AUSTRALIAN GOVERNMENT UNDER FIRE OVER PLANS TO REDUCE WHOLESALE MARGINS

A A

The Australian government has decided to reduce wholesale margins from 11.1% to 7.5% on the price paid for drugs by pharmacies. The measures have come amid attempts to curb expenditure on the country's AUD6.6bn (US$4.87bn) Pharmaceutical Benefits Scheme (PBS).

Wholesalers groups have attacked the move, claiming that it will negatively affect revenues. Currently, wholesalers operate a "cross-subsidy" model in which unprofitable product lines are supported by profitable ones. This allows the full range of PBS drugs to be delivered across Australia.

However, wholesalers are claiming that this system is becoming increasingly uneconomic, and are considering stopping drug distribution to the country's more remote and rural areas. They allege that of the 2,600 prescription drugs on the PBS, only 600 are profitable.

Australians are expected to spend around AUD50bn (US$36.88bn) on drugs on the PBS in the next five years, with the government accounting for around 80% of costs. The authorities expect the new regulations to save up to AUD350mn (US$258.19mn) in that period.