Mike Freelander (Macarthur, Australian Labor Party) Share this | Hansard source

I rise today to support the remarks made by the shadow minister for health, the member for Ballarat. In doing so I would also like to acknowledge the work of the minister and his advisers in the Department of Health in developing these proposals and bringing them to the parliament. I also wish to recognise the ongoing work of the Therapeutic Goods Administration and the Pharmaceutical Benefits Advisory Committee, whose efforts do so much to underpin the integrity and viability of our healthcare system and, more particularly, the Pharmaceutical Benefits Scheme.

As the shadow minster has already indicated, Labor will not be opposing the bill. This is one of those rare beasts in a bipolar political age, an important but relatively uncontentious bill. It's an important bill because the PBS is, with Medicare, one of the two great bulwarks of affordable universal health care in Australia. The PBS was introduced by the Chifley government, who fought the conservatives to introduce it in 1948. It underpins affordable treatments for all Australians. The Pharmaceutical Benefits Scheme subsidises the cost of the majority of medicines we all use and are prescribed. The PBS is the means by which the Australian government helps all of us pay for prescription drugs that many of us could never afford. The annual cost of the scheme is close to $11 billion in a Commonwealth health budget of around $70 billion and total government spending on health of $115 billion in the financial year 2015-16.

For non-concessional Australian patients, the cost to consumers of drugs listed on the PBS is capped at $39.50. When drugs cost more than this, the government covers the extra cost. The consumer's contribution is often called 'a co-payment'. This is the out-of-pocket expense that needs to be met by individuals whenever they fill a prescription. Like Medicare, the PBS owes its existence to Labor. It is a fundamental Labor initiative and, whilst the minister is very fond of making announcements of PBS listing, it's very important to know that the PBS has bipartisan support and the minister relies on advice from the PBAC and the Therapeutic Goods Administration about which products to list. It is not something that is done ad hoc. As I've mentioned, it has bipartisan support, although it is a Labor initiative.

It's a real-life expression of how idealism and a belief in a fair society can be translated into reality and sustained by careful policy and by political cooperation and goodwill. Over its 70-year history, it has been one of those things that government do that we've all come to rely on. I always think whenever some cranky old bloke asks what the government does for him that the PBS is probably not a bad place to start my answer. The PBS supports all Australians.

The PBS has not only delivered better health outcomes to over four generations of Australians but has produced a fairer and stronger society for all of us, not just some of us. It's even managed to satisfy—and it's hard to imagine economists ever being pleased—those most closely concerned with efficiency and proper targeting of government programs. As I was researching this speech, I came across a couple of studies by the National Centre for Social and Economic Modelling, at the University of Canberra, showing that 80 per cent of the benefits conferred by the PBS have consistently gone to the bottom 20 per cent of income earners. In terms of helping those who need it most that's a very impressive result; so far, so good.

As we all know, the job of government is unending and good public policy is seldom allowed to settle into a comfortable holding pattern. There are always competing priorities, and with the PBS this is increasingly so. Inevitably, elevated community expectations, an ageing population, new medical breakthroughs and demands for other services increase the pressure on government to lower health costs. The PBS is not immune from those pressures. With increasing complexity of prescribing and the use of the new biologics and genetically targeted drugs, this task is going to get harder and harder. I believe we are on the cusp of a rapid increase in the use of these medications, and pressure on the PBS and the PBS budget will become ever greater. Governments have to either find more resources or make more efficient uses of the ones they have, and this bill is part of that.

Private individuals, without considering a PBS, have very few choices, and some of them are pretty unpalatable. One of those unpalatable choices is not visiting the doctor and another is not filling prescriptions, because the costs are so high. Presently, even now, up to 10 per cent of Australians don't get or defer getting their prescriptions filled because they can't afford to. As we now see with private health insurance costs, household and government budgets can only stretch so far.

The reach and the cost of the PBS began to ramp up in the mid-1990s, coinciding with a very significant expansion in the number of new drugs prescribed for chronic ailments such as diabetes and cardiovascular disease. Between 2005-06 and 2013-14, PBS expenditure grew on average by five per cent a year, and, like other elements of the health budget and private healthcare costs, they outstripped other calls on the public purse and private incomes. On one estimate, prices for generic prescription drugs in Australia went from being the third cheapest in the developed world to the third most expensive. Action was needed, and, despite the likely political pain, it occurred. To his credit, one of the last of the Howard government health ministers introduced price disclosure and step-price reduction arrangements applying to many drugs in 2007. Labor built on that early work, making significant changes and improvements in 2010. In controlling PBS spending, Labor's clear aim was to reduce costs by exacting greater value from the pharmaceutical companies. The rate of increase in the cost of the PBS did, in fact, decline.

Returned to office in 2013, the coalition, regrettably, also pursued—in the Yes, Minister sense of the term—a more courageous approach. It also attempted to drive down demand for medicines and expenditure on them by slugging patients. Unnecessary and unfair, this was more than a misstep. It's taken the coalition the best part of 3½ years to get there but, fortunately, it now seems to be showing some signs of catching on and following the Labor lead. What we have in this bill is a more measured approach, in total contrast to the horrors of the 2014 budget and the outlandish attacks on the health system championed through the government's wrong-headed Commission of Audit report.

Thankfully, despite some limitations, this bill is close to Labor's reform strategy and builds on the work of the Gillard and Rudd governments on the pricing of medicine. So progress has been made, even if that progress has not been rapid enough for some. According to the most recent Grattan Institute survey, by May 2017 Australia's prescription drug prices were, on average, 3.7 times higher than the benchmarked international best price. That is not a great result, but it is a big improvement on the 16 times higher finding in its 2013 report for the same suite of medicines.

The bill, for the most part, implements measures announced in the 2017-18 budget. Labor welcome the resulting price reductions for consumers and the underlying savings to the federal budget facilitated by the bill. We welcome, too, the decision of the government to reinvest savings from the planned price reductions in the listing of new medications on the PBS, even though we have some concerns about the lack of transparency in the processes involved. The Senate Standing Committee for the Scrutiny of Bills has qualms concerning ministerial decisions involving the statutory price reduction process. The minister's response to the Scrutiny of Bills Committee was, in my view, not entirely convincing. Identifying a non-exhaustive list of criteria to guide the minister's decision-making powers might have been a helpful and useful step forward.

In the nine months since the budget, public and industry reaction has been muted. This may be a sign that the changes proposed are both moderate and modest. So, if nothing else, the minister has done a reasonable job to date in not frightening the horses. This is a policy area where this government has had to learn to tread much more carefully. The downside is that a number of crunch issues are deferred for another day, and this is my major concern. Likewise, if the government's main aim is to restrain cost pressures, this bill signals only a small victory. Cost pressures right across the healthcare system are not going to abate of their own accord.

Striking the correct balance between affordability and choice will always be the core issue for the PBS. As I have previously mentioned, my view is that there will be a rapid expansion in the number of applications for medications to be listed on the PBS in the next few years due to the rapid development of biologic drugs and genetically targeted medications. These savings are a very small part of what is a large PBS budget—around three per cent of the PBS cost over the next five years. We need to prepare ourselves for a lot of pressure on the PBS budget in the next three or four years as our drug developments increase.

I cannot specifically comment on the mechanics of the price reduction formula contained in the bill, especially from my limited vantage point in opposition. However, the government's projected savings seem very plausible, even if still quite generous, I believe, to the pharmaceutical companies. Under the existing PBS pricing arrangements, when a new competing brand lists alongside an existing brand of a generally patented drug, there's an immediate price reduction for the new and existing brand. Presently, this is about 16 per cent, and this bill will increase that up to 25 per cent. However, evidence from overseas suggests that some reductions can be as much as 80 per cent. Such large drops in price are a reflection of the sharply declining price once many drugs cease to be unique.

Only time will tell if the government's savings proposals are as robust as they need to be. I imagine that there's a degree of uncertainty as to whether this bill will generate enough savings to fund all the new medicines that warrant PBS listing in the next few years and simultaneously contain the overall cost of the scheme. This is something that is presently unclear and is a major concern for me. Perhaps the minister would like to enlighten us on this. I'd be very interested. It might be useful, too, if he could help us join the dots on the extent to which the projected savings have already been consumed by the recent new listings the minister referred to in his second reading speech. It's too early to make the biggest call of all: whether the PBS is as efficient and cost-effective as we could make it. We need to look across the Tasman to see that there is still hope for delivering significant price reductions for generic drugs under the PBS. There is some evidence that the costs in New Zealand of some common medications, such as paracetamol et cetera, is much, much less than we're paying in Australia. Our two systems aren't strictly comparable and New Zealand's approach does trade off less brand choice for lower budget outlays, but it is a reminder that there are some systems that seem to be more efficient than our own.

One other issue that the bill proposes is the repeal of the sunset clause that would, from June 2020, end restrictions on the location of new or additional pharmacies. The change, I think, is problematic. I do understand that this matter was being looked at by the government's Review of Pharmacy Remuneration and Regulation inquiry, but their findings have now been effectively gazumped. It may have made some sense to wait for the completion of that review before the government signed off on this aspect of the bill, but what's done is done.

In the time remaining, I'd like to touch briefly on a number of other matters less directly connected with the bill. At the conclusion of his second reading speech, the minister stressed the need to balance access to affordable medicines when and where needed with ensuring value for taxpayers' dollars. I couldn't agree more. The minister's point on the need to balance competing claims is an entirely sensible response to a difficult resourcing problem. What disappoints me is that this minister's good sense of recognising the need to balance choice with value of money is in stark contrast to the almost hysterical naysaying we've had from the government on Labor's proposal to have a proper inquiry into the cost and effectiveness of private health insurance. But I digress, if only a little.

Lastly—and I do not in any way intend this as a criticism—can I encourage the minister also to do whatever he can to bring forward and broaden the government's plans to have in place a national real-time register for monitoring dangerous drugs and also to expedite the extension of that real-time monitoring to all high-cost prescription drugs available under the PBS. This is an initiative that will save lives and which can more than pay for itself by reducing the overuse of prescription drugs. I would also encourage a review of doctors' prescribing habits in a more formal way so that we can further reduce costs. I recommend the bill to the house.

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