Peter Dutton (Dickson, Liberal Party, Shadow Minister for Health and Ageing) Share this | Hansard source

I rise to contribute to this debate on the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 [No. 2]. By way of background, this bill was implemented as a 2008-09 budget measure which Labor says was an election commitment, but we can find no such commitment. It will impose fees at three points: the original submission for listing, after successful application and at resubmission.

The introduction of a cost recovery measure was expected to generate additional revenues of $7 million over forward estimates, with a net cost of $2.2 million. However, the EM states that, once fully operational, annual revenue from fees is expected to total about $9.4 million in 2008-09, rising to $14 million in 2009-10. Irrespective, savings are a very small proportion of the approximately $7 billion spent on the PBS.

Indicative fees and charges proposed under the scheme as at June 2008 were as follows: a major submission, $119,500; a minor submission, $12,500; secretariat listing, $1,000; generic products, $500; and pricing arrangements, $25,000. This effectively means it could cost approximately $145,000 to make a single submission. To bring new drugs to the market, the costs are estimated to be approximately $315,000, providing there are no complications.

Cost recovery measures were first introduced in the 2005-06 budget, with a proposed implementation date of 1 July 2007. Implementation was delayed due to consultations with the pharmaceutical industry about the PBS reform process during 2006.

When originally proposed in 2005-06, there was concern that such measures were undermining the independence of the PBAC and might result in manufacturers declining to list drugs on the PBS. In 2005-06, Medicines Australia argued the operation of the PBAC was a Commonwealth government function and cost recovery measures would be inappropriate. Arguments in favour of cost recovery suggest that a pharmaceutical company receives significant benefit from listing and it is unreasonable that the taxpayer should pay the bill for listing. Manufacturers already incur significant costs in preparing a submission and, under such a proposal, the pharmaceutical industry would also have to pay the additional fee when the submission is considered by the PBAC. There are concerns that cost recovery could affect the independence of the PBAC and the PBS.

Cost recovery has been implemented successfully in the TGA process, which has maintained its independence. However, the TGA and the PBAC have very different roles. The TGA decides whether a drug or medical device can be marketed in Australia, whereas the PBAC advises the minister on which drugs should be approved for a public subsidy.

The Productivity Commission advised that cost recovery arrangements should only be introduced to improve efficiency and should not be implemented where it is inconsistent with policy objectives. Whilst cost recovery may improve efficiency, if it leads to higher drug prices and delays to PBS listings, it would be inconsistent with the objective of the PBS of providing timely and affordable access to pharmaceuticals.

Like many people in this place, including the minister, I have contact with the industry and listen to stakeholders. Their concerns in relation to this particular bill are certainly strongly held. The industry argues that this would be a global first, that it would be unprecedented and that the measures do not adhere to the principles of cost recovery. There is no service to the seller. Recovery is being made for a purchaser’s function, and it could take the costs of a listing to over $1 million. It could risk Australian patients’ access to some new medicines and it could impact small population groups—and this is a very important point.

The point relates to drugs which are brought to the market, which do have a very small patient base, where it is a listing which involves a so-called ‘orphan drug’ and where the returns to the company are nowhere near what the public perception might be about the returns on some of the so-called superdrugs—where there is a significant return on investment to companies. We are talking about smaller population drugs where there is significant cost to the company to bring that drug to market. In many cases, it is already financially unviable for that drug to be brought forward to market, but there is cross-subsidisation that takes place, obviously, in relation to some of the decisions that these companies make. It means that they can afford, in some cases, for the public good, to bring a particular drug forward even though the returns might be quite minimal—if positive at all.

So there are concerns, and I say to the minister that there is a need for the department and for her office to heed those concerns and to look at the measures and how they can provide a way forward so that patient outcomes are optimised into the future.

Some companies will decide that it is not worth listing some drugs for those groups and that is going to have a detrimental outcome for some patient groups. Again, that is something that the government has to weigh up in the decision-making process. It does, the industry advise, have the potential to deter innovation and investment in the Australian pharmaceutical industry and it is, in fact, a tax. It should be acknowledged by the government as such. There is no comparison to the TGA process where payment is for registration. These are all important points in this debate. The government reintroduces this measure at a time the industry is dealing with a substantial four-year reform process initiated in 2007 and it also comes as the budget imposes a further $175 million in price cuts on the industry. It is important to note as part of this debate that the now minister expressed strong opposition to cost recovery when she was the shadow minister for health and ageing. Indeed, the minister said that such actions would threaten the independence of the PBS:

The PBAC needs to be independent of government and of industry, and we cannot see the justification for this move to the cost-recovery model. I have asked the government to reconsider this approach given the risk to the independence of the PBAC.

Obviously, the minister’s view has changed quite considerably over the course of the last 18 months. I also note, as part of my contribution to this debate, that the chair of the PBAC suggested that there were no concerns about cost recovery impacting on recommendations or, indeed, independence of the commitment. The PBS gives Australia one of the best pharmaceutical delivery systems in the world and we intend to make that better. Giving Australians access to the best available medicines that are safe and of the highest quality should be a priority of any government. It certainly was a priority of the coalition government. That is why we initiated the PBS reform and it is why this government has continued with that process.

The coalition fully supports the charter of the PBS to provide timely and affordable access to subsidised medications for the Australian community and, despite some rewrite of history that has taken place in a number of portfolios over the course of the last 18 months by this government, it is important to place on the record that during the coalition government’s time we increased expenditure on pharmaceutical benefits from $2.22 billion in 1996-97 when we came to government to $6.4 billion in 2006-07. That is a significant increase, recognised by people in the industry but most importantly recognised by Australians who have the potential for lifesaving drugs to make a difference to their situation and to improve their health. That is certainly a continuing priority for this coalition. When we return to government we will make sure that we continue to have a sustainable PBS system. We will also continue to listen to the concerns of those within the industry who are making investment decisions about whether or not they will manufacture or conduct research and development in this country and whether or not they continue to employ staff in a highly productive industry. These are all decisions which go to whether or not these future investments will be made in this country. That is why the government needs to tread very lightly.

As part of this debate, I want to mention Pauline Talty, a very brave woman who lives in Sydney. She has a terrible condition which necessitates a transplant that is going to be performed overseas because of an announcement made by the government earlier today. This has been a very difficult time for Pauline and her family. It has been an extremely taxing time for a number of months. They have jumped through bureaucratic hoops to facilitate the only option available to this young woman. I have met with Pauline in hospital. I have listened to her case and I have spoken and corresponded with her family and supporters and her case is compelling. I thank the government for their change of heart, for the reversal of their decision. It is a common-sense outcome that they would support this woman to travel overseas to have what potentially is a lifesaving transplant operation.

I thank the government for that change of heart, which did not come easily. A great deal of public debate has taken place. I also want to thank all of the media outlets involved in airing the case of Pauline Talty. I want to thank the Alan Jones program for the interest they have shown in this issue because this really was about the life and death of a young Australian. We have been able to help Pauline in her cause to come to this great outcome, an outcome which I said on radio recently I would praise the government for if they were to change their mind. I offer that praise to the government today. I hope that every accommodation will be made in the delivery of this outcome and Pauline’s travel overseas. We wish her a successful operation and hope and pray that she is returned to Australia so that she can lead the life she has dreamed of for so long, and for her family to live with some peace of mind knowing that she has been given an opportunity to have her life extended, a life which otherwise, without the assistance of this program, would not have been possible.

Also, I want to make some comments about the announcements in the budget last night. The situation is quite dire for public hospitals right around the country. That is why this Prime Minister promised at the last election that he would fix public hospitals by mid-2009. There is now a closing gap but nonetheless a six-week window open to the Prime Minister to fix public hospitals. That is the promise he made at the last election. It is a promise which is going to be broken in six weeks time because, despite any best intention at the eleventh hour, this Prime Minister is not going to be able to fix public hospitals in six weeks. That was the commitment given by this government at the last election but we came through another budget last night without any evidence whatsoever of how they are going to fix public hospitals.

Interestingly enough, the words that were used by the Prime Minister were that he would fix the public hospitals. That has been airbrushed from the Prime Minister’s website. It now says that they will improve public hospitals. And the latest contribution from the federal minister is that they will water down that commitment even further. That is of great concern to all Australians, because all Australians heard at the last election that this Prime Minister would fix public hospitals by mid-2009, and he has failed to do so. And how can you have a health system—

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