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Overview of Pharmaceutical Regulation in Australia

Discuss about the Regulation of Pharmaceuticals and Other Drugs.

Governments in the world are arising to enact and enforce regulation to the pharmaceutical industries. It is also a necessity for Australian to have the same strong regulations of pharmaceutical products. The Therapeutic Goods Act 1989 (Cth) establishes both the Australian Register of Therapeutic Goods (ARTG) and the Therapeutic Goods Administration (TGA) which are the main bodies for the regulation of pharmaceutical products.[1] The TGA scope of regulation includes medicines that are prescribed by the specialists, medicines in the general pharmacy (behind and over-the-counter), medicines sold in the supermarkets, supplements, herbal medicines, medical devices, laboratory products for testing diseases, vaccines, etc.[2] The work of ARTG is the registration of all pharmaceutical products before their export, import or supply within the state.[3] Pharmaceutical Benefits Scheme (PBS) works as the public insurance driver by subsidizing much of the costs that Australian residences have to pay to gain access to the drugs. Australia has been spending much on drugs than in any other public service. In the last report, the Australian government spent about 14% on PBS which is equivalent to $ 3.5 million per day or $1.3 billion per year.[4]

The primary legislation that governs medicines and other pharmaceutical products in Australia is the Therapeutic Goods Act 1989.[5] This act also works together with the regulations set under the Therapeutic Goods Regulations.[6] Both instruments complement each other to offer safety to Australian citizens. The Therapeutic Goods Act aims to regulate matters that deals with quality of medicines, their saftey safety, efficaciency and timely accessibility of therapeutic goods.[7] The act also provides for the requirements that need to met before a drug is listed or registered in the Therapeutic Goods register.  The Therapeutic Goods Regulations gives effect to Therapeutic Goods Act by providing the conditions for manufacturing, suppliance, registering, listing, and advertising of drugs in Australia.[8] The authorities that forms part of the regulations are the Therapeutic Goods Administration (TGA) and various committees. The TGA governs all activities of distribution of medicines which include pre-market evaluations and approval, manufactures’ licensing monitoring of post-market, development, the assessment of pharmaceutical products for exportation. The committees make recommendations regarding the drugs monitoring and regulations.

A new drug must first pass through the Australian Drug Evaluation Committee (ADEC) for assessment of public safety. After which it would be listed for Therapeutic Goods Administration (TGA).[9] The product sponsors is then required to make application for their new drug to be subsidized through the Pharmaceutical Benefits Scheme (PBS). An application for PBS listing is evaluated by the Pharmaceutical Benefits Advisory Committee (PBAC). The PBAC assess the drug to guarantee whether it is effective and whether its price is worth government funding.[10] Once the drug passes the PBAC evaluation, it passes to the Pharmaceutical Benefits Pricing Authority (PBPA) who negotiate its price with the sponsoring company. Once the PBPA and the sponsor reach an agreement, the Australian Government takes the advice from both considers the advice of both the PBPA and PBAC to list it on PBS or not.[11]

Drug Patenting Paradox

Therapeutic Goods Act 1989

Like as mentioned above, companies protect their high prices by patenting their drugs.  Patenting allows them to enjoy the monopoly without the fear of generic competitors. The practice encourages R&D and it serves as a reward since these companies invest on some of the neglected diseases. There is a notion that Australia’s patenting system allows filtration of some low-quality products to the patent. There is also a belief that little is done to follow up with drug sponsors to see whether they retain the quality of their drugs in the rush for competition. Also, the government does not follow up to ensure that the patent is owned by the legal owner, the party that developed the drug. In confirmation of this claim, a study analyzing the patent status of the top 15 expensive drugs in Australia was conducted.[12] The study found that 75% of these patents were owned by companies that were not the drug sponsors.[13] Also, the study noted that despite some of the patents were held for over 20 years, and the majority of them were owned by firms that never had a history of drugs’ R&D.[14]   In minimizing this practice of evergreening, Australia could learn from India where the Indian supreme court denied Novartis, a world's leading pharmaceutical company the right to patent its novel version of a cancer drug.[15] In addition, the Government should enact strong yet parsimoniously reasonable IP rights. These are rights that can strongly enforce and that provide incentive necessary for underpinning appropriate levels of investment in innovations while still not being too broadly defined. The government can also work seek international agreement with jurisdictions looking forward to cut unfair prices through reasonable patent laws.[16]

Therapeutic group premium is a policy within the PBS. The PBS keeps individual drugs into one drug group if they are considered to be having the same target for disease, efficacy and drug safety.[17] Within the group, there is a drug with a low price and another one with a higher price. All these drugs are listed in PBS as qualified for subsidy where the government subsidizes the price for the lowest-priced drug.[18] The TGP refers to the difference between the high price prescribed drug is known as the premium brand, and the base price drug. For those drugs prescribed within this group, it is the patients who cover the TGP.

While TGP urges the companies charging high prices to lower their charges, the policy wastes $320m per year due to the flaws in its implementation.[19] For instance, the policy is applied to only four groups of drugs. When compared with other nations such as the Netherlands, the policy applies to all types of drugs. Germany applies the same to about thirty types.  The failure of Australia to apply to other drugs makes the government keep subsidizing multiple drugs that solve the same problem.[20] A solution for this problem can only be found within the policy itself. For instance, the policy should be implemented to provide the solution it was intended to provide when it was being made. The government should also compare more groups of medicines as other countries do.[21] Calculation of premiums using comprehensive data can work better than the way the government uses selected surveys from drug companies.[22] The government should also inform patients on switching between expensive and cheap competitors where the quality and efficacy is the same to save costs.[23] In other words, implementing the policy in the right way would save a lot of costs.

Therapeutic Goods Administration

The price disclosure is a policy within PBS demanding drug manufacturers to reveal to the Government the price the charge the pharmacists for the drugs as the market price. Initially, the price disclosure was applicable to some few types of medicines. In 2010, the government required that all medicines in formula 2 (F2) be disclosed. Before this move, the Government was paying prices that were even more than what the medicine cost in the market. That is, manufacturers were selling medicines to the pharmacists at a lower price than the one PBS was providing as the subsidy. The policy has led to a significant reduction in medicine prices and the government is saving billions as it can adjust the PBS price depending on the market price.  

However, there is still much needed to be done on the price disclosure. For instance, comparing UK and Australia, the average price of a drug in Australia is about 14 times higher. Comparing with New Zealand, the same medicine would cost 16 times higher. 

Further, moving away from drugs patenting, Australian citizens still have to cover the high price of the drugs that have passed their patenting period due to a flaws in the price disclosure policy. In practice, PBS has formula one (F1) which are the single-brand drugs on-patent, and formula two (F2) for the off-patent drug in multiple brands.[24] Comparators usually go to F1 when there is still under assessment, and they will move to F2 formulary sometimes later.[25] There is a 16% reduction whenever a PBS-listed product where a new brand features has same efficacy with a brand in PBS.[26]

The problem in Australia is that even though the entry of the generic medicines forces the price down of these off-patented drugs, the price reduction is either very small, takes time before it is affected, or it is never affected at all. In analyzing this flaw, one study demonstrated that the Australian government can save over A$500 million in a year by fixing issues with price disclosure.[27] The study was conducted with the aim of illustrating how Australia is paying higher prices on medication due to failing to amend the equivalent prices whenever comparators of drugs listed on PBS on come off-patent.

Some of the medicines that this study noted were nab-paclitaxel. In the year the powder-based chemotherapy nab-paclitaxel, the solvent-based comparator cost fell by 20% while the nab-paclitaxel’s cost still remained constant. The failure to change the price led the government to spend over A$13 million on the nab-paclitaxel.[28] Similarly, the price of denosumab did not change when alendronate price was affected. The failure to change the price of denosumab led the government to spend $75 million on denosumab between July 2014 and April 2015.[29]  With this, amending the faults arising from the price disclosure policy could save the country from the current crisis of the unmanageable pharmaceutical subsidy. The government should ensure that all policies for amending prices are followed once the right price has been identified.

Pharmaceutical Benefits Scheme

The two main international agreements that are on the debate among the countries are the Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Trans-Pacific Partnership Agreement (TPP).[30] Most countries have adopted the TRIPS agreement.  The TRIPS’ regime requires all its member states to grant patents to international companies who operate in the field of technology and mainly in pharmaceuticals.[31] In the past, there were no requirements for the countries to provide patent protection on pharmaceuticals and this enabled them to promote low-cost access to drugs.[32]  The TRIPS bound all members which currently seems as more benefit to those countries who have the advanced infrastructure for manufacturing and transporting drugs worldwide.[33]

Australia is also a member of the TPP which places a number of constraints on the government’s regulation of pharmaceutical products and the setting of prices. An analysis of the key provisions of TPP has revealed that this agreement could have an extreme impact on the way member countries regulate drugs in terms of their effectiveness, safety, approval for marketing, drug listing and the control of prices.[34] For instance, the TPP has a chapter on Technical Barriers to Trade (TBT) which contains some provisions that are described as the WTO-plus.[35] One of these provisions requires each party to permit persons of the other parties to contribute to matters of affecting technical regulations, rules, standards and assessment of conformity etc. In resolving issues with TPP and TRIPS, the government can pursue negotiations to reach lessen the rules and raise the issue of importance of public health over rights to intellectual properties as seen the Doha Declaration.[36]

Conclusion

The aim of his paper was to provide an analysis of the general outline of pharma sector in Australia. The paper also aimed at providing an insight on the different ways that Drugs get permitted and some escapes in PBS and its possible policy resolutions in Australia. The paper has looked at the current crisis in Australia regarding the increasing prices of pharmaceutical products. Therefore, the paper also discussed the various policies that the government has elected to resolve the issue. Ultimately, by analyzing the various policies and agreements, the paper was able to find loopholes and provided resolutions which could help the government in minimizing the costs.

Azam, Monirul. Intellectual Property and Public Health in the Developing World. Open Book Publishers, 2016.

Breadon, Peter, Leah Ginnivan, Stephen Duckett, and Prasanna Venkataraman. “Australia’s Bad Drug Deal: High Pharmaceutical Prices.” SSRN Scholarly Paper. Rochester, NY: Social Science Research Network, March 1, 2013. https://papers.ssrn.com/abstract=2275103.

Patenting and Evergreening

Campbell, Dennis. International Consumer Protection. Vol. 1. Springer Science & Business Media, 2013.

Christie, Andrew F., Chris Dent, Peter McIntyre, Lachlan Wilson, and David M. Studdert. “Patents Associated with High-Cost Drugs in Australia.” Edited by Gemma Elizabeth Derrick. PLoS ONE 8, no. 4 (April 5, 2013): e60812. https://doi.org/10.1371/journal.pone.0060812.

Duckett, Stephen, Peter Breadon, and Grattan Institute Grattan Institute. “Premium Policy??: Getting Better Value from the PBS.” Article; Article/Report. [Carlton, Victoria] Grattan Institute, 2015. https://trove.nla.gov.au/work/195055762.

Gale, Nicola K., and Jean V. McHale. Routledge Handbook of Complementary and Alternative Medicine: Perspectives from Social Science and Law. Routledge, 2015.

Gleeson, Deborah, Joel Lexchin, Ruth Lopert, and Burcu Kilic. “The Trans Pacific Partnership Agreement, Intellectual Property and Medicines: Differential Outcomes for Developed and Developing Countries.” Global Social Policy 18, no. 1 (April 2018): 7–27. https://doi.org/10.1177/1468018117734153.

Harvey, Ken. “Regulation of Complementary Medicines.” Internal Medicine Journal 47, no. 9 (September 2017): 983–85. https://doi.org/10.1111/imj.13548.

———. “Transparency and the Therapeutic Goods Administration.” Australian Prescriber 36, no. 4 (August 1, 2013): 110–11. https://doi.org/10.18773/austprescr.2013.043.

Health, Australian Government Department of. “Pharmaceutical Benefits Scheme (PBS) | Australian Statistics on Medicines 2015.” Australian Government Department of Health, 2016. https://www.pbs.gov.au/info/statistics/asm/asm-2015.

Hirshorn, Janice, and Deborah Monk. “The Regulation of Therapeutic Products in Australia.” In The Textbook of Pharmaceutical Medicine, edited by John P. Griffin, 613–40. Oxford, UK: Wiley-Blackwell, 2009. https://doi.org/10.1002/9781444317800.ch26.

Karnon, Jonathan, Laura Edney, and Michael Sorich. “Costs of Paying Higher Prices for Equivalent Effects on the Pharmaceutical Benefits Scheme.” Australian Health Review 41, no. 1 (2017): 1. https://doi.org/10.1071/AH15122.

Lexchin, Joel, and Deborah Gleeson. “The Trans Pacific Partnership Agreement and Pharmaceutical Regulation in Canada and Australia.” International Journal of Health Services 46, no. 4 (October 2016): 597–613. https://doi.org/10.1177/0020731416662612.

Lipworth, Wendy, Evan Doran, Ian Kerridge, and Richard Day. “Challenges to Pharmaceutical Policymaking: Lessons from Australia.” Australian Health Review, 2014. https://doi.org/10.1071/AH13240.

Löfgren, Hans. “The Trans-Pacific Partnership Agreement: A Threat to Affordable Medicines and Public Health.” Southern Med Review 4, no. 2 (December 2, 2011): 49–50. https://doi.org/10.5655/smr.v4i2.1001.

Luo, Jing, and Aaron S. Kesselheim. “The Trans-Pacific Partnership Agreement and Implications for Access to Essential Medicines.” JAMA 314, no. 15 (October 20, 2015): 1563. https://doi.org/10.1001/jama.2015.10872.

Malbon, Justin, Charles Lawson, and Mark Davison. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights: A Commentary. Edward Elgar Publishing, 2014.

Mansfield, Sarah J. “Generic Drug Prices and Policy in Australia: Room for Improvement? A Comparative Analysis with England.” Australian Health Review: A Publication of the Australian Hospital Association 38, no. 1 (February 2014): 6–15. https://doi.org/10.1071/AH12009.

Novartis Ag v. Union of India, 6 SCC 1 (Supreme Court 2013).

Paris, Valérie, and Annalisa Belloni. “Value in Pharmaceutical Pricing.” OECD Health Working Papers, July 11, 2013. https://doi.org/10.1787/5k43jc9v6knx-en.

Pogge, Thomas, Matthew Rimmer, and Kim Rubenstein. Incentives for Global Public Health: Patent Law and Access to Essential Medicines. Cambridge University Press, 2010.

Rubinson, Max. “Exploring the Trans-Pacific Partnership’s Complexities through the Lens of Its Intellectual Property Rights Chapter.” Emory Int’l L. Rev. 31 (2016): 449.

Schoonveld, Mr Ed. The Price of Global Health: Drug Pricing Strategies to Balance Patient Access and the Funding of Innovation. Ashgate Publishing, Ltd., 2015.

Thai, L. P., J. R. Moss, B. Godman, and A. I. Vitry. “Cost Driver Analysis of Statin Expenditure on Australia’s Pharmaceutical Benefits Scheme.” Expert Review of Pharmacoeconomics & Outcomes Research 16, no. 3 (May 3, 2016): 419–33. https://doi.org/10.1586/14737167.2016.1136790.

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Therapeutic Goods Regulations (1990).

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