Carol Brown (Tasmania, Australian Labor Party) Share this | Hansard source

I rise to contribute briefly to the debate on the Pharmaceutical Benefits Scheme, the PBS, which was an initiative of a Labor government and has been operating in Australia for over 60 years. It was designed to facilitate affordable and timely access to prescription medication. The PBS has become a key feature of the modern Australian healthcare system on which Australians rely heavily. The aim of the PBS remains the same as it was when the scheme was first introduced by Labor over 60 years ago: to ensure all Australians have access to affordable, high-quality medication. Indeed, the very concept of the PBS finds its foundations in the long-held Labor notion of universal health care: that affordable health care, including services and products, should be available to all Australians, not just those who can afford to pay a given price. In light of this, the PBS, by subsidising the cost of an array of prescription medicines, has operated to facilitate the implementation of universal health care when it comes to access to medicines. The positive effect that the PBS has had should not be underestimated. Hundreds of thousands of Australians suffering from a wide variety of health conditions—including those suffering from chronic illnesses such as asthma and arthritis—have unquestionably benefited both physically and financially from the ability to access subsidised prescription medication.

The same can be said for the hundreds of thousands of Australian men, women and children who have benefited from being immunised under the National Immunisation Program. It would not be unreasonable to suggest that countless lives have actually been saved because of the operation of the NIP, which provides fully funded vaccines for major preventable diseases. Indeed, it is through the operation of the government health initiatives such as the PBS and the NIP that this country has been able to establish a reasonable, basic standard of health and wellbeing for a majority of Australians. The government recognises the immense value of the PBS and the NIP and is dedicated to ensuring that initiatives continue to operate to ensure that all Australians enjoy a decent standard of physical health and wellbeing.

The specific purpose of the bill we are debating here today is to amend the National Health Act 1953 by introducing provisions allowing the Commonwealth government to implement cost recovery arrangements for the services and activities related to listing medicines on the PBS or designating vaccines for the National Immunisation Program. On 25 August, the Senate Standing Committee on Community Affairs handed down its report on the bill. The majority report recommended that the bill be passed, with an additional recommendation that the regulations contained in the bill:

… should incorporate specific measures, whether through exemptions or waivers or some other form, to ensure that there is no disincentive for companies to lodge applications to list low-volume medicines, or to change or extend the indications of listed medicines.

I fully endorse the recommendations contained in the majority report. During the course of the inquiry the committee heard evidence from a number of stakeholders regarding the possible impact cost recovery may have on the PBS listing process. At present, to be listed on the PBS a pharmaceutical must receive marketing approval from the Therapeutic Goods Administration—the TGA—and obtain a positive recommendation from the Pharmaceutical Benefits Advisory Committee, or PBAC. This recommendation goes to the Pharmaceutical Benefits Pricing Authority—the PBPA—and then to the minister for final approval.

Until this point, the costs associated with lodging an application for PBS listing, regardless of whether the application succeeded or failed, were borne by the Australian taxpayer and not the pharmaceutical company lodging the application. When combined with the actual cost of providing subsidised medicines and fully funded vaccines under the PBS and the NIP, this equates to a significant financial outlay for the Commonwealth government and taxpayers. Indeed, in the 2006-07 budget cycle the Commonwealth government paid $6.4 billion to approved pharmacists, hospitals and medical practitioners in the form of subsidies for the supply of medicines under the PBS. A further $280 million was provided by the Commonwealth to fully fund the supply of vaccines under the NIP. Undoubtedly it is this large financial outlay by the Commonwealth government which led witnesses during the inquiry, such as Associate Professor Thomas Faunce, to highlight the importance of the introduction of cost recovery arrangements to ensuring the long-term sustainability of the PBS.

Under the proposed amendments contained in the bill, the onus of the costs associated with lodging an application for PBS listing will be shifted to the companies seeking the listing. Under the changes, the Commonwealth government will be entitled to recover both the costs associated with lodging a submission to the PBAC and, subsequently, the costs of the processes that arise from those submissions in relation to new listings or changes to existing listings. Under the model contained in this bill, as opposed to that proposed by the previous Howard government, all revenue collected from cost recovery will be paid directly into consolidated revenue, guaranteeing the independence of the PBAC, which will have no role in the setting of fees and will not receive any revenue from the industry.

It is important to note that the government was in opposition when the previous government sought to introduce cost recovery for the PBS and NIP. At the time, we shared some reservations with some of the stakeholders about the previous government’s proposal—in particular, the possibility that the independence of the PBAC could be threatened. However, as I have mentioned, under the model contained in this bill the independence of the PBAC is guaranteed. Under our model, cost recovery will not affect the structure or the operation of the PBAC, nor will it compromise the independence of the committee decisions.

Once the legislation is fully operational, it is estimated that the annual revenue regained from cost recovery fees will be around $9 million in 2008-09, increasing to around $14 million in the following years. It is important to note in saying this that the government is committed to ensuring that there is due process to make sure that the fees that are levied are fair and reasonable. The government believes that this is not an unreasonable burden for pharmaceutical companies to bear in light of the significant financial benefits which such companies enjoy if they are successful in having a product listed on the PBS. Indeed, pharmaceutical companies have had years to prepare for the introduction of PBS cost recovery fees, since the previous government, despite its delay in introducing the initiative, never once told the industry that it was off the policy agenda. It is likely that making pharmaceutical companies, rather than Australian taxpayers, accountable for the costs associated with lodging a submission will encourage companies to prepare better quality submissions.

There were some concerns raised during the course of the inquiry that the addition of cost recovery fees to the process of listing medicines on the PBS may present companies with a disincentive to develop and list new medicines—specifically, low-volume medicines. However, as the Minister for Health and Ageing pointed out, cost recovery is not a new process. Indeed, the experience of the TGA, where cost recovery fees have been applied successfully for the past 15 years and new products continue to be registered, highlights the viability of the cost recovery process. The department noted in their submission to the committee that the financial incentive of being listed on the PBS, in most cases, outweighs any disincentive in relation to cost recovery fees. However, it also noted that niche products designed for a smaller market will, under the legislation, be given consideration under the cost recovery arrangements which would allow for a discretionary waiver of fees on those grounds. In its final report the committee recommended that the bill be passed, but it also recommended:

… that the regulations should incorporate specific measures … to ensure that there is no disincentive for companies to lodge applications to list low-volume medicines, or to change or extend the indications of listed medicines.

While the bill in its current form provides some scope for a waiver of cost recovery fees where it may be in the public interest, the proposed amendments would simply make it absolutely clear that there will be no disincentive whatsoever to smaller pharmaceutical companies lodging submissions or for any company to lodge submissions for lower volume medications.

The government agrees with the committee that the regulations should provide for the protection from fees for applications seeking to list orphan or low-volume products. The minister has released the draft regulations, and I understand that the period for consultation on the draft regulations will continue until 19 December. A number of drugs will be granted exemption from cost recovery fees. For example, TGA designated orphan drugs and drugs approved for temporary supply will attract automatic exemption. Medicines used in palliative care, medicines used to treat conditions common to Aboriginal and Torres Strait Islander populations and paediatric medicines will also be exempt. The draft regulations show that the department can waive fees where it is in the public interest and where the payment of a fee would result in the application not being financially viable.

The Productivity Commission has pointed out that, by ensuring that the pharmaceutical companies that are regulated bear the costs associated with making a submission, cost recovery under the PBS can promote economic efficiency and equity by promoting cost consciousness among agencies and users. Obviously, by passing on the cost burden in the majority of cases these measures also promote the longevity and sustainability of the PBS, which has served the Australian community for over 60 years. Therefore, under these measures Australian men, women and children will continue to enjoy affordable and timely access to a wide variety of medications. Indeed these measures will ensure that the PBS—which has become the keystone of the Australian health system—continues to promote, as far as possible, universal access to quality health care in terms of both products and services. The measures contained in this bill are in line with the Rudd Labor government’s broader commitment to improving access to affordable quality healthcare services in this country. The government introduced these measures in its May budget and their implementation has already had significant financial consequences. The opposition is being completely hypocritical by not supporting this bill. As I have said, I support the recommendations of the Senate community affairs committee majority report and hence the passage of the bill.