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

The previous speakers in this debate on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 have spoken about the foundation stones of the Pharmaceutical Benefits Scheme and the coalition’s history of reform to make this scheme sustainable. In commenting on the coalition’s 2007 reforms, a report released by the Department of Health and Ageing states:

… the data suggests that the PBS is buying more generics at a cheaper price while maintaining access to new innovative medicines. More generic prescriptions at overall lower cost to Government is an indication that the community will gain better value from PBS expenditure over time, particularly as medicines become subject to competition.

In many ways, the PBS reforms initiated by the coalition government have achieved more than was anticipated. The reforms were not undertaken lightly but were subject to extensive consultation and negotiation prior to the introduction of the legislation. Unfortunately, this government has failed badly to demonstrate any capacity to consult or, indeed, to engage in evidence based reform. Many of this government’s so-called reform processes are driven by ideology or by fiscal incompetence. There is scant regard for outcomes, which has been all too evident with the Building the Education Revolution, the insulation scheme, cuts to the cataract rebate and chemotherapy changes to name just a few. In light of these issues, it is especially important that the parliament carefully scrutinises all measures presented by this government.

The bill before us seeks to accelerate and increase statutory price reductions. Specifically, it provides an additional two per cent reduction for drugs listed on F2A. In addition, there will be a five per cent reduction to all drugs listed on F2T. The price reduction applying when a bioequivalent drug is listed or when a drug moves from F1 to F2 will increase from 12½ per cent to 16 per cent. The bill expands and accelerates the price disclosure arrangements for all medicines listed in the F2 formulary. The addition of a new brand will no longer be required to trigger a price reduction.

An important aspect of the MOU which is enacted by this legislation is a minimum average 23 per cent price reduction to applicable F2 medicines in the cycle to 1 April 2012. The MOU does specify that drugs will continue to be excluded from adjustments where the difference between the weighted average disclosed price and the proved ex-manufacturer price is less than 10 per cent. For medicines subject to price reductions, the guaranteed adjustment proportion is calculated and, in effect, used to gross up each price reduction so that the average of 23 per cent is reached.

Given that the Minister for Health and Ageing has a chequered history of implementing savings measures, it may not be improbable that the minister demanded X amount of savings over the forward estimates and negotiations then worked backwards to arrive at the 23 per cent. This would have allowed the minister to lock in savings over the forward estimates to try and rebuild her image with the then so-called ‘Gang of four’. Unfortunately, though, it may not be conducive to good public policy and gives greater justification for closer parliamentary scrutiny. According to evidence at Senate estimates, price disclosure will impact 1,600 brands, up from 160 at present. The process of price disclosure is administratively complex. It is claimed by some stakeholders that such a large increase in the number of brands covered and the additional 23 per cent weighted average price cut will give rise to higher administrative costs.

Whilst it may be appropriate to pursue measures to better match the price paid by government to the market price, it is important that the government consults on such a large change. It appears that this has not been the case. Generic medicine companies are highly exposed to the price reductions and disclosure provisions. Whilst there are some conflicting accounts of their level of involvement in negotiations on these changes, it appears that generic companies were not directly involved in devising the final MOU. The viability of the generic medicine sector is of particular importance in ensuring a competitive market when medicines come off patent and reducing the cost of medicines to the government and individuals. The sector also employs 5,000 Australians in a variety of roles, including manufacturing, research and development. The subsidised pharmaceutical sector is different from other fully competitive markets. When drugs come off patent there can be reluctance from medical practitioners and patients to move to other brands. The generic sector is important to price competition, but brand substitution is imperfect and it can be difficult for Australian generic companies to attain and maintain market share.

In circumstances where it is clinically appropriate, pharmacists can offer patients a generic alternative. The coalition introduced a financial incentive for pharmacists to dispense a substitutable, premium-free medicine. While this agreement continues that incentive, it explicitly states that the Commonwealth will not make any variations without the consent of Medicines Australia and also will not introduce any measure which favours the prescribing or dispensing of generic brands without the consent of Medicines Australia. It remains to be seen whether the information campaign proposed by the government will be sufficient to offset other factors affecting market share and viability of generics as a result of these changes.

The MOU also provides for no new therapeutic groups to be formed for the duration of the agreement. The government introduced a new therapeutic group in the 2009-10 budget and three new groups in MYEFO. Clinicians raised concerns, particularly in relation to the bisphosphonate group. It was argued that the government had failed to consider the concerns of many clinicians that the drugs were not interchangeable at a patient level. At present, exemptions can be granted by Medicare to premiums paid by patients in certain circumstances. However, if the drugs are not interchangeable and exemptions need to be granted in most instances, timely access to treatment may be jeopardised. Accordingly, a Senate committee inquiry was launched into the therapeutic goods to allow for a proper investigation and, in the interest of process, the Senate disallowed the relevant groups until the Senate committee had reported. Contrary to what has been suggested the Senate did not move the disallowance because of opposition to the policy of therapeutic groups; rather, it was to allow clinical concerns to be heard and to examine the process and reasoning of the government’s MYEFO measure.

The 2009 budget measure for two statin drugs was not disallowed and there are a number of therapeutic groups that have existed for many years. The concerns supporting the disallowance were purely in relation to the process followed and clinical arguments presented. The MOU does specify that the three therapeutic groups announced in MYEFO are not excluded for the purposes of this agreement. It is appropriate that consideration be given to the groups following the outcome of the Senate inquiry, which is consistent with the coalition’s position from the outset.

The bill also makes changes to section 100 of the act to provide for the government’s compromised chemotherapy arrangements. The government first proposed changes to the funding of chemotherapy drugs in a 2008-09 budget measure. The government claimed that the savings of $105.4 million would be delivered over four years. The changes proposed to reduce wastage of chemotherapy drugs by providing funding according to the precise quantity of active ingredient used rather than by the vial. The changes were due to commence on 1 July 2009, but the Minister for Health and Ageing announced in April last year that the changes would be delayed until 1 September 2009. It is only now, towards the end of 2010, that the minister has finally worked through the detail with stakeholders. The changes would have made it unviable for many pharmacies to supply such drugs, especially in rural and remote communities. The wastage from unused portion in the vials would have been wholly borne by pharmacies. The minister did not understand and did not bother to consult on the practical implications of the proposal. It created unnecessary stress for patients, pharmacists and health professionals. Incredibly, it took two years for the minister to resolve. The chemotherapy bungle again highlights the minister’s, and indeed this government’s, incompetence and dangerous policy approach.

The changes proposed under this bill are also reported to affect wholesalers who ensure timely supply of pharmaceuticals to community pharmacies and in turn patients. Under the previous reforms, funding was provided through the community service obligation to ensure no adverse interruption to the supply chain. Under these new changes, it appears that there has been a failure to consult or at least a blatant disregard for the concerns raised. With a change such as this it is imperative that the government is able to provide assurances that the supply chain will not be disrupted. To date there has been no such substantiated assurance.

The MOU also provides for changes to administrative processes to streamline the listing of new treatments. These changes are welcomed and, on behalf of patients and clinicians, I genuinely hope the government manages to fulfil this promise. This is particularly the case with the time taken for cabinet consideration. With the listing of new drugs we have seen this government using the process to delay important treatments recommended by the PBAC. This was exemplified with drugs such as Avastin, approved by the PBAC in July 2008 but not listed by the minister until July 2009. Unfortunately, the language of the MOU on this aspect is far from convincing. It states:

… the Commonwealth will use its best endeavours to implement a maximum time frame of six months for consideration and decision …

Too often this government’s so-called best endeavours are nowhere near good enough.

The coalition will stand up for parliamentary scrutiny, especially on measures as significant as this. The bill before us today proposes significant changes to a vital component of our health system. Following extensive consultation, the PBS has undergone significant reform over the last few years. The coalition government’s reforms are expected to generate savings far greater than originally anticipated according to the government’s own calculations. The government has sought to wring more savings out of the scheme through measures that were not consulted on and may have had serious implications for patient access to treatment. Again it appears that this minister has undertaken a complex change without consulting fully with all stakeholders affected.

It is important that the parliament be given an opportunity to scrutinise the changes in detail and that all stakeholders can have input. The bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and the coalition will reserve its position and consider the outcome of that inquiry. It is entirely appropriate that debate on this bill occurs with the benefit of the inquiry’s findings. The coalition proposes that the bill be deferred until after the reporting date of the inquiry—that is, 16 November. This will allow for a more informed consideration and there will remain a number of sitting days for the bill to be debated before the parliament rises this year. Accordingly, I move the following amendment:

That all the words after “That” be omitted with a view to substituting the following words: “the House declines to give the bill a second reading until the Senate Standing Committee on Community Affairs has reported to the Senate on its inquiry into the bill”.

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