Lifestyle diseases likely to boost medicines bill, say Fitch analysts

Analysts say the nation’s medicines bill is likely to spike because of lifestyle-related diseases, reaching up to $15.8bn a year.

Fitch analysts say Australia’s regulatory environment and population wealth make it one of the world’s most attractive markets for innovative drug makers.

The nation’s medicine bill is likely to spike over the next five years as an increasing number of Australians suffer from lifestyle-related diseases, Fitch analysts say.

The increasing prevalence of lifestyle-related illness in Australia, combined with an ageing population, is likely to cost as much as $15.8 billion in medicine consumption by 2022, sharply up from $13.2bn in 2017, the ratings agency said.

That increase equates to a five-year compound annual growth rate of 3.7 per cent.

“The burden of non-communicable diseases in Australia will continue to grow steadily,” Fitch analyst Sakshi Sikka told The Australian.

“Factors such as smoking, excessive alcohol consumption, poor nutrition and physical inactivity will cause an increase in the burden.”

She said that according to the Australian Institute of Health and Welfare, 7 per cent of the total health burden in Australia was due to overweight and obesity in 2011.

Despite the nation’s growing medicine bill, Ms Sikka said that for drug makers operating in Australia, the environment remains challenging, as the listing of high-value pharmaceuticals on the Australian Pharmaceutical Benefit Scheme remains difficult and pricing pressure grows.

“Drugmakers continue to face uncertainty in the listing of new medicines on the PBS because the regulatory framework for market authorisation and reimbursement remains complex,” Ms Sikka said.

“This is compounded by the existing policy that every dollar spent on new medicines must be counterbalanced by an equivalent offset, determined in advance, from within the health budget.”

In addition to the pricing challenge, Fitch said multinational pharmaceutical firms face a significant commercial threat from Australia’s position to support a viable generics and biosimilars sector, and increase the uptake of these medicines.

Still, despite the downside risks, Ms Sikka said that Australia’s regulatory environment and population wealth make it one of the world’s most attractive markets for innovative drug makers, as demand for patented drugs remains robust.

“The government continues to subsidise the cost of medicines for every medicine approved by the Pharmaceutical Benefits Advisory Committee to ensure that new, essential medicines are affordable for all Australians,” she said.

“In addition, Australia’s Department of Health has outlined its focus on streamlining the drug approval processes undertaken by the Therapeutic Goods Administration which will be highly beneficial for multinational drugmakers.”