Pharmaceutical company Eli Lilly’s decision not to list its GLP-1 drug Mounjaro on Australia’s Pharmaceutical Benefits Scheme (PBS) has raised concerns about the future of medicine accessibility in the country. After three years and multiple submissions, Mounjaro received a positive recommendation from the Pharmaceutical Benefits Advisory Committee (PBAC), but Lilly ultimately rejected the conditions attached to the listing, which the company deemed financially untenable.

Lilly’s refusal centered on two key issues: the price set by PBAC and a risk-sharing arrangement tied to patient access caps. The PBAC’s pricing framework bases cost-effectiveness assessments on comparators that often include decades-old or generic drugs, which industry representatives say undervalues innovative treatments. In Mounjaro’s case, this pricing tied to a discontinued medicine meant Australia’s subsidised price was noticeably lower than those in other countries. Additionally, a cap limiting PBS access to 450,000 patients with Type 2 diabetes came with a provision that would require Lilly to cover the cost of any usage above that threshold, effectively supplying the drug for free if demand exceeded the cap.

Lilly Australia and New Zealand general manager Manny Simons described the extended and repetitive PBS submission process as “devastatingly punitive” and expressed skepticism about submitting future drugs for PBS listing, including those in Lilly’s pipeline. He criticized the system’s emphasis on cost minimization over patient benefit, noting that most drugs now fail to gain listing under current arrangements and warned that the situation could worsen.

The broader context involves shifts in the global pharmaceutical market, notably the influence of policy changes in the United States, where proposed “most favoured nation” (MFN) pricing could tie American drug costs to the lowest prices paid in comparable countries, including Australia. Although the MFN policy is not yet legislated, pharmaceutical companies are said to be adjusting their global pricing and market strategies preemptively. This environment has seen increasing reluctance from drug companies to negotiate with Australia, threatening delays or outright absence of new medicines on the PBS.

Health Minister Mark Butler acknowledged the challenges but suggested some companies may be leveraging negotiations strategically. He highlighted upcoming discussions with Medicines Australia aimed at reforming PBS processes, including reviewing how cost comparators and discounting methods are applied. Butler emphasized the government’s commitment to balancing affordable drug access with encouraging pharmaceutical innovation.

Clinical experts and industry stakeholders have echoed calls for reform. Former PBAC member Geoff McColl and other medical professionals warn that the current system's emphasis on minimizing costs risks limiting access to effective new medicines. There are also concerns Australia could face shortages similar to those seen in other countries that experienced pharmaceutical company withdrawal due to underinvestment.

The issue extends beyond Mounjaro. Several drugs recommended for PBS listing, including advanced treatments for non-Hodgkin lymphoma and breast cancer, remain unavailable through the scheme due to stalled price negotiations. Industry representatives stress that delays and access gaps could negatively affect Australia’s health outcomes compared to other developed nations.

Amid these tensions, voices within government and industry urge modernization of Australia’s medicines approval and pricing frameworks to reflect the complexity and cost of current drug development. Labor backbencher and pediatrician Mike Freelander, who chaired a parliamentary inquiry into emerging medicines, emphasized the need for reforms that recognize the value of innovative and targeted pharmaceuticals, despite their high development costs.

As the pharmaceutical landscape evolves globally, Australia faces the challenge of maintaining its historically efficient and cost-effective drug subsidy system while ensuring timely access to modern treatments for its population. The standoff over Mounjaro highlights the potential risks of continuing current practices without significant adaptation.