Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I rise to speak on the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008. Australia has arguably one of the best systems of pharmaceutical delivery in the world. After several innovations over the life of the coalition’s time in government, we can say that Australians have access to the very best available medicines and that they are safe and of the highest quality. We also have one of the lowest cost medicine systems in the Western world. The coalition has a proud history of working with industry to ensure we bring the best and most advanced medicines to market in a timely fashion and at a low cost to Australians. This amendment will allow the government to charge fees for services provided by the Pharmaceutical Benefits Advisory Committee, PBAC, and related services performed by the Department of Health and Ageing. What is proposed is that fees will be charged to drug companies which make an application to the PBAC. Pharmaceutical companies already pay fees to the Therapeutic Goods Administration to test the efficacy and safety of new drugs that they wish to bring to market. This amendment will extend the cost recovery structure so that pharmaceutical companies will now also contribute to the costs incurred by the PBAC in its role in advising the minister as to which drugs should be listed on the Pharmaceutical Benefits Scheme.

Full cost recovery of the PBS was considered by the coalition in government last year and in 2005. However, for a very good reason, it was never introduced: there were definitely problems with its implementation. Consultants called in by the Department of Health and Ageing identified potential problems with the fees based proposal and suggested other methods be considered. It was felt that fees alone would create an environment where the sponsors of generic medicines could potentially receive a free ride. Concerns were expressed that an unfair financial burden would be passed on to pharmaceutical companies seeking to list a medicine for the first time or to change a listing. This had the potential to stifle new products and innovation.

I note that, during debate on changes to the PBS, introduced by the coalition in May 2007—in which the PBAC cost recovery was not included, I might add—the now Minister for Health and Ageing expressed strong opposition to the proposed scheme of PBAC cost recovery. On 31 May 2007, the minister—at that time the shadow minister—said:

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 ...

That was the member for Gellibrand on 31 May 2007. The member for Gellibrand, who is now the Minister for Health and Ageing, is now doing a complete backflip and is seeking to use this as a revenue raiser in the budget. How policies change to suit the agenda! Here we have a government desperate to pull back on its budget spending spree.

The member for Gellibrand was concerned about the independence of the PBAC a year ago but obviously not today. The member for Gellibrand expressed some apprehension that, if pharmaceutical companies were to pay for their own consideration on the PBAC, the process of achieving PBS listing could not be said to be an arms-length process. The member for Gellibrand has changed her tune today. This was the very concern expressed by the then AMA president Mukesh Haikerwal. He acknowledged that the TGA, which is also involved in regulating new pharmaceuticals, does employ cost recovery strategies. However, the TGA looks only at safety and efficacy data for any given drug. It does not look at subsidising the drugs through the PBS. It is a very important difference. There are concerns that having a user-pays system will have the effect of making a public body financially dependent on the industry it is supposed to be regulating.

In October, Professor Christopher Nordin AO, who is a visiting professor at the University of Adelaide and a consultant physician at the Royal Adelaide Hospital, told ABC radio:

The influence of industry on the PBAC is bound to grow as it pays an increasing proportion of the running costs.

We have to ask the Minister for Health and Ageing how she has managed to put these concerns to rest. It has certainly not been by raising her concerns with the industry, including Medicines Australia, the peak body representing pharmaceutical benefits companies. In fact, it was a complete surprise to Medicines Australia when the cost recovery measures appeared in the budget on 13 May. True to form for this new government, the first time the industry learned of a government decision—in this case to introduce cost recovery—was six weeks before its proposed start date of 1 July 2008. Medicines Australia are particularly concerned about the financial impact on their member companies. The cost to make a submission to the PBAC will be just shy of $150,000. These costs will come in on 1 July this year. These significant costs are being sprung on the industry with a mere six weeks notice and without any consultation and any adequate warning. Without having set aside funds for these fees, they will either come out of general revenue, where possible, or we will simply see the delay of presentation of many pharmaceuticals to the PBAC until such time as the fees can be allocated. This will particularly affect drugs for smaller patient populations.

The financial year for pharmaceutical companies runs from January to December mainly, meaning these new costs will begin midway through a financial year. They have not been able to budget for such massive cost increases. It is easy to see the pharmaceutical industry as a cash cow. However, these companies are already facing major price cuts from 1 August as a result of PBS reforms passed through the House last year by the previous government. The pharmaceutical industry in Australia has already seen three manufacturing plant closures announced in the past year alone at a cost of some 500 Australian jobs. The industry in Australia has fierce global competition. What it needs are signals from the government that encourage, not discourage, investment in Australia by their global head offices.

This lack of consultation and the lack of advice, or the ignoring of advice, is becoming a bit of a theme with the government. It seems that the Prime Minister has taken policy advice from Star Command instead of seeking input from the key bodies, departments or anyone else that has some expertise and can contribute in a meaningful way. Far too many questions and concerns remain unanswered. There has been insufficient consultation on how cost recovery will be implemented and insufficient time given for the industry either to prepare for this introduction or to be able to pay for it, and concerns about the independence of the PBAC have not been sufficiently allayed. We will be referring this bill to a Senate committee to ensure industry and other consultation takes place because no consultation has taken place and so far—and I would be very happy to stand corrected—the minister has not provided answers. Maybe the parliamentary secretary can provide answers. The minister was on the record as saying one thing last year but now that she has become the minister she is saying something entirely different. I think the minister owes an explanation to the House, to the Australian people and to those people who are very concerned about the impact of having pharmaceutical companies pay for their own regulator.

Belinda Neal (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008, which introduces a number of amendments to the Pharmaceutical Benefits Scheme. The bill before the House today amends part VII of the National Health Act 1953. The Pharmaceutical Benefits Scheme has operated successfully for almost 60 years in Australia. It is a mechanism that brings access to affordable quality medicine to thousands of working families in Australia. The PBS is regarded around the world as one of the fairest and most equitable systems for the delivery of affordable medicine. The Australian health system has its problems, but I am extremely proud of it when I compare it with some of the extremes around the world, schemes that either do not provide proper health care or provide health care at a great cost, such as in the US. True health care is not universally available, and I am very proud that here in Australia we provide health care at an affordable level. Medicare, coupled with the Pharmaceutical Benefits Scheme, is the true basis of that.

The Pharmaceutical Benefits Scheme is not only a scheme that provides affordable pharmaceuticals; it is quite a flexible scheme. I wish to congratulate the Minister for Health and Ageing on her response in this budget to the request by a number of type 1 diabetes sufferers, particularly young people, that the insulin pump be put on the PBS. I was thrilled and excited to see that the minister, in her warm-hearted way, was able to respond to that request and to provide that item on the PBS. I had the pleasure of having a delightful young girl, Lauren Espedido, visit me in my electorate. She suffers from type 1 diabetes and, along with her parents, she explained to me the real need to be able to access the insulin pump and for it to be affordable. If you have to pay for it entirely yourself, it costs approximately $8,000, I am informed, which is obviously out of the reach of many working families. The family put their case to me and I passed on those views and made a representation to the minister, along with a number of other people in the community and in the parliament, and I was thrilled to see that the minister was able to include that request in the budget provisions. I, and also on behalf of the Espedidos, wish to express a very heartfelt thankyou to the minister for that positive and quick response.

The Minister for Health and Ageing described the PBS in her second reading speech as an ‘efficient, transparent and predictable system for industry and the supply chain’. It is also a system that provides significant benefits for consumers both in terms of reduced prices for pharmaceuticals and in the simplicity of its use. The unique feature of the scheme is that PBS subsidies are delivered directly to the users at the point at which they purchase the medicines they require. The PBS is a much valued part of the Australian healthcare delivery infrastructure. Over the nearly six decades of its existence, the scheme has attracted significant government expenditure to keep it viable and relevant to the changing needs of Australian society. But there is a concern: the PBS rises on average at a rate of 4.6 per cent. So, unless we are careful, unless we take care to make the necessary adjustments, the cost of the scheme will mean that it is no longer viable and we cannot continue to provide it to the Australian community. So constant adjustments, sometimes minor in nature, are necessary to ensure that the scheme continues to operate effectively and is viable.

In 2006-07 government expenditure on the PBS was approximately $6.4 billion. It is expected that around $7 billion will be invested in the PBS this year. While this represents a large amount of government expenditure, the PBS has been shown to deliver significant benefits to the Australian community. In my opinion, as the PBS is part of our universal health care it is money well spent. The provisions in the current bill will enhance access to the PBS entitlements for many Australians and strengthen the scheme as a whole.

The bill proposes four minor amendments to the National Health Act 1953. Schedule 1 expands the criteria for determining that brands of pharmaceutical items are comarketed and provides that the minister may determine that comarketed brands cease to be comarketed. Schedule 2 provides for people who are otherwise eligible for pharmaceutical benefits to access those benefits while working outside Australia as officers of the Commonwealth or of a state or territory—and, of course, for their accompanying spouses and dependent children. Schedule 3 allows legally married and de facto couples living apart permanently due to illness or infirmity to use PBS safety net arrangements jointly as if they were living together. It is very unfortunate that up until now elderly couples, perhaps married for 30, 40 or 50 years, have been treated, in their minds, as not married if one of them becomes ill or has to enter a nursing home. Many people find that, as well as the financial impact, extremely distressing. Schedule 4 makes minor changes to two PBS related definitions and removes provisions for the gazettal of determinations made in relation to pharmaceutical benefits that may be prescribed by participating dental practitioners and authorised optometrists.

Safeguards currently built into the PBS guidelines affect the ability of Australian government officers to obtain supplies of PBS medicines when working outside Australia. Accessing medicines in some overseas locations may be difficult or uncertain. In some places where officers are sent to perform duties for an Australian government, the range and quality of medicines available locally may not match those of medicines available through the PBS in Australia. In addition, the supply of medicines and their quality may be unreliable or medicines may only be available at a high cost.

Schedule 2 of the bill, as I have outlined, proposes amendments to the act which will allow people who are otherwise eligible for pharmaceutical benefits to access those benefits under the PBS while they are working outside Australia. This provision will provide great assistance to such officers and their families. The present prohibitions on export of PBS medicines for or to other persons outside Australia remain in place. The new arrangements do not cover people working overseas for private companies, studying overseas, providing services as an independent contractor to governments, conducting personal business, travelling as tourists or living overseas permanently. The changes to the eligibility criteria are limited in scope and do not allow broad access to the PBS for people outside Australia. Several Commonwealth departments have been seeking these changes for some years. It is estimated that around 3,000 people will be eligible for this extended assistance.

I want to say a bit more about the safety net for couples living apart. This provision will allow legally married or de facto couples living apart permanently due to illness or infirmity to use the PBS safety net jointly. The PBS safety net provides that families can combine certain PBS charges toward a joint safety net tally. After the threshold is reached, all members of the family benefit from reduced charges for PBS medicines required for the remainder of the calendar year. The act defines who is a member of a person’s family for PBS safety net purposes. As currently defined under the act, when a couple are living apart on a permanent basis, they are deemed not to be members of the same family for the PBS safety net. A separate safety net is used for each person, together with each person’s dependent children. This rule also applies for couples living apart permanently due to illness or infirmity. This means that the PBS contributions required to reach the safety net threshold for both persons may be double that required if the couple were living together.

Schedule 3 amends the act to extend the definition of family for PBS safety net purposes by amending the definition of spouse. Under the amendment, members of a legally married or de facto couple living apart permanently due to illness or infirmity are not taken to be living separately on a permanent basis. This will result in the members of such couples being entitled to safety net benefits in the same manner as if they were living together. PBS payments will be able to be combined toward the same safety net tally and a reduced copayment rate will apply for both persons when the threshold is reached. This will benefit such couples by potentially reducing PBS outlays to reach the safety net by up to 50 per cent.

These important amendments will provide significant financial relief and appropriate recognition to eligible couples struggling to afford these medicines. There is no good reason why people living apart as a result of illness or infirmity should not have their marriage recognised through this legislation. This is a matter of fairness and equity of access to the entitlements of the PBS.

Taken together, these new arrangements will help strengthen the PBS. As I mentioned earlier, the success of the PBS is that the subsidies, which allow access to reduced prices for pharmaceutical medicines, are provided directly to the consumers at the point of purchase. Families will be assisted greatly by these new measures, especially couples living permanently apart. The modest costs involved—approximately $300,000 a year to provide PBS entitlements for families of officers working overseas, and approximately $1.1 million per year for amendments extending PBS entitlements to couples living apart—are but a small fraction of the total PBS expenditure, which, as I said, is expected to be $7 billion this year.

The cost of these measures to the public purse is far outweighed by their contribution to the public good. These amendments are a clear demonstration that the Rudd Labor government recognises the importance of the PBS in maintaining the health of Australians. Affordability, equity and access with regard to quality pharmaceutical medicines are vital to this goal. The bill before the House today delivers on these objectives. I commend the bill to the House.

Mal Washer (Moore, Liberal Party) Share this | Link to this | Hansard source

I rise to discuss the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 and the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2008. The previous government undertook an extensive period of consultation to introduce the most far-reaching reforms of the Pharmaceutical Benefits Scheme in its 60-year history. All members will know that this is the 60th anniversary of the Pharmaceutical Benefits Scheme, a very important year.

The consultations involving the reforms were far-reaching and sought to deliver a five-year transition towards a more transparent process for the pricing of all medicines, particularly those coming off patent. There are a considerable number of medicines coming off patent in the next few years, and globally we are experiencing a significant drop in the price of patent medicines. Not only do we have one of the lowest cost medicine systems in the world; we certainly have one of the best systems of pharmaceutical delivery. There is no doubt that Australians have access to the very best available medicines that are safe and of high quality. The previous government delivered far-reaching reforms in consultation with all sectors of the pharmaceutical industry. These reforms delivered an estimated $580 million over four years and $3 billion over 10 years of savings to the taxpayer.

This amendment will result in a significant charge being levied for each and every application to the Pharmaceutical Benefits Advisory Committee, or PBAC. These charges will be levied the research based pharmaceutical companies, the exact same companies consulted by the former government when it introduced PBS reforms—reforms that the now Minister for Health and Ageing disagreed with in opposition and now embraces in government.

The fees proposed will be charged to pharmaceutical companies who make an application to the PBAC to have their drugs listed on the PBS. The PBAC advises the minister of drugs that should be listed on the PBS. The companies already pay fees to the Therapeutic Goods Administration, or TGA, to test the efficacy and safety of new drugs made available to the Australian market. Medicines listed on the PBS ultimately benefit the consumer in the community.

Full cost recovery was considered by the coalition government in 2005 and again last year. It was never introduced for very good reason, as problems with this fee based proposal were identified by consultants summoned by the Department of Health and Ageing. A number of problems were identified, such as sponsors of generic medicines having a potentially easy ride compared to the heavy costs carried by companies seeking to list a medicine for the first time or change a listing. This would inhibit new products and innovations—a tragedy for the Australian consumer.

In May 2007 the Minister for Health and Ageing opposed any proposed scheme of PBAC cost recovery, stating:

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 ...

I agree with the minister’s position of May 2007 when she stated there was no doubt that a conflict of interest, real or perceived, would exist if the cost recovery measure was enacted.

The user-pays system will make a public body, the PBAC, financially dependent on industry, which it is supposed to regulate. The influence on the PBAC by industry will undoubtedly grow as industry pays for the running costs of this previously independent body. Industry itself has had six weeks warning of this decision, as it was announced in the 13 May budget with a proposed start date of 1 July this year. As the member for North Sydney emphasised, industry has had no way of budgeting for the cost of presentation to the PBAC, which will possibly be as high as almost $150,000 for a submission. There is no doubt that this will affect drugs with a small patient population. For many industry groups, this may result in possible delays in presentation of pharmaceuticals to the PBAC. Companies are already facing major price cuts, which will be introduced from 1 August 2008, as a result of PBS reforms from the coalition last year. This will, again, add to cash flow problems.

The pharmaceutical industry in Australia suffered three manufacturing plant closures in the last year alone, costing approximately 500 Australian jobs. We must now encourage investment in Australia from those industries with a global head office and not discourage it by these measures. Too many uncertainties exist and there has not been sufficient consultation or appropriate time frames undertaken with industry, nor have concerns about the independence of the PBAC been addressed. This bill should be referred to a Senate committee to ensure consultations with industry and others occur.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008. This bill amends the National Health Act 1953 and provides authority for the Commonwealth to recover costs for the listing of medicines, vaccines and other products or services on the Pharmaceutical Benefits Scheme and the designation of vaccines to the National Immunisation Program. The Pharmaceutical Benefits Scheme is very important to the people of Australia. Along with Medicare and public hospitals, it forms a cornerstone of our public health system. We should recall that the Pharmaceutical Benefits Scheme itself was one of the great social reforms of the Chifley government when it was established in 1948.

When we have visitors to this country from overseas and when Australians are overseas themselves we often hear comments from people from other countries about the importance of the Pharmaceutical Benefits Scheme and the benefits that it provides in every sense to the people of Australia. This scheme is the envy of many countries across the world in the way in which it is able to provide for the health of Australians. It is a scheme that seeks to do so at the lowest possible cost to government and to consumers. It is by subsidising the cost of medicines that we ensure that all Australians have access to the medicines they need. It is a scheme which recognises that the ability to live one’s life with access to essential medicines is, for very many people, crucial to the quality of the life that they are able to lead.

The Pharmaceutical Benefits Scheme is, in a real sense, a key part of our social safety net. It is a key part because it provides protection for Australians very often at the time of greatest need in their lives. For those with a long-term need for medication, those with chronic diseases, the existence of the scheme means that they are relieved of significant costs and permitted to enjoy a quality of life that they would otherwise not be able to. For those who suffer from acute illnesses, the Pharmaceutical Benefits Scheme ensures that, during times of serious illness, they are protected from extreme costs that might otherwise be visited on them.

This bill will provide power for the making of regulations—subject, of course, to parliamentary scrutiny—for the recovery of costs in the Pharmaceutical Benefits Scheme. It is broad in scope in the regulation-making power that it confers in allowing for regulations to cover: the administration processes surrounding the making of submissions; the prescribing of fees; the timing and manner of payment of fees; penalties and refusals to provide services for late and nonpayment; exemptions from fees and the waiver, remission and refund of fees; and the review of administrative decisions made in relation to cost recovery. Of course, it is very important that there be such a review process to challenge, or at least provide the opportunity to challenge, administrative decisions.

The benefits of the Pharmaceutical Benefits Scheme listing for pharmaceutical companies start with the fact that, subject to regulatory approval, companies would be free to market their goods without PBAC or NIP listing. For pharmaceutical companies, the decision to list is a commercial decision. They generally seek to list in recognition of the commercial benefits that will arise from listing in the scheme. Listing provides a high level of commercial certainty for pharmaceutical companies. It is worth bearing in mind the overall cost of this scheme. To give some indication: in 2006-07, the top 20 pharmaceutical companies shared a total of $4.46 billion from the Commonwealth via the PBS subsidy.

Cost recovery, which is the system that is here proposed, is a system that is in use in many areas of Commonwealth administration. We know from a situation that arises in my former professional area, the court system, that it is well recognised that it is appropriate, particularly for the commercial litigation area, to seek to recover the cost to the public system of providing the service that is utilised by commercial enterprises in having their litigation and disputes resolved through the public system. The Therapeutic Goods Administration has a cost recovery process and it has found, as have other areas of Commonwealth administration which use cost recovery processes, that there has not been any loss of independence bound up in using a cost recovery process.

What is proposed here for the Pharmaceutical Benefits Scheme will certainly not undermine the independence of the Pharmaceutical Benefits Advisory Committee, nor will it jeopardise the integrity of the listing process. PBAC will not be dependent on pharmaceutical industry funding, and what is proposed will not change the process of having medicines made available under the PBS or the NIP. The government will continue to provide direct funding for all Pharmaceutical Benefits Advisory Committee activities, PBAC will have no role in the setting or collecting of fees, and any revenue collected will be paid into consolidated revenue. It is important to note that the fees are not taxation and certainly will not affect Australians who rely on the Pharmaceutical Benefits Scheme.

There will be benefits to government and, through that, to the community, in that the PBAC process is a costly process. Taxpayers currently bear the costs of listing, despite there being very substantial commercial benefits for companies who are seeking listing. There will be substantial revenue raised through the use of this cost recovery system. It is anticipated that, in the first year of operation, this will be in the order of some $9 million, rising to about $14 million in the following year.

It is a simple system designed to ensure that those who are in a position to gain financial benefit from listing will cover the costs that are currently borne by the taxpayers. I commend the bill to the House.

Justine Elliot (Richmond, Australian Labor Party, Minister for Ageing) Share this | Link to this | Hansard source

The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 amends the National Health Act 1953. This is to provide authority for the cost recovery of services provided by the Commonwealth in relation to submissions or amendments to the listing of medicines, vaccines and other products on the Pharmaceutical Benefits Scheme and the National Immunisation Program. These amendments ensure that applicants, mostly pharmaceutical companies, may be charged fees when they seek services provided by the Commonwealth in relation to the exercise of a power by the minister under section 9B of the act, relating to the designation of a vaccine on the National Immunisation Program, or a provision in part VII relating to listings or a change to listings for a medicine or other product on the PBS.

The cost to the government of providing subsidised medicines and fully funded vaccines to the Australian community is significant. In 2006-07, the Commonwealth paid more than $6.4 billion to approved pharmacists, hospitals and medical practitioners for the subsidised supply of medicines under the PBS. A further $280 million was provided by the Commonwealth to the states and territories for the fully funded supply of vaccines under the National Immunisation Program within their respective jurisdictions.

Australian pharmaceutical manufacturers and distributors with medicines or vaccines listed on the PBS and the National Immunisation Program receive considerable financial benefits from the supply of their products to the Australian community. For example, in 2006-07, the top 20 pharmaceutical companies by total cost of payments each received an average of $223 million from the Commonwealth via a PBS subsidy.

The government was in opposition when the previous government sought to introduce cost recovery of services associated with listing on the PBS and the National Immunisation Program. At the time, we shared some of the reservations of some stakeholders about the previous government’s proposal, in particular the possibility that the independence of the Pharmaceutical Benefits Advisory Committee, the PBAC, could be threatened. However, in the model reflected in this bill, the independence of the PBAC is guaranteed. The expertise, integrity and sense of propriety that PBAC members bring to their task will not change as a result of the cost recovery. The PBAC will continue to provide expert advice on medicines independent of government and industry. Cost recovery will not affect the structure or the operation of the PBAC, nor will it compromise the independence of the committee’s decisions.

There are notable examples of agencies, such as the TGA, which regulate in the public interest, where that regulation necessarily results in commercial gain and where cost recovery has been implemented successfully and without a loss of independence. Revenue from PBS cost recovery will depend on the number and type of submissions brought to the PBAC for consideration.

Once the legislation is fully operational, annual revenue from fees is expected to total around $9 million in 2008-09, rising to around $14 million in the following years. The government is committed to ensuring that there is a due process to ensure that fees are levied in a fair and equitable way. Therefore, the regulations will also provide for the review of administrative decisions made in relation to cost recovery. In consultations, there was broad agreement on a simple internal dispute resolution mechanism of negotiation between the parties. It is important to note that the Australian community, beneficiaries of the PBS, will not be required to pay any extra for PBS medicines or vaccines. I thank all the members for their contributions to the debate on this bill.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.