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Regulation impact statement: Codeine re-scheduling

Version 1.1, December 2016

20 December 2016

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Net benefit for each scenario

As stated earlier, a simultaneous modification of the regulatory control mechanisms for both Schedule 2 and Schedule 3 codeine medicines is required. If a single regulatory option was enacted the desired outcomes would largely be negated by consumers shifting from either Schedule 2 to Schedule 3 (or vice versa). By coupling the 6 options, 3 scenarios result (in addition to scenario 1 - status quo). Table 20 details the regulatory cost, health economic costs and benefits per scenario.

For consumers and the government the main additional economic costs relate to:

  • net out-of-pocket costs to consumer;
  • additional costs to MBS due to additional GP and pain consultations; and
  • additional costs to the PBS due to additional scripts for PBS listed pain medications.

The additional costs to the MBS are the primary driver of additional costs to government, while the identified health benefits are principally associated with:

  • prevention of accidental death;
  • improved quality of life when a patient benefits from other treatment options that would not have previously been explored;
  • prevention of adverse events related to unintentional overdose of paracetamol or ibuprofen; and
  • reduced dependence and risk of dependency.
Table 20: Regulatory (for first year, 2017 and the period 2017-2026) as well as the economic costs and benefits (for the period 2017-2026) for each option and scenario ($million)
Scenario 2 Scenario 3 Scenario 4
Option 2 Option 5 Option 3 Option 5 Option 4 Option 6
Regulatory costs (average annual) Option ($0.05) ($0.13) ($10.14) ($0.13) ($10.24) ($2.21)
Scenario ($0.18) ($10.27) ($12.45)

For the 10-year period from 2017-2026 the following costs and benefits have been estimated:

Regulatory costs (not discounted) Option ($0.50) ($1.30) ($101.40) ($1.30) ($102.40) ($22.10)
Scenario ($1.80) ($102.70) ($124.50)
Health economic costs (7% discounted) Option ($20.70) ($409.87) ($14.49) ($409.87) ($56.03) ($209.87)
Scenario ($430.57) ($424.36) ($265.90)
Health economic benefits (7% discounted) Option 0 0 0 0 $243.95 $5,353.17
Scenario 0 0 $5,597.12
Net benefit (7% discounted) Option ($21.20) ($411.17) ($115.89) ($411.17) $85.52 $5,121.20
Scenario ($432.37) ($527.06) $5,206.72

The regulatory costs as well as the economic costs and net benefits have been derived using two separate models. Each model has inherent assumptions that were informed by specific data or feedback from stakeholder consultations. There were some assumptions in the economic model that had data gaps and conservative estimates have been used in these circumstances. These conservative assumptions using limited data have been clearly articulated in the KPMG report (Annex 1), hence the above are estimates only.

The implementation of Scenario 4 clearly results in a net benefit to society over 10 years ($5,207 million) (Table 20).

Scenario 1 (Option 1: status quo)

This scenario represents the status quo and hence it is not expected to provide any additional regulatory burden or benefit. However, while there are no net benefits associated with this option, the identified negative net health benefits are significant and should not be dismissed.

While codeine-containing medicines remains in the OTC market, there is no ability for GPs to monitor patient use of codeine for chronic pain, despite GPs being better equipped than pharmacists to do so. Hence other treatment or therapy options for a particular patient are unlikely to be explored or encouraged. On this basis, it is anticipated that individual health outcomes will not improve and, more broadly, the impacts on the healthcare system will continue to increase as they have done so over the last few years.

Furthermore, without reducing the pack size to not more than 3 days' supply and including a label warning that 'codeine can cause addiction', no change in patient behaviour will likely result in codeine dependent individuals.

Given the level of concern for public health and safety, this regulatory option could not occur in conjunction with a voluntary real time monitoring (RTM) system that monitors the sale and provision of the these medicines [notwithstanding the significant limitations and concerns that have been raised as outlined in 'Why are regulatory options being considered?' (p. 39)]. Pharmacists would experience increased engagement with 'challenging' patients when managing the use of OTC codeine medicines, noting that the pharmacy environment does not usually allow for private conversations in the way that doctors' rooms do.

Scenario 2 (Options 2 and 5: reduce pack size of Schedule 2 and Schedule 3 and new label warning)

and Schedule 3 and new label warning)

Scenario 2 (Options 2 and Option 5: reduce the pack size to not more than 3 days' supply on all Schedule 2 and 3 codeine-containing medicines and include a label warning that 'codeine can cause addiction') is likely to induce some behavioural changes in certain individuals who are dependent or who abuse codeine. Behaviours such as 'Pharmacy shopping' is likely to increase, as dependent users attempt to source their codeine. Historically, changing the labelling and decreasing the pack size of codeine medicines has not adequately addressed the problem of misuse, dependence or medicine misadventure.

This scenario will affect 214 ARTG medicine entries (entirely OTC) across a total of 37 sponsors ( Table 4) (22 plus 15).

Table 20 summarises the regulatory burden estimates, economic costs and benefits for Option 2 plus Option 5 to give a negative net benefit of $432.37 million for this scenario. Other than Scenario 1, this scenario induces the lowest net regulatory and health economic costs of $1.8 million and $430.57 million respectively for the period of 2017-2026. The principal economic costs are associated with out-pocket costs to consumers.

As for Scenario 1 above, given the level of concern for public health and safety, it is anticipated that regulatory Scenario 2 can not occur in isolation of a mandatory real time monitoring (RTM) system (see p. 39 'Why are regulatory options being considered?'). With any adoption of a RTM system, the states and territories will need to agree to support such a mandatory reporting system with changes to relevant jurisdiction legislation which will take time.

As Scenario 2 allows for the continued supply of OTC codeine medicines that have the potential to induce dependency, its adoption will not address all the public health concerns. Furthermore, the current SPF implies that OTC medicines should not require a recording and monitoring system to protect public health, as this is often attributed to Schedule 8 medicines (Controlled Drugs, or drugs of dependence). Hence this scenario would not address the current inconsistency in the scheduling of OTC codeine-containing medicines in Australia, and with the exception of the UK, this would be in contrast to international best practice regulation.

As discussed above (p. 44 'Business-as-usual (BAU) variations to existing medicines'), regular changes to medicine labels are part of normal business practice. It is estimated that more than half of the medicines labels for those medicines marketed in Australia are changed every 3 years. When proposing scheduling options for the length of transition time, the burden placed on businesses is consistent with the risks posed to public health.

Furthermore, as stated above under 'Regulatory cost assumptions for Option 2' (p. 65) from our industry consultations, 50% of codeine sponsors already produce 3 day packs or have a production line that could accommodate this change across their impacted product portfolio, provided the implementation timeframe is sufficient. These sponsors will not need to implement new manufacturing arrangements for the outer carton (apart from the printing) nor inner blister pack. It is estimated that approximately 18 sponsors (50% of 37 sponsors) will incur costs to change their pack size.

Consultations have indicated that the shortest implementation time frame would be 9 months.

Scenario 3 (Options 3 and 5: up-schedule Schedule 2 to Schedule 3 and reduce pack size for Schedule 3)

Scenario 3 (Option 3 and Option 5: up-schedule Schedule 2 to Schedule 3 and reduce the pack size to not more than 3 days' supply and include a label warning that 'codeine can cause addiction') is likely to induce behavioural changes in certain individuals who are dependent or who abuse codeine medicines. Behaviours such as 'Pharmacy shopping' are likely to increase, as dependent users attempt to source their codeine more often due to the reduced pack size. Historically, changing the labelling and decreasing the pack size of codeine medicines has not adequately addressed the problem of misuse, dependence or medicine misadventure.

This scenario will affect 214 ARTG medicine entries (entirely OTC) across 37 sponsors (Table 4 p. 47) (22 plus 15).

Table 20 shows the summary of the regulatory burden estimates, economic costs and benefits for Options 3 and 5. The net regulatory and economic costs for Scenario 3 are $102.7 million and $424.36 million respectively for the period from 2017-2026. The principal economic costs are associated with out-of-pocket costs to consumers. This is attributed to the increased expense of codeine-containing medicines due to pharmacy oversight.

As with Scenario 2, it is anticipated that this regulatory scenario (Options 3 and 5) could not occur in isolation of a voluntary real time monitoring (RTM) system (see p. 39 'Why are regulatory options being considered?'). However the costs/benefits of a monitoring system, with all of the the issues highlighted above, have not been modelled.

As for Scenario 2 and discussed above (p. 44 'Business-as-usual (BAU) variations to existing medicines'), regular changes to medicine labels are part of normal business practice. It is estimated that more than half of medicines labels for medicines marketed in Australia are changed every 3 years. When proposing scheduling options for the length of transition time, the burden placed on businesses in consistent with the risks posed to public health.

Furthermore, as stated above under 'Regulatory cost assumptions for Option 3' (p. 70), from our industry consultations, 50% of codeine sponsors already produce 3 day packs, or have a production line that could accommodate this change across their impacted product portfolio, provided the implementation timeframe is sufficient. These sponsors will not need to implement new manufacturing arrangements for either the outer carton (apart from the printing) or inner blister pack. It is estimated that approximately 18 sponsors (50% of 37 sponsors) will incur costs to change their pack size.

Consultations have indicated that the shortest implementation time frame would be 9 months.

Scenario 4: (Options 4 and 6: OTC codeine not available)

When Option 4 is taken together with Option 6 (Scenario 4), all Schedule 2 and Schedule 3 codeine-containing medicines will be up-scheduled to Schedule 4. This scenario will affect 214 ARTG medicine entries (entirely OTC) across 37 sponsors (Table 4, p. 47).

Table 20 summarises the regulatory burden estimates, economic costs and benefits for Options 4 and 6. The predicted net regulatory and economic costs for Scenario 4 are $124.50 million and $265.90 million respectively for the period of 2017-2026. The principal economic costs are associated with out-of-pocket costs to consumers, pharmacies and doctors and increased PBS and MBS costs to the government (discussed below). The economic health benefit is estimated to be $5,597.12 million for 2017-2026, with a net health benefit of $5,206.72. The economic health benefits are principally driven by the QALY gains (as described under option 6 above), as better diagnosis and other treatment options are explored, including referral to a pain management clinic or other non-pharmacological interventions.

Behaviours such as 'Pharmacy shopping' will cease, but dependent users would likely engage in 'doctor shopping' in an attempt to source their codeine. This is the preferred scenario, as GPs are well equipped to understand the available options to treat these patients.

Codeine-containing medicines are likely to be used for their intended purposes only, with the risks of use clearly articulated at the time of prescribing. Alternative options can be discussed to minimise the risk to patients and increase the quality use of medicines.

For some consumers, Scenario 4 will result in a reduction in out of pocket costs with no change in health status. These consumers are those who currently use low-dose codeine combination medicines occasionally (only three days at a time for acute pain), and are expected to substitute this medicine with codeine free alternative that do not require a prescription. Generally these will be at a lower cost to the consumer compared to the expenditure that would otherwise have occurred, for a medicine that is as effective. Hence there will be financial savings to some consumers as they switch to less expensive medications, without a loss in pain relief.

The identified health benefits of this scenario are:

  • prevention of accidental death
  • improved quality of life as a patient benefits from other treatment options that would not have previously been explored
  • prevention of adverse events related to unintentional overdose of paracetamol or ibuprofen, and
  • reduced dependence and risk of dependency.

As with previous scenarios there was a net reduction in out of pocket costs to the consumer. When this occurs, the model adjusts the resultant saving to be included as a benefit, not a negative cost. This saving to consumers is the result of a combination of factors, including:

  • the reduction in use of low-dose codeine
  • the substitution of low-dose codeine with cheaper supermarket products such as paracetamol or ibuprofen
  • patients who continue with prescription medicines (whether containing codeine or not) in most cases will pay the same or less than their current expenditure on low-dose OTC codeine medicines
  • if patients substitute low-dose codeine medicine with high dose prescription codeine medicine via script, they can be provided with up to five repeats by their GP, thus reducing the need for visits to their GP
  • high bulk-billing rate for GP consultations
  • the rate at which pain-related GP consultations can be accommodated within visits that would otherwise have occurred in the absence of the proposed regulatory change.

Consultations have indicated that the shortest implementation time frame for Scenario 4 would be 12 months.

Predicted costs to deliver health benefits

Other economic costs to the government for this scenario relate to additional costs to MBS due to additional GP and pain consultations and additional costs to the PBS due to additional scripts for PBS listed pain medications.

The additional MBS costs in 2017 are estimated at $59.4 million, of which 83% relate to the costs of improved treatment for pain relief that would otherwise not have occurred. The remainder ($5.6 million) relate to the costs of additional consultations to obtain prescriptions for low-dose codeine medications. The present value of additional costs to the MBS over the ten year period 2017-26 are $185.2 million, of which 61% relate to treatment costs. This difference in the proportion that relate to treatment costs over the ten-year period is the result of the need for treatment for patients with chronic therapeutic use (dependent and non-dependent) decreasing as the use of low-dose codeine medications reduces due to the requirement for patients to obtain a prescription from a GP.

The predicted additional prescription medicines dispensed is 4.6 million with a predicted cost to the PBS ($23.1 million) in the first year (2017), and the present value of the additional costs to the PBS ($61.4 million discounted at 7%) over 2017-26 (Table ES11 of the KPMG report). Only some of the 4.6 million additional prescriptions in 2017 that are expected to occur under Scenario 4 will incur cost to the PBS.

Unlike the regulatory costs for industry, the additional costs for doctors and pharmacists are likely to occur over the entire 10-year period and are estimated to be $2.7 million for Scenario 4 during the period of 2017-2026.

The identified regulatory benefits of this scenario are:

  • codeine is scheduled in a manner than provides greater consistency with the SPF (Scheduling Policy Framework), with reduced public risks, and
  • Australian regulation of codeine will be consistent with comparable international regulators.
Health benefits

The economic modelling accounts for additional health costs such as out-of-pocket expenses for consumers cost to the MBS through increased GP and/or specialist consultations and the additional costs to the Government (MBS and PBS). These health costs are assumed to begin 12 months after a scheduling decision is made.

The health benefits estimated for Scenario 4 include gains in 'quality of life years' (QALY) due to the exploration of alternative, more effective treatment pathways that would not have previously been explored as well as the prevention of deaths.

The number of deaths prevented per year for Scenario 4 is conservatively estimated at five, based on information derived from the Roxburgh study[130] with each death prevented valued at $4.2 million.

A gain in QALY of 9,208 in 2017 was estimated. The monetary valuation of a QALY as per OBPR guidelines[131] is $182,000, which results in an estimated gain of $1,651 million (in 2017) and a gain (present value) of $4,399 million over the period of 2017-26. The majority of the QALY gains occur in the first two years as customers pursue different treatment pathways as a consequence of GP consultation. The model assumes that the reduction in the number of patients participating in additional therapy occurs at a rate of 30% per year.

The health benefits are driven by QALY gains as better diagnosis and other treatment pathways for chronic pain are explored, including referral to pain management clinics or other non-pharmacological interventions. There are predicted economic costs that will be incurred with the delivery of these public health benefits that are principally associated with out-of-pocket costs to consumers, pharmacies/doctors as well as increased PBS and MBS costs to the government.

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