Brett Mason (Queensland, Liberal Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Hansard source

Senator Brown, I think we discussed this earlier in the committee stage. The working group has nothing to do with recommending listing new medicines; it is the Pharmaceutical Benefits Advisory Committee, the PBAC, which all sides have mentioned this morning, that recommends listing new medicines. The PBAC will continue to recommend only those medicines that have been assessed as safe, effective and cost-effective. This is robust and successful and admired internationally for listing a wide range of medicines that offer the best clinical benefit to patients and the best value for money. This system will not change under the PBS reforms. Senator Brown, I would be surprised if you did not agree with the current system in relation to the listing of new medicines by the Pharmaceutical Benefits Advisory Committee. This system will not change. There is nothing in this bill that will change that. And if you do not agree with that, I am surprised that the Greens oppose that process because I have heard very few people in the community opposing it—very few.

In relation to reference pricing, you are quite right: reference pricing was one of the key factors in the pricing of groups of medicines under the act. But there are problems with it. In a sense, what I am about to discuss is all about trying to get, as I think we all want to do, the best value for money for the consumer and also for the taxpayer. Current reference pricing arrangements limit the capacity to pay lower prices for multiple-brand drugs as price reductions may flow directly to other drugs in the same reference pricing group. This is highly problematic when a price reduction flows to a single-brand drug in a reference pricing group and therefore a suitable alternative may not be available for an individual patient. Therefore, that group of medicines cannot lower in price because people would miss out because, with a single brand, a particular company may not be able to reduce the cost of the drug. If the supplier of the single-brand drug does not agree to reduce the price, the minister must determine that either another special patient contribution premium applies or the supplier may withdraw the drug from the PBS. That is the problem. While all drugs in a reference pricing group provide similar health outcomes at the population level—that is what a reference pricing group is—not all treat exactly the same condition, nor may they be equally suitable for an individual patient.

There will be some cases where a patient cannot easily move from one drug to the next. There may be similar health outcomes, but that does not mean they can necessarily move from one drug to the next. The withdrawal from the PBS of some single-brand drugs in these circumstances would therefore create difficulties for prescribers and also for patients. Finding a way to significantly reduce prices and not endanger the continued listing of a single-brand drug that is not interchangeable has been a key consideration in developing the PBS reform package.

What has developed in Australia and is developing overseas is that, with the arrival of generic drugs, drugs are becoming a commodity. What the government wants—I think what the taxpayer wants—is for the government, the taxpayer who foots the bill, to take advantage of lower priced drugs where there is a market for those drugs. At the moment the price is artificially inflated. I was looking this morning at the department’s submission to the Senate committee inquiry. I noticed on page 9 of that submission the comparison of United Kingdom and Australian prices for some commonly prescribed drugs. Senator Moore would be aware of this table, I am sure. Two of the most expensive drugs in terms of PBS expenditure are pravastatin and simvastatin; I think they are both for lowering cholesterol. In 2005-06, the cost of pravastatin to the taxpayer was $72.4 million and simvastatin in the same period was $153.1 million. We all agree that is a lot of money.

The aim of this bill is to ensure that the market operates with respect to those generic drugs that are artificially held up because of reference pricing. That is the key to it. The example that is in the submission from the department to the Senate community affairs committee is that pravastatin in Australia costs $50.82 and in the United Kingdom it is $9.32. Less than one-fifth of the price is being paid in United Kingdom for the same drug. For simvastatin, the cost in Australia is $52.02 and in the United Kingdom it is $9.11—again, less than one-fifth of the cost. What the government is arguing, and I understand the opposition agrees with this, is that those savings should be passed on to the taxpayer and to the patient, because we are talking here about hundreds of millions of dollars and, over 10 years, billions of dollars. I do not see why the taxpayer should foot that bill.