Greg Hunt (Flinders, Liberal Party, Minister for Health) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The National Health Amendment (Pharmaceutical Benefits—Budget and Other Measures) Bill 2017 amends the National Health Act 1953 to implement measures negotiated with the pharmaceutical and pharmacy industries and announced in the 2017 budget.

1. Industry agreements — savings and policy stability

The amendments reflect compacts with Medicines Australia, the representative body for the innovative medicines sector in Australia; the Generic and Biosimilar Medicines Association, which is the representative body for generic and biosimilar medicine suppliers in Australia; and the Pharmacy Guild of Australia.

The compacts are underpinned by a range of shared principles to create a world-class health system, transparency in decision-making, accountability for reforms, and stability and certainty with regards to government investment.

Together these agreements will generate savings to the Pharmaceutical Benefits Scheme (PBS) of around $1.3 billion over four years from 2017-18, and $1.8 billion over the five-year term of the agreement with Medicines Australia. This in turn will support cheaper medicines for consumers, better value for money for Australian taxpayers and improved access to product innovations.

And while these savings are vital for current and future spending on medicines, the government recognises that they must be achieved in a way that works for industry and supports a viable and sustainable pharmaceutical industry in this country. It is real reform which delivers better access to more drugs while saving money and reinvesting that in new medicines.

The measures in the Medicines Australia agreement do that by delivering certainty for the medicines industry through a stable PBS environment, where funding for new listings is further supported through delivering price reductions for on-patent medicines that are reaching the end of their patent life, and when these medicines come off patent and become subject to competition.

This certainty will strengthen the medicines ecosystem by encouraging companies to continue to bring innovative, life-changing medicines to Australia, build partnerships with Australian researchers, and encourage investment in local clinical trials and manufacturing. This will ensure Australia remains at the forefront of the launch of new and innovative medical treatments.

2. Pricing policy changes— anniversary statutory price reductions

The first of the main pricing changes in the bill extends, for another two years, the existing five per cent price reduction that applies for single brand drugs on the F1 formulary on their fifth anniversary of listing. This measure was due to end in 2020, but now will apply until April 2022.

The second of the changes introduces two new anniversary price reductions for drugs on F1. These are a 10 per cent reduction after 10 years of listing on the PBS; and a further five per cent reduction after 15 years of listing. There will be a catch-up special reduction day on 1 June 2018 to apply these reductions to medicines that have already reached their 10-year or 15-year anniversary by that date, and subsequent anniversary reduction days will occur on 1 April of each year.

The F1 formulary has been the fastest growing part of the PBS by price for individual medicines, and by cost to the PBS. Every new drug is an additional investment by the government in companies in the innovative medicines sector, and each contributes directly to that sector's growth. I give as examples Stelara, Entresto, Opdivo and Ibrutinib. These are critical drugs that are life-saving or life-changing.

The Australian government continues to invest in new medicines by accepting all positive recommendations of the Pharmaceutical Benefits Advisory Committee (PBAC).

This is a significant and continual pipeline of reinvestment and revenue for the innovator medicines sector. It is reasonable that after a period of time, a small percentage is recouped to help support further new listings. That is the principle behind this fundamental reform. Delaying the first of the reductions until at least five years after PBS listing recognises that manufacturers need time to recoup their investment in developing and bringing new medicines to market.

2.1 Pricing policy changes— first new brand statutory price reductions

The third pricing change will increase the price reduction that applies on listing the first additional new brand of a medicine.

Under PBS pricing policy, when a first new competing brand lists alongside an existing brand of an F1 drug, an immediate price reduction occurs for the new brand and the existing brand. The reduction is also flowed on to other related brands and strengths of the medicine.

The new measure will increase this reduction from 16 per cent to 25 per cent on such an occurrence.

2.2 Ministerial discretion for price reductions

Under the new pricing arrangements, previous price reductions can be taken into account before a statutory price reduction is applied. For example, new anniversary reductions may be able to be reduced in part or waived in full by considering the net total of reductions since January 2016.

As is the case for new anniversary price reductions, the increased price reduction to be applied when a new, competing brand lists on the PBS can also be adjusted, taking into account previous price reductions that have applied to the medicine. On this basis, a statutory price reduction can be applied in full, in part, or not at all—depending on the amount of previous eligible reductions. The new method will adjust, taper and cap reductions to ensure that price reductions since January 2016 do not exceed certain maximums.

For example, where previous price reductions for a medicine are already equivalent to 40 per cent or more of the price on 1 January 2016 the reduction will be reduced to nil.

Where previous price reductions are between 15 and 40 per cent of the January 2016 price, the reduction will be less than 25 per cent. It will be adjusted and capped so that the final reduced price is 40 per cent of the original.

And where previous reductions are 15 per cent of the January 2016 price or less, the new brand reduction will be the full 25 per cent.

In addition to using previous reductions to reduce listing anniversary and new brand reductions, the amendments include other provisions for discretion in applying statutory price reductions. These provisions reflect the undertakings in the Medicines Australia agreement and include that any relevant matter may be taken into account in deciding to reduce or not apply a reduction.

2.3 Price disclosure— increased price disclosure price reductions threshold

Continuing the theme of considering pricing history and context in applying PBS pricing policy is a new measure for price disclosure.

Under PBS price disclosure arrangements, drug companies are required to report data on sales to wholesalers, pharmacists and other suppliers. The information is used as the basis for adjusting the price for all brands of a medicine to the weighted average price. If the weighted average sale price in the market is at least 10 per cent below the PBS price, the PBS price is adjusted. Over time, PBS prices are maintained, or reduced every six months in line with average market prices.

The new measure provides that after a medicine has had seven full cycles of price disclosure data collection and reduction days, the threshold for price disclosure price reductions will increase from the current 10 per cent to 30 per cent. This move should provide some relief from price disclosure reductions for medicines which may already have had repeated market-driven price reductions. It will mean that, as long as the weighted average discount for a medicine in this category is less than 30 per cent, there will be no price disclosure reduction to the base price for any related brand of the drug after the seven cycles.

This will help to protect the price of medicines where there is little room left for competition or where a price reduction could affect the viability of the medicine.

To ensure this measure is correctly targeted, the amendments also include that, if there are two consecutive cycles where the price disclosure reduction is at least 30 per cent, the threshold will revert to 10 per cent.

2.4 Listing of new presentations—not as new brands

A specific measure welcomed by the pharmaceutical sector is that a company will be able to list a new presentation of its own originator brand without being subject to a new brand price reduction. The new presentation must be listed within five years or, with discretion, within 10 years of the original listing of the drug on the PBS.

These new provisions will benefit consumers and companies by encouraging the early listing of products which are innovative new versions of already listed medicines.

2.5 Funding future medicines

The government is committed to making fiscally responsible investment decisions that are informed by the best available evidence about patient safety and improved patient outcomes. That is why this government came to office promising to respect the independence of the PBAC but to improve listing times on the PBS.

The agreement with Medicines Australia enables the government therefore to continue its commitment to list all medicines with a positive PBAC recommendation.

Since the budget the government has made significant new investments in medicines:

3. ACPA and pharmacy location rules

I now want to turn to pharmacy location rules. Pharmacy location rules have been in place since 1990, when the Fifth Community Pharmacy Agreement was signed between the Pharmacy Guild of Australia and the Commonwealth of Australia. The location rules are also a fundamental component of the Sixth Community Pharmacy Agreement.

The location rules are in place to ensure a suitable geographic spread of pharmacies approved to supply PBS medicines, including in rural and remote regions of Australia.

The Sixth Community Pharmacy Agreement terminates on 30 June 2020, at which time all legislative provisions in the National Health Act 1953 relating to the rules and the ACPA are scheduled to cease.

This bill will remove the cessation of operation provisions from the National Health Act 1953, preserving the existing arrangements and providing ongoing assurance and certainty for pharmacies, particularly those in rural and remote communities.

Conclusion

In conclusion, the landmark compacts announced in the budget reflect the government and industry's shared desire to maintain a world-class health system.

They also reflect the outcome of extensive negotiations, which could only occur due to the positive and strong relationship that the government has and has been able to establish with these organisations.

I would like to thank all stakeholders who have worked collaboratively with the government in recent months to develop the industry agreements and the measures in this bill. In particular, I want to acknowledge Medicines Australia, and the strong leadership of its chair, Wes Cook, supported by the CEO, Milton Catelin. Wes has been an extraordinary person to work with. He asked his industry to accept very significant reductions in remuneration in return for the listing of new medicines, and the creation of a fund and a contingency for those medicines with the savings that were otherwise made. So all of the savings are being reinvested in new listings. I want to thank all of the members of the Generic and Biosimilar Medicines Association; and the Pharmacy Guild of Australia, led by the extraordinary George Tambassis and David Quilty.

This agreement, again, gives stability to the sector. In particular, it allows them to be able to plan on a long-term basis and it provides security for those pharmacists with their gearing and banking ratios.

I also want to acknowledge Alex Best from my office, who played such a critical and fundamental role in the negotiation of these agreements. He has been a source of immense guidance, wisdom and counsel, as we've achieved them. We were able to achieve five major compacts at the time of the budget, with the RACGP, the AMA, Medicines Australia, the GBMA and the Pharmacy Guild of Australia. Most recently—only last week—we were able to add to that the agreement with the Medical Technology Association of Australia, which will, in turn, contribute to the stability and the affordability of private health insurance going forward and the ability to list new devices at an earlier time, giving Australian patients better access. All of these compacts together represent the first and the second wave of our current health reform program.

The amendments in this bill, therefore, deliver a responsible and necessary response to growing pressures on the PBS. They provide for a fair outcome for pharmacies, the pharmaceutical industry, government and consumers. They also represent the value of taxpayers' dollars, which provide the funding for the PBS. The aim of this government is to ensure that Australians have access through the PBS to affordable medicines when and where they need them. Contributing to a more sustained and more sustainable PBS allows us to respond sooner to the increasing demand for innovative and often costly medicines. All up, this is an outstanding outcome for the medicines industry and, more importantly, for the patients of Australia. I commend the bill to the House.

Debate adjourned.