HEALTH POLICY CSIRO PUBLISHING
Australian Health Review, 2014, 38, 517–522 http://dx.doi.org/10.1071/AH14012
Discounting of medicines in Australian community pharmacies Loc P. Thai1,3 BPharm(Hons), PhD Candidate Agnes I. Vitry1 PhD, Senior Research Fellow John R. Moss2 MSocSci, BEc, MBBS, FCHSM, FPHAA, Associate Professor 1
Quality Use of Medicines and Pharmacy Research Centre, Sansom Institute, University of South Australia, GPO Box 2471, Adelaide, SA 5001. Australia. Email: [email protected] 2 School of Population Health, University of Adelaide, North Terrace, Adelaide, SA 5000, Australia. Email: [email protected] 3 Corresponding author. Email: [email protected]
Abstract Objective. There are many medicines listed on the Australian Pharmaceutical Benefits Scheme (PBS) in which point of sale price is less than the level of the general patient co-payment. In these circumstances, the patient covers the total cost of the medicine from their own pocket with no government subsidy. The aim of the present study was to compare the consumer prices of under general co-payment prescription medicines between banner group pharmacies with open discounting policies and community pharmacies without; and to assess the impact of the April 2012 PBS price disclosure policies on the discounts offered. Methods. The consumer prices of 31 under co-payment medicines were collected from banner group pharmacy websites and individual pharmacies both before and after April 2012. PBS maximum prices were obtained from the PBS website. Absolute and relative price differences between PBS and pharmacy groups were calculated. Results. Before April 2012, banner group pharmacies provided discounts to patients of around 40% per prescription, whereas other pharmacies provided discounts of around 15%. Total price savings were on average $9 per prescription at banner group pharmacies and $3.50 at other pharmacies. Percentage discounts did not change greatly after April 2012, when price decreases occurred on the PBS. Conclusions. Banner group pharmacies with pricing strategies are able to provide greater discounts to patients compared with other pharmacies. Community pharmacies still have the ability to provide substantial discounts after the April 2012 price reductions. What is known about the topic? There is currently little known about the under co-payment medicines market in Australia and the price discounts available to patients. What does this paper add? This research shows that patients who purchase under co-payment medicines are able to save money if they purchase from pharmacies with openly advertised discounting policies. Price reductions related to the implementation of the price disclosure policy had a small effect on the discounts offered by community pharmacies to patients. What are the impacts for practitioners? The effect of discounting on under co-payment medicines to patients may increase their ability to afford essential medicines. Questions remain on whether the effect of discounting on under copayment medicines may affect the quality of professional services provided to patients by pharmacists. Received 23 January 2014, accepted 18 June 2014, published online 7 August 2014
Introduction Since the 1950s, all Australians have benefited from government subsidised access to medicines through one component of their universal health insurance system, the Pharmaceutical Benefits Scheme (PBS).1 In 2010–11, the total expenditure on prescription medicines in the Australian community was $11.5 billion, with Commonwealth government subsidisation accounting for 71.5% Journal compilation AHHA 2014
($8.2 billion) of total expenditure.2 The remaining expenditure on PBS medicines was accounted for by patients, through either a compulsory co-payment for PBS subsidised medicines or through expenditure on under co-payment medicines. The co-payment is adjusted every calendar year in line with the Consumer Price Index (CPI). In 2012 the co-payment for concession card holders was $5.80 per prescription, whereas the www.publish.csiro.au/journals/ahr
518
Australian Health Review
general co-payment was a maximum of $35.40 per prescription.3 General patients are defined as patients who do not hold a concession card. For medicines in which total cost is greater than the co-payment, community pharmacies are not allowed to discount the price of medicines to patients. There are several PBS-listed medicines in which actual price does not reach the level of the general co-payment. In these cases, the individual patients cover the total cost of the medicine from their own pocket with no government subsidy. In 2010–11, under co-payment prescriptions accounted for 13.7% of total community prescription medicines expenditure ($1.7 billion).2 For under co-payment medicines, there is no minimum price level that community pharmacies are required to price medicines at, with the maximum price set by the PBS. Several studies have shown that generic medicines prices in Australia are higher than those in the UK, USA and New Zealand.4,5 There are several reasons why the PBS pays higher prices for generic medicines. Manufacturers and the Pharmaceutical Benefits Pricing Authority (PBPA) negotiate the ex-manufacturer price, from which the subsequent wholesale and maximum prices to consumers are calculated. The original exmanufacturer price is based upon the initial data supplied to the Pharmaceutical Benefits Advisory Committee (PBAC) before listing on the PBS. Once the medicine is listed, the government loses some control over the information regarding the actual price paid by community pharmacies compared with the ex-manufacturer price benchmarks. Competition for market share within the generic medicines market often leads to the prices paid by community pharmacies being lower than the ex-manufacturer price on the PBS, suggesting that manufacturers are able to lower their prices to wholesalers and/or retailers. The benefits from these trading terms have bypassed the government and have instead been passed along to community pharmacies. As a consequence, in 2007 and later in 2010, the Australian government introduced a range of reforms to decrease the price of generic medicines listed on the PBS by recuperating part of discounts proposed by wholesalers to community pharmacies. A major component of these reforms was the introduction of a price disclosure policy, requiring manufacturers to disclose to the government the actual price at which generic medicines were sold to the distribution chain. The price disclosure policy aimed to reduce PBS expenditures by decreasing PBS listed prices to more accurately reflect the actual cost of medicines to community pharmacies. The second wave of reforms in 2010 included expanded price disclosure cycles which are scheduled to occur annually. Price adjustments are intended to continue until all prices are adjusted to more accurately reflect wholesale prices. In April 2012, as a result of the first expanded and accelerated price disclosure cycle, 237 PBS listed products (from 75 molecules) had their PBS listing prices reduced.6 The long-term impact of the changes to the PBS pricing policies have been forecast to save the Australian government over $A17 billion to 2017–18.7 Community pharmacies can have different business and pricing strategies. Of the 5000 community pharmacies in Australia, over 3000 were part of a banner group in 2012.8 Banner groups allow pharmacies to be associated with a larger name, and to access marketing resources and enhanced purchasing power. Several banner groups utilise discount medicine pricing to the general patient as a business strategy and advertise this policy to
L. P. Thai et al.
the public. In 2012, Chemist Warehouse advertised on their website and outside their pharmacies that patients were able to purchase prescription medicines with savings of up to 50%. Chemist Warehouse explained that their discounts on prescription medicines to consumers were due to aggressive pricing and larger volumes of trade.9 The ability to stock medicines cheaply is passed on to the consumer through discounts in the under copayment prescription medicines market. Not all banner groups and independently owned pharmacies have a publicly promoted open discounting policy. Although some banner pharmacies publicly advertise price lists, there are many pharmacies that do not make their prices publicly known. In 2010, a consumer survey of 900 members of CHOICE, a leading consumer advocacy group in Australia, showed that 72% of consumers still purchase medicines from pharmacies without open discounting policies. The majority of patients who purchase prescription medicines are concession card holders, where discounting of medicines is not applicable because prices are rarely below the concessional co-payment level. In 2010, 17.8% of all prescriptions in the community were for under co-payment medicines, with most being for PBS subsidised medicines.10 Of the patients who purchased medicines from pharmacies with open discounting policies, the majority stated that pricing was the most important reason for doing so. The advice from CHOICE was that patients can benefit from shopping around and purchasing medicines from pharmacies which sell medicines at cheaper prices.11 Past research has shown that prescription co-payment levels have an adverse impact upon a patient’s ability to afford and use essential medicines.12–14 Decreasing the amount that patients pay for medicines by discounting in the under co-payment market decreases the impact of cost as a barrier for general patients to access necessary medicines in the community. In this study, the prices of under co-payment medicines were compared between the PBS maximum listed price, prices offered by pharmacies with open discounting policies and those by pharmacies without. We also assess whether price discounts offered by these pharmacies were affected by price disclosurerelated reductions in April 2012. Methods Medicine selection The 50 most dispensed medicines by volume from 1 July 2009 to 30 June 2010 were chosen to reflect those which are the most widely used in the community. The list of these medicines was obtained from the PBPA Annual Report for 2010.15 Only medicines in which dispensed price was less than $35.40, the general co-payment in 2012, were included in this study. Out of the 50 most dispensed medicines, 33 had a dispensed price in 2012 which was less than the general co-payment. Of these 33 medicines, two (paracetamol 500 mg and aspirin 100 mg) were excluded from this study due to their availability as unscheduled over-the-counter medicines without requirement for a prescription. In total, 31 under co-payment prescription medicines were included in the study. Data collection There were two periods of data collection, March 2012 and July 2012, before and after the PBS April 2012 price reductions. Data
Medicines pricing to patients
Australian Health Review
on prescription medicine prices for two banner group pharmacies with open discounting policies, Chemist Warehouse and Terry White Chemists, were obtained from their respective websites.16,17 These two banner group pharmacies were selected upon the basis that the prices of their discounted medicines were publicly available. Medicines prices from pharmacies with no open discounting policies were obtained from individual pharmacies in arrangement with the managing pharmacist. In total, seven pharmacies with no open discounting policies (six from South Australia, one from Tasmania) were surveyed and provided de-identified information for this study. Some of the selected pharmacies were contacted through an academic intermediary, whereas others were contacted through professional contacts with pharmacy owners. The seven selected pharmacies did not belong to the two comparator banner groups in this study. Other pharmacies were contacted for participation in this study but they declined. The characteristics of the selected pharmacies are not known due to confidentiality arrangements. For medicines listed with multiple brands, the brand with the lowest price was selected and its price recorded. The price at each of the pharmacy groups was the actual price charged to the patient. The PBS maximum price to the consumer was obtained from the PBS website (www.pbs.gov.au). The PBS maximum price to the consumer takes into account all dispensing fees, safety net recording fee and allowable additional fee to pharmacists and is the maximum price that consumers are allowed to be charged for PBS medicines. Data analysis Data collected from pharmacies with no open discounting policies were aggregated to produce a mean price across those pharmacies. Items listed on the PBS were matched for medicine, form, strength, and pack size. Information on some medicines
prices was not available for Terry White Chemists, where 21 medicines had prices available before April 2012 and 30 medicines had prices available after April 2012. Analysis was conducted on these 21 medicines in all pharmacy types before and after April 2012. The price per prescription medicine from each of the two banner group pharmacies with open discounting policies, the average price across other pharmacies and PBS maximum price to the consumer were compared both before April 2012 and after April 2012. The absolute cost differences were calculated as the difference between the PBS maximum prices and prices at which medicines were dispensed in pharmacies. Scatter plots were drawn from the results, plotting the prices of medicines in pharmacies against the PBS maximum price to the consumer. Linear regression analyses were conducted to determine the relationships between the prices of medicines on the PBS and the prices of medicines sold in the different pharmacies. For the analysis of Chemist Warehouse and pharmacies with no open discounting policies, linear regression analyses were conducted over the 31 medicines. For Terry White Chemists, linear regression analyses were conducted for those 21 medicines before April 2012 and for 30 medicines after April 2012 for which price data were available. Results The prices for medicines sold at pharmacies with open discounting policies (Chemist Warehouse and Terry White Chemists) and pharmacies without open discounting policies, are summarised in Tables 1–4. Tables 1 and 3 only take into account Chemist Warehouse and pharmacies with no open discounting policies because they contained all 31 medicines selected. Tables 2 and 4 consider the prices of all 21 medicines that had prices available in Terry White Chemists before and after April 2012, respectively.
Table 1. Under co-payment medicines prices before April 2012 Unless indicated otherwise, data are the mean s.d. PBS, pharmaceutical benefits scheme Characteristics Total no. medicines Prescription cost ($) $ difference from PBS maximum price % difference from PBS maximum price P-valueA for difference from PBS maximum price
PBS maximum price
Chemist Warehouse
Pharmacies with no discounting policies
31 23.52 ± 8.03
31 13.45 ± 7.05 10.07 ± 3.20 45.57 ± 13.27
Australian Health Review, 2014, 38, 517–522 http://dx.doi.org/10.1071/AH14012
Discounting of medicines in Australian community pharmacies Loc P. Thai1,3 BPharm(Hons), PhD Candidate Agnes I. Vitry1 PhD, Senior Research Fellow John R. Moss2 MSocSci, BEc, MBBS, FCHSM, FPHAA, Associate Professor 1
Quality Use of Medicines and Pharmacy Research Centre, Sansom Institute, University of South Australia, GPO Box 2471, Adelaide, SA 5001. Australia. Email: [email protected] 2 School of Population Health, University of Adelaide, North Terrace, Adelaide, SA 5000, Australia. Email: [email protected] 3 Corresponding author. Email: [email protected]
Abstract Objective. There are many medicines listed on the Australian Pharmaceutical Benefits Scheme (PBS) in which point of sale price is less than the level of the general patient co-payment. In these circumstances, the patient covers the total cost of the medicine from their own pocket with no government subsidy. The aim of the present study was to compare the consumer prices of under general co-payment prescription medicines between banner group pharmacies with open discounting policies and community pharmacies without; and to assess the impact of the April 2012 PBS price disclosure policies on the discounts offered. Methods. The consumer prices of 31 under co-payment medicines were collected from banner group pharmacy websites and individual pharmacies both before and after April 2012. PBS maximum prices were obtained from the PBS website. Absolute and relative price differences between PBS and pharmacy groups were calculated. Results. Before April 2012, banner group pharmacies provided discounts to patients of around 40% per prescription, whereas other pharmacies provided discounts of around 15%. Total price savings were on average $9 per prescription at banner group pharmacies and $3.50 at other pharmacies. Percentage discounts did not change greatly after April 2012, when price decreases occurred on the PBS. Conclusions. Banner group pharmacies with pricing strategies are able to provide greater discounts to patients compared with other pharmacies. Community pharmacies still have the ability to provide substantial discounts after the April 2012 price reductions. What is known about the topic? There is currently little known about the under co-payment medicines market in Australia and the price discounts available to patients. What does this paper add? This research shows that patients who purchase under co-payment medicines are able to save money if they purchase from pharmacies with openly advertised discounting policies. Price reductions related to the implementation of the price disclosure policy had a small effect on the discounts offered by community pharmacies to patients. What are the impacts for practitioners? The effect of discounting on under co-payment medicines to patients may increase their ability to afford essential medicines. Questions remain on whether the effect of discounting on under copayment medicines may affect the quality of professional services provided to patients by pharmacists. Received 23 January 2014, accepted 18 June 2014, published online 7 August 2014
Introduction Since the 1950s, all Australians have benefited from government subsidised access to medicines through one component of their universal health insurance system, the Pharmaceutical Benefits Scheme (PBS).1 In 2010–11, the total expenditure on prescription medicines in the Australian community was $11.5 billion, with Commonwealth government subsidisation accounting for 71.5% Journal compilation AHHA 2014
($8.2 billion) of total expenditure.2 The remaining expenditure on PBS medicines was accounted for by patients, through either a compulsory co-payment for PBS subsidised medicines or through expenditure on under co-payment medicines. The co-payment is adjusted every calendar year in line with the Consumer Price Index (CPI). In 2012 the co-payment for concession card holders was $5.80 per prescription, whereas the www.publish.csiro.au/journals/ahr
518
Australian Health Review
general co-payment was a maximum of $35.40 per prescription.3 General patients are defined as patients who do not hold a concession card. For medicines in which total cost is greater than the co-payment, community pharmacies are not allowed to discount the price of medicines to patients. There are several PBS-listed medicines in which actual price does not reach the level of the general co-payment. In these cases, the individual patients cover the total cost of the medicine from their own pocket with no government subsidy. In 2010–11, under co-payment prescriptions accounted for 13.7% of total community prescription medicines expenditure ($1.7 billion).2 For under co-payment medicines, there is no minimum price level that community pharmacies are required to price medicines at, with the maximum price set by the PBS. Several studies have shown that generic medicines prices in Australia are higher than those in the UK, USA and New Zealand.4,5 There are several reasons why the PBS pays higher prices for generic medicines. Manufacturers and the Pharmaceutical Benefits Pricing Authority (PBPA) negotiate the ex-manufacturer price, from which the subsequent wholesale and maximum prices to consumers are calculated. The original exmanufacturer price is based upon the initial data supplied to the Pharmaceutical Benefits Advisory Committee (PBAC) before listing on the PBS. Once the medicine is listed, the government loses some control over the information regarding the actual price paid by community pharmacies compared with the ex-manufacturer price benchmarks. Competition for market share within the generic medicines market often leads to the prices paid by community pharmacies being lower than the ex-manufacturer price on the PBS, suggesting that manufacturers are able to lower their prices to wholesalers and/or retailers. The benefits from these trading terms have bypassed the government and have instead been passed along to community pharmacies. As a consequence, in 2007 and later in 2010, the Australian government introduced a range of reforms to decrease the price of generic medicines listed on the PBS by recuperating part of discounts proposed by wholesalers to community pharmacies. A major component of these reforms was the introduction of a price disclosure policy, requiring manufacturers to disclose to the government the actual price at which generic medicines were sold to the distribution chain. The price disclosure policy aimed to reduce PBS expenditures by decreasing PBS listed prices to more accurately reflect the actual cost of medicines to community pharmacies. The second wave of reforms in 2010 included expanded price disclosure cycles which are scheduled to occur annually. Price adjustments are intended to continue until all prices are adjusted to more accurately reflect wholesale prices. In April 2012, as a result of the first expanded and accelerated price disclosure cycle, 237 PBS listed products (from 75 molecules) had their PBS listing prices reduced.6 The long-term impact of the changes to the PBS pricing policies have been forecast to save the Australian government over $A17 billion to 2017–18.7 Community pharmacies can have different business and pricing strategies. Of the 5000 community pharmacies in Australia, over 3000 were part of a banner group in 2012.8 Banner groups allow pharmacies to be associated with a larger name, and to access marketing resources and enhanced purchasing power. Several banner groups utilise discount medicine pricing to the general patient as a business strategy and advertise this policy to
L. P. Thai et al.
the public. In 2012, Chemist Warehouse advertised on their website and outside their pharmacies that patients were able to purchase prescription medicines with savings of up to 50%. Chemist Warehouse explained that their discounts on prescription medicines to consumers were due to aggressive pricing and larger volumes of trade.9 The ability to stock medicines cheaply is passed on to the consumer through discounts in the under copayment prescription medicines market. Not all banner groups and independently owned pharmacies have a publicly promoted open discounting policy. Although some banner pharmacies publicly advertise price lists, there are many pharmacies that do not make their prices publicly known. In 2010, a consumer survey of 900 members of CHOICE, a leading consumer advocacy group in Australia, showed that 72% of consumers still purchase medicines from pharmacies without open discounting policies. The majority of patients who purchase prescription medicines are concession card holders, where discounting of medicines is not applicable because prices are rarely below the concessional co-payment level. In 2010, 17.8% of all prescriptions in the community were for under co-payment medicines, with most being for PBS subsidised medicines.10 Of the patients who purchased medicines from pharmacies with open discounting policies, the majority stated that pricing was the most important reason for doing so. The advice from CHOICE was that patients can benefit from shopping around and purchasing medicines from pharmacies which sell medicines at cheaper prices.11 Past research has shown that prescription co-payment levels have an adverse impact upon a patient’s ability to afford and use essential medicines.12–14 Decreasing the amount that patients pay for medicines by discounting in the under co-payment market decreases the impact of cost as a barrier for general patients to access necessary medicines in the community. In this study, the prices of under co-payment medicines were compared between the PBS maximum listed price, prices offered by pharmacies with open discounting policies and those by pharmacies without. We also assess whether price discounts offered by these pharmacies were affected by price disclosurerelated reductions in April 2012. Methods Medicine selection The 50 most dispensed medicines by volume from 1 July 2009 to 30 June 2010 were chosen to reflect those which are the most widely used in the community. The list of these medicines was obtained from the PBPA Annual Report for 2010.15 Only medicines in which dispensed price was less than $35.40, the general co-payment in 2012, were included in this study. Out of the 50 most dispensed medicines, 33 had a dispensed price in 2012 which was less than the general co-payment. Of these 33 medicines, two (paracetamol 500 mg and aspirin 100 mg) were excluded from this study due to their availability as unscheduled over-the-counter medicines without requirement for a prescription. In total, 31 under co-payment prescription medicines were included in the study. Data collection There were two periods of data collection, March 2012 and July 2012, before and after the PBS April 2012 price reductions. Data
Medicines pricing to patients
Australian Health Review
on prescription medicine prices for two banner group pharmacies with open discounting policies, Chemist Warehouse and Terry White Chemists, were obtained from their respective websites.16,17 These two banner group pharmacies were selected upon the basis that the prices of their discounted medicines were publicly available. Medicines prices from pharmacies with no open discounting policies were obtained from individual pharmacies in arrangement with the managing pharmacist. In total, seven pharmacies with no open discounting policies (six from South Australia, one from Tasmania) were surveyed and provided de-identified information for this study. Some of the selected pharmacies were contacted through an academic intermediary, whereas others were contacted through professional contacts with pharmacy owners. The seven selected pharmacies did not belong to the two comparator banner groups in this study. Other pharmacies were contacted for participation in this study but they declined. The characteristics of the selected pharmacies are not known due to confidentiality arrangements. For medicines listed with multiple brands, the brand with the lowest price was selected and its price recorded. The price at each of the pharmacy groups was the actual price charged to the patient. The PBS maximum price to the consumer was obtained from the PBS website (www.pbs.gov.au). The PBS maximum price to the consumer takes into account all dispensing fees, safety net recording fee and allowable additional fee to pharmacists and is the maximum price that consumers are allowed to be charged for PBS medicines. Data analysis Data collected from pharmacies with no open discounting policies were aggregated to produce a mean price across those pharmacies. Items listed on the PBS were matched for medicine, form, strength, and pack size. Information on some medicines
prices was not available for Terry White Chemists, where 21 medicines had prices available before April 2012 and 30 medicines had prices available after April 2012. Analysis was conducted on these 21 medicines in all pharmacy types before and after April 2012. The price per prescription medicine from each of the two banner group pharmacies with open discounting policies, the average price across other pharmacies and PBS maximum price to the consumer were compared both before April 2012 and after April 2012. The absolute cost differences were calculated as the difference between the PBS maximum prices and prices at which medicines were dispensed in pharmacies. Scatter plots were drawn from the results, plotting the prices of medicines in pharmacies against the PBS maximum price to the consumer. Linear regression analyses were conducted to determine the relationships between the prices of medicines on the PBS and the prices of medicines sold in the different pharmacies. For the analysis of Chemist Warehouse and pharmacies with no open discounting policies, linear regression analyses were conducted over the 31 medicines. For Terry White Chemists, linear regression analyses were conducted for those 21 medicines before April 2012 and for 30 medicines after April 2012 for which price data were available. Results The prices for medicines sold at pharmacies with open discounting policies (Chemist Warehouse and Terry White Chemists) and pharmacies without open discounting policies, are summarised in Tables 1–4. Tables 1 and 3 only take into account Chemist Warehouse and pharmacies with no open discounting policies because they contained all 31 medicines selected. Tables 2 and 4 consider the prices of all 21 medicines that had prices available in Terry White Chemists before and after April 2012, respectively.
Table 1. Under co-payment medicines prices before April 2012 Unless indicated otherwise, data are the mean s.d. PBS, pharmaceutical benefits scheme Characteristics Total no. medicines Prescription cost ($) $ difference from PBS maximum price % difference from PBS maximum price P-valueA for difference from PBS maximum price
PBS maximum price
Chemist Warehouse
Pharmacies with no discounting policies
31 23.52 ± 8.03
31 13.45 ± 7.05 10.07 ± 3.20 45.57 ± 13.27
