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

I rise to speak on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012. In September 2010, the then health minister, Nicola Roxon, signed an MOU between the Commonwealth and the peak pharmaceutical industry body to 'promote the long-term sustainability of the Pharmaceutical Benefits Scheme'. The MOU sought to ensure that the PBS expenditure remained sustainable and that the PBS remained responsive to change and to the availability of new and innovative medicines. Clause 4 of the MOU states:

The Commonwealth undertakes not to implement new policy to generate price-related savings from the PBS during the period of agreement …

The government offered policy certainty to the sector in return for additional savings of $1.9 billion over five years. It is reported that Medicines Australia wrote to Minister Roxon stating that it believed that the Australian government would abide by its explicit recognition of the need for such stability.

Only months later, on 25 February 2011, Minister Roxon announced the decision to defer listing a number of medicines which had been recommended for listing by the government's own independent expert committee, the Pharmaceutical Benefits Advisory Committee. This was an unprecedented decision, for a government to go against the advice of the PBAC and make the listing of medicines a political decision. This resulted in a situation where the politics of the day could, and in some cases would, directly impact on whether a patient would or would not have access to a life-saving medicine at an affordable price.

The government claimed that the deferrals were due to its fiscal circumstances. However, by most accounts the government only deferred drugs to the value of about $30 million. This is insignificant in the scheme of things, particularly compared to what the Labor government has wasted on programs such as school halls, pink batts, GP superclinics and the like. The decision to defer PBAC-recommended and potentially life-saving medicines from being listed on the PBS rightly received widespread condemnation by stakeholders. The pharmaceutical sector was particularly aggrieved as it was, in the words of Medicines Australia, a breach of the intent and spirit, if not strictly the letter, of the MOU.

But, more than a breach of an MOU, the decision to defer the medications represented one of the most concerning changes to the conventions of how governments administer the PBS. The Pharmaceuticals Benefits Scheme was the first element of Australia's universal healthcare scheme and has received bipartisan support for many years. Even today, as the PBS website tells us, the PBS is intended to provide 'timely, reliable and affordable access to necessary medicines for Australians'. The PBAC undertakes a thorough analysis of the cost-effectiveness of all new medicines and makes recommendations regarding those medicines that it finds are value for money and should be made available to patients. Traditionally, all medicines that the PBAC concluded were cost-effective and recommended were listed on the PBS by the government. Those under $10 million have been listed by the Minister for Health without the need for cabinet approval.

The PBAC method has been extremely effective, and our PBS is, or certainly has been, the envy of the world. In recent times, unlike the case in many countries, our processes have kept budget increases to less than inflation. Medicines Australia analysis found that the PBS grew by just 2.8 per cent in the year to March 2011, in comparison to the consumer price index for the same time of 3.3 per cent. This would indicate that the growth rate of the PBS is sustainable, largely thanks to the PBS reform by the previous coalition government, and in particular by the then health minister, Tony Abbott. Therefore, there was no reason to defer listing of medications that had been recommended for listing by the expert advisory panel, the PBAC, other than the government's own fiscal and policy mismanagement—and, I suspect, a Treasurer and Minister for Finance and Deregulation who were scared and wanted to send a message of uncertainty to the industry to try and defer listings and to make the process uncertain, again adding to perceptions around this government's sovereign risk. That is a view that is held by many within the sector, and it should be quashed. Naturally, consumer groups protested. So did the industry groups, which, as I mentioned previously, worked in good faith with the government to achieve an affordable and sustainable PBS system.

As a consequence of the government's actions, it had to go back to stakeholders to negotiate a new set of principles for a deferrals policy, which it announced on 30 September 2011. In what was essentially a major backflip, six of the medicines which the government had deferred from listing were finally listed on the PBS. The government continued to insist on its right to bring all PBAC recommendations to cabinet for final approval but, strangely, agreed not to defer PBAC recommended medicines for listing in the next 12 months. It did not say what might happen after that time.

In order to negotiate these outcomes for patients, the stakeholder group agreed to a number of other measures. A significant commitment of this new agreement was that all parties would support technical amendments to the National Health Act 1953 and the National Health (Pharmaceutical Benefits) Regulations 1960 to correct anomalies. It is in relation to this final commitment that the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012 is before us.

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012 makes technical amendments to the National Health Act 1953 to improve the operation of the pricing and price disclosure for medicines supplied under the PBS, to commence 1 October 2012. The bill also makes some modifications to the way medicines are listed for supply for doctors' emergency bags. This government claims the bill will be cost neutral for the PBS.

Under the current legislation, the price of a medicine can be expressed in different ways for different functions. For example, at the time of listing on the PBS, prices are currently referred to as an 'approved price to pharmacists', which includes the manufacturer price and a wholesale margin. The Commonwealth price, which is the price paid by the PBS to the pharmacist, includes a further mark-up and dispensing fees. Price disclosure calculations require the removal of the wholesale margin because they are based on an approved ex manufacturer price. The purpose of these amendments is to remove the concept of the approved price to pharmacists as the core PBS price in the act and replace it with an approved ex manufacturer price, which is the very basic price of a medicine.

At present, as the minister advised, statutory price reductions for medicines coming off patent are applied to the approved price to pharmacists, but price disclosure calculations take place at the manufacturer price. The bill will require price setting and price reductions occurring on the PBS to be based on the one base ex manufacturer price for each pharmaceutical item. It will require that only one approved ex manufacturer price be agreed or determined for a pharmaceutical item, that being the price for the lowest listed pack quantity. If a brand has a pack quantity different from the pricing quantity, the price will be calculated as a proportional ex manufacturer price.

Provisions for premium brand pricing will continue where a price set for a pharmaceutical item is higher than the price that would apply under the approved ex manufacturer price or proportional price. This will enable pricing functions to operate uniformly at ex manufacturer level across the PBS, including where the same item is listed under different PBS programs and mechanisms of supply.

The bill before us provides transitional provisions and includes a method for converting current PBS prices to an ex manufacturer amount. The transition to the new prices is designed to be cost neutral overall. It is claimed that the amendments are designed not to achieve price reductions but rather to achieve a consistent base level price for each item of medicine. However, the minister has advised that there will be around 40 pharmaceutical items for which the conversion calculations will result in different prices, and some negotiations will be required on a case-by-case basis. Where negotiations are not successful, a default price will be applied which is the lowest of the converted ex manufacturer prices for the item.

While the pricing elements of the bill were subject to consultation, the coalition has been advised that key stakeholders were not consulted on provisions relating to prescriber bag supplies. Concerns have not been raised regarding this component of the bill, but surely those professions affected should have been consulted or at least advised.

The minister has indicated that the bill will not change the medicines listed on the PBS or access to them and—I have beaten the bells in the other chamber—on that basis I indicate that the coalition does not oppose this bill.

Chris Hayes (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to support the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012. The bill will amend the National Health Act 1953 in order to improve the pricing of medicines on our Pharmaceutical Benefits Scheme and the way they are delivered. The Australian government's Pharmaceutical Benefits Scheme, the PBS, provides reliable, timely and affordable access to a wide range of medicines for all Australians. Under the current system, prices for PBS items are determined on the price-to-pharmacy basis, which is a combination of the ex-manufacturer price and a wholesale margin. This bill ensures that the common base point for price calculation of medicines listed on the Pharmaceutical Benefits Scheme will be the ex-manufacturer price alone. This will bring the PBS calculations into line with the calculation approach which has been used by the pharmaceutical industry, as I understand it, for many years. Importantly, prices for different brands and quantities of the same medicine will be determined from the same base ex-manufacturer price. This will create uniformity in determining the price of same-brand medication.

The new price for items and brands on the Pharmaceutical Benefits Scheme will be determined by subtracting the wholesale margin and arriving at the ex-manufacturer price. That alone will be the price determinant. This will ensure uniform pricing of all brands of medicines across the different PBS programs and mechanisms of supply. Under the new system, only one ex-manufacturer price will need to be agreed on for a brand of any pharmaceutical item. These changes are in line with the recently proposed price discount system, which aims to ensure that Australian taxpayers benefit from discounts and incentives provided by manufacturers of medicines where there is more than one brand on the PBS.

In the past, manufacturers commonly sold pharmacies new brands of older medicines, the patents for which had expired, at lower prices. The government unfortunately missed out on those discounts and continued to pay the full PBS amount to pharmacies. In other words, there was a disproportionate subsidy from taxpayers. Price disclosure will require manufacturers to notify the government of the prices at which medicine is being sold to pharmacies. The government has been aware for a while now that pharmaceutical companies tend to provide undisclosed discounts to pharmacies for stocking their products, but the pharmacies still receive the same amount of reimbursement from the government under the PBS. Price disclosure will therefore provide a vital $1.9 billion in savings. That can be used to make further investments in our healthcare system generally.

Price disclosure brings the government price into line with the market price, benefiting taxpayers and consumers. This will ensure a more efficient Pharmaceutical Benefits Scheme—a scheme which has been assisting Australians for years—and will ensure that those discounts are passed on to patients. Under price disclosure, on 1 April this year some 75 medicines became cheaper for the government and the price of over 60 medicines dropped for patients. In August this year, patients will have additional savings on 126 brands through the premium paid by patients being reduced. For instance, a cholesterol-lowering drug will be between $5 and $14 a month cheaper than it was previously. On average, patients will be making a saving of $3 per packet of medicine.

Price disclosure means that the price the government pays is in line with the market price, ensuring the cheapest possible prescriptions for people who are in need. Concessional patients will continue to receive their prescriptions at the concessional rate, making only a $5.80 co-payment. The most a general patient can pay for a PBS prescription is a co-payment of $35.40. The PBS helps to make medicines more affordable for Australians by limiting the amount we pay towards the cost of medicine items, as well as the selected brands under the Pharmaceutical Benefits Scheme. A number of vital, and often life-saving, medications cost a heck of a lot through research and development, but under the PBS they are provided to Australian citizens at an affordable rate. From 1 January this year, Australians have been paying no more than $35.40 for the vast majority of the items listed on the PBS, or $5.80 if they have a concession card. Under the PBS system the Australian government pays the remaining cost. This bill is another example of the Australian government's commitment to creating and maintaining a strong, sustainable and viable world-class healthcare system. Like the shadow minister, I have pride in commending the bill to the House.

Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012. This bill supports the government's price disclosure program, announced on 1 April this year, and it is the government's price disclosure policy that is helping to keep the PBS sustainable by reducing the price of medicines. Price disclosure applies to products on the PBS that have more than one brand and it applies when there is a generic version available. It is designed to ensure that the government is able to capture the savings associated with the introduction of generic medicines as a result of patent expiry. Generic medicines have the same active agreement as the original patented version but are usually cheaper, as there is greater competition for the market.

These amendments, and the price disclosure program in general, are being introduced by the government to correct the inconsistencies between what the medicines are worth when they come off the production line and what they sell for in pharmacies. Before the introduction of price disclosure, program costs were much higher. When a medicine's patent expired, the government was still reimbursing pharmacists at the same rate as before the patent expired, and this was occurring even though generic brands could be produced at less expense. The amendments in the bill remove the concept of an approved price to pharmacists as the level at which pricing agreements were made and replace it with an approved ex-manufacturer price—the price that is set at the beginning of the process. Currently there are many provisions and functions in the act that rely on approved price to pharmacists. They will work equally well or better using ex-manufacturer prices.

Under the 2010 reforms agreed with Medicines Australia, this government brought forward the achievement of these savings through the expansion of the reach of price disclosure and by shortening the time period in which the price reductions are achieved. The effect of these changes is that, as of 1 April this year, 75 medicines have become cheaper for the government and we are now on track to achieve $1.9 billion in savings through this policy. For those of us who are consumers rather than manufacturers or pharmacists, this has led to a drop in price from 1 April this year for all these medicines due to the price disclosure program.

This drop in price of many commonly used medicines is great news to people in my electorate and, of course, many other electorates around Australia too. I do talk about my electorate of Deakin because we have a higher percentage of people over the age of 65 than average and, as many members in this House know, as people age they tend to more often need prescription medicines whilst often having to get by on a lesser income due to the change from work to retirement on a pension or an income stream. As we all know, the PBS is a Commonwealth government scheme that provides Australians with access to subsidised medicines, and the PBS helps to make medicines affordable for all Australians by limiting the amount that people pay towards the cost of their medicines under the PBS.

That said, the PBS does not come cheaply; it comes in at a cost of an estimated $9.7 billion for the current financial year. Since the introduction of the price disclosure program, the cost of medications for treating many common medical conditions ranging from blood pressure and high cholesterol to depression and anxiety has been reduced. There has also been a cost reduction for a number of common antibiotics. Under the introduction of the price disclosure program, people who required medicines under the PBS paid a copayment amount that ranged from $5.80 for Health Care Card holders to $35.40 for those not eligible for a Health Care Card. The operation of the price disclosure program brings a direct benefit to the consumer, who now saves money whenever the price of an item falls below the copayment amount or where an item already under the copayment amount becomes cheaper. There are many examples of these benefits. I will mention a few of these, so that we can look at this from the view of the consumer—of the people who are on those medications.

I would like to start with a medicine that is in high demand in Australia: Simvastatin, a commonly used cholesterol-lowering drug. Again, many people of a certain age know all the problems that come with visiting the doctor and finding out that they have a problem such as a high cholesterol level and that they need to do something about it. Patients such as that who previously paid the general copayment amount of $35.40 for a month's supply of Simvastatin 40-milligram tablets will now pay $22.68, a saving of over $12 every month. Patients will also save money on some medications already below the copayment. For example, the price paid by the patient for the 20-milligram rather than the 40-milligram version of the tablet of Simvastatin will be reduced from $31.87 to $17.72, saving the patient over $14 a month. Similarly, patients will save up to $9.22 for Pantoprazole, which is another common medication taken for reflux and ulcers. There will also be savings of up to $2.57 for Perindopril, which is for high blood pressure and heart disease, and up to $1.89 for Metformin, which is used to treat type 2 diabetes.

From the types of medications I have just identified that are commonly used, it has to be said that they are not luxuries; for many people, they are necessities. They actually cannot get by in their day-to-day life without them. They are—as I said—essential for conditions such as diabetes, epilepsy, heart disease and high cholesterol. But there are also the many less serious conditions that affect many of us from time to time. Again, people that require those medications may also benefit from these changes. By reducing the cost of essential medications, this government is helping Australians live their lives to the full, without having to worry about the expense of the drugs that help them to do so.

The current act requires the setting and maintaining of prices for PBS medicines be expressed at different levels for different purposes. This method has proven inefficient and complex, and up till now, the end price of these subsidised medicines have been calculated on an approved price to the pharmacist. The main amendments in this bill remove the approved price to pharmacists and replace it with an approved ex-manufacturer price as the core PBS price in the act. Through these measures, the government aims to increase the efficiency and transparency of the pricing of the PBS. These amendments will ensure that sustainability of the PBS, as well as deliver the best value for money to Australians in need of prescription medicines.

The government identified that in the case where patents on drugs had expired that too much was being paid, and consumers were paying too much for their medicines. With savings of $1.9 billion, as I have said, over five years, this bill will help Australian taxpayers to get the best value for their health dollar. And even better, these savings help enable the listing of new medicines, such as those to treat such serious conditions as rheumatoid arthritis, myeloid leukemia, pulmonary arterial hypertension and renal failure.

Every Australian should have access to affordable medicines, and these amendments will not only ensure the sustainability of the Pharmaceutical Benefits Scheme but will streamline the way in which the prices of the PBS medicines are set. I commend the bill to the House.

Ms Catherine King (Ballarat, Australian Labor Party, Parliamentary Secretary for Health and Ageing) Share this | Link to this | Hansard source

I thank the members for Dickson, Fowler and Deakin for their contributions on the debate on this bill.

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012 does put in place a pricing structure for the PBS that will deliver real benefits for the pharmaceutical industry and the administration of the PBS. The proposed amendments to the bill will create a uniform platform for the pricing of medicines across the PBS. Its creation of connections between prices will allow price changes and price calculations to flow. The new pricing structure will improve the operation of many current PBS policies but it is not intended to change PBS prices and it does not affect PBS funding or programs, nor access to medicines listed on the scheme. The effects for patients and pharmacies are insignificant. The effects for pharmaceutical companies will be small—as small as we can make them.

Meeting the 1 October 2012 commencement date relies on cooperation between government and industry in setting the new prices. Where prices need to change, we will be working to ensure that the effects are shared between companies and government as evenly as possible. The bill provides for a more efficient PBS. There are benefits for industry and government and indirectly for the users of the PBS. I want to again thank members and senators for their comments. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.