The Australian Pharmaceutical Industry

The pharmaceutical industry in Australia faces a watershed amid extensive government reform centred on the A$6–7 billion-plus per year Pharmaceutical Benefits Scheme (PBS) and the impact of global structural concerns. These structural adjustments include lack of productivity in drug development pipelines, the expiration of patents protecting high-revenue-generating drugs, the greater prominence of life sciences and steadily declining returns on pharmaceutical companies' considerable investments in research and development (R&D).

These domestic and international changes represent the elements of the 'perfect storm' that will leave no member of the industry untouched. Those pharmaceutical businesses that want to survive are already bolting down new business models and exploring new markets to replace revenues lost due to declining pipelines and increasing competition.

However, the level of urgency across the industry varies significantly. Traditional community pharmacies are facing challenges posed by new retail formats and regulatory change, while distributors are pursuing supply chain and market access opportunities.

With considerable time having passed since the Howard government announced a far-reaching pharmaceutical reform package, and with the Rudd administration starting to put its stamp on the sector, PricewaterhouseCoopers has conducted its own temperature check of the industry.

Over a three-month period we conducted extensive interviews with key players in the domestic industry. We surveyed half of the top 20 pharmaceutical companies, several mid-sized and small pharmaceutical companies and a number of industry associations and distributors. Overall, our respondents included most stakeholders in the pharmaceutical industry in Australia.

Those surveyed processed PBS prescription costs of A$3.013 billion (about 46% of the total cost to the top 20 suppliers) and represented 74,167,023 scripts (about 50% of the top 20 and 44 per cent of the total market by volume) in 2005–06. This report summarises and highlights the issues facing the industry.