness of a drug. Price volume agreements must be applied to all new listings and all existing listed products should be reviewed and have new price/volume agreements that are sensitive to changes in the volume of sales. The public service needs to retain expertise that assists the committees in their work. Stronger restrictions are needed on manufacturers to avoid poorly informed campaigns for listings. The program for the quality use of medicines should be extended. The consumer contribution should be maintained as a price signal but to lessen the impact, where there is a generic equivalent, the customer should be sufficiently informed to make the choice.