Jan McLucas (Queensland, Australian Labor Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Hansard source

I thank all senators for their contributions in this debate. I hope in my summing-up that I am able to respond to a range of questions that have been raised in debate. Senator Fielding, I know you may want to go from the chamber but I will canvass the issues that you have raised. Can I also offer you the opportunity to speak with my advisers so you are assured that those issues you have raised will be addressed and give you the opportunity to rethink your indication about how you are intending to vote on this bill. I take the point that you made in your opening that you essentially support cost recovery in this area, and we are pleased about that. The concerns you have raised I will address in my summing-up speech, but I also offer you that opportunity to be able to receive information from my advisers in the next few minutes.

I thank all senators for their contributions and hope that I address all of the questions or points that have been made. The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 amends the National Health Act to provide authority for the cost recovery of services provided by the Commonwealth in relation to submissions for the listing or amendment to a listing of medicines, vaccines and other products on the Pharmaceutical Benefits Scheme, the PBS, and the National Immunisation Program, the NIP. These amendments will ensure that applicants, mostly pharmaceutical companies, may be charged fees when they seek services from the Commonwealth in relation to the exercise of a power by the minister under section 9B of the act in relation to the designation of a vaccine on the NIP or a provision in part 7 relating to listings or a change to listings for a medicine or other product on the PBS.

As we have heard this morning, the bill has been subject to a detailed examination by the Senate Standing Committee on Community Affairs, which took evidence from a range of stakeholders. I thank on the record all people who submitted and gave evidence to that inquiry. After careful scrutiny of the evidence presented to that inquiry, the committee has recommended that the bill proceed in its current form.

The government agrees with the Senate committee and notes its findings that the regulations supporting the legislation should provide for the protection from fees for applicants seeking to list orphan drugs or low-volume products with small patient populations. This finding accords with the government’s own thinking. The minister has circulated the draft regulations showing that they will contain provisions to exempt from fees applications that seek the listing of orphan drugs. That is part 4, sections 14 and 15 of the regulations.

The regulations also show that the Department of Health and Ageing can waive fees where it is in the public interest to do so and where the payment of the fee would result in an application not being financially viable. The government has provided a copy of a draft version of the regulations to the Senate committee, the contents of which demonstrate the government’s intent to minimise the impact on fees upon the listing of orphan and low-volume products. It has also provided them to interested stakeholders, mainly the industry.

I note Senator Fielding’s concern that drugs may not become available as a result of the application of cost recovery. Senator Fielding, that concern is shared by the government. That is why we have taken a lot of trouble in those two parts of the regulations, which I am happy to provide to you, to ensure that the application of this cost recovery regime would not in fact lead in any way to a limiting of access to medications by anyone in the Australian community. I am quite sure that the way in which the regulations have been formulated provides that protection.

I also thank Senator Moore for her history lesson about the provision of regulations to committees. I thank Senator Moore for indicating to the Senate that, in her time as chair and member of the Senate Standing Committee on Community Affairs in its various forms, she has not known regulations to be provided to that committee. I thank her for acknowledging that this government has provided those regulations for the committee’s use. We acknowledge that it would have been terrific to have been able to get them to the committee earlier. However, they were provided when it was possible to do so. We are keen to be open and transparent. We are keen for there to be scrutiny of this legislation. We are keen for comment.

In that vein, within the next week, the department will release to stakeholders a draft explanatory statement for the regulations. That will further assist with understanding the issues that Senator Siewert has raised. Stakeholders and any other interested party will be able to provide comment on the draft regulations and the draft explanatory statement until 19 September—that is, the consultation period will be four weeks from around now.

Examples of low-volume drugs where exemptions from fees would be granted are medicines used in palliative care, medicines used to treat conditions common to the Aboriginal and Torres Strait Islander population and paediatric medicines—issues that have been raised by a number of contributors to the debate and concern for which is shared by the government.

A number of contributors talked about a concern that the independence of the PBS might be threatened. Senator Xenophon has raised that privately with me as well. In the 2005-06 budget, the previous government sought to introduce cost recovery of services associated with listing on the PBS and the NIP. We shared at that time the reservations of some stakeholders about the model that was proposed by the previous government. It was arguable at that time that the independence of the PBAC could be threatened if it was reliant upon the pharmaceutical industry for its funding. However, now in opposition, the originators of this proposal purport to be concerned about the impact of cost recovery on the independence of the PBAC.

The PBAC’s independence is now guaranteed in the government’s model, which is reflected in this bill. The inquiry found and the government affirms that the expertise, integrity and sense of propriety that PBAC members bring to their task will not change as a result of cost recovery. The PBAC will continue to provide expert advice on medicines, independent of government and of industry. The arrangements for funding the PBAC directly through the budget will continue and the PBAC will have no role in setting fees and will take no part in discussions with companies over fees. Cost recovery will not affect the structure or the operation of the PBAC and nor will it compromise the independence of PBAC decisions. Cost recovery has been implemented successfully in many government agencies, including the TGA, without any loss of independence.

The cost of providing subsidised medicines and fully funded vaccines to the Australian community is a significant financial burden to the Commonwealth. In 2007-08, the Commonwealth paid around $7 billion to approved pharmacists, hospitals and medical practitioners for the subsidised supply of medicines under the PBS. A further $543 million was provided by the Commonwealth to the states and territories for the fully funded supply of vaccines under the NIP within their respective jurisdictions.

Australian pharmaceutical manufacturers and distributors with medicines or vaccines listed on the PBS and the NIP receive considerable financial benefits from the supply of their products to the Australian community. The Senate committee heard evidence that the proposed cost recovery fees would impose a financial burden on industry. I think we should put this into a bit of perspective. We are talking about a revenue gain from an industry that has an annual turnover of more than $18 billion. The cost recovery impost on that annual turnover of $18 billion is $14 million. To those people listening, yes, those figures are very large, but let us again put that into perspective. The cost recovery is 0.008 of a per cent of the annual turnover. People should think about the maths. They should think about their grade 7 schoolteacher’s advice when they are making the assertion that this would place a financial burden on industry that would be too big to bear.

We also have to remember that the pharmaceutical industry spends a lot of money informing and educating medical practitioners. There has been some discussion about how appropriate that is. The cost of that informing and educating of medical practitioners on an annual basis is $60 million. That is $60 million for conferences, dinners and events where doctors and other medical practitioners are educated. We are talking about a cost recovery impost of $14 million compared to that expense of some $60 million. Eight one-thousandths of one per cent of the annual turnover is the figure that we are talking about.

Pharmaceutical companies receive much by way of benefits from the Australian taxpayer once products are listed on the PBS and they have considerable financial capacity to absorb these charges. It is not unreasonable that they contribute financially towards maintaining the architecture of the PBS. Achieving a product listing on the PBS provides a high level of commercial certainty to a company in relation to that product’s sales.

Fees will reflect the amount of effort required in evaluating submissions. The more complex and time-consuming the evaluation and price negotiation, the higher the fee. Of course, the major determinant for the fee structure, whether a submission is minor or major, where the submission includes substantive change, is very well known to the industry and simply reflects both current practice and PBAC guidelines.

The Senate committee also heard concerns about access to and affordability of medicines for ordinary Australians, whether they be hardworking families or the frail elderly near the end of their lives. I assure the Senate that the government is committed to ensuring that the PBS is accessible to those who need support while remaining affordable to taxpayers. It is important to note that as a result of this measure the Australian community, the beneficiaries of the PBS, will not be required to pay any extra for PBS medicines or vaccines. Patient co-payments are currently $5 for concession card holders or up to $31.30 for general patients. They will not be affected by cost recovery arrangements, which will be administered separately to the PBS.

The opposition argue that the measure is being introduced without consultation with industry. I am afraid that it becomes a little bit laughable when they are arguing that position on that side. The pharmaceutical industry has had plenty of time to prepare for the introduction of cost recovery, which was first introduced in the 2005-06 budget. In addition, extensive consultation occurred with pharmaceutical companies in 2007. In respect of Senator Humphries’s claim that this issue was taken off the former government’s agenda, at no time did the previous government ever tell the pharmaceutical industry that cost recovery was off the agenda and the Department of Health and Ageing has continued to consult with them since the budget announcement.

In accordance with Australian government cost recovery guidelines, the department will introduce ongoing monitoring mechanisms to ensure that fees remain based on efficient costs. The department has also met with industry and agreed to establish a consultative mechanism with industry on cost recovery. A full review of the fees will occur in 2010-11. The government is committed to ensuring that there is due process to ensure that fees are levied in a fair and equitable way. The regulations will therefore provide for a review of administrative decisions made in relation to cost recovery. In consultations with industry there was broad agreement on a simple, internal dispute resolution mechanism for negotiations between the parties. In the first instance, if a matter cannot be resolved through discussion, the department will ask someone in the office who was not part of the original decision to review the case and make a fresh decision. If this still does not satisfy the company, they will have the right to take their case to the Administrative Appeals Tribunal.

Revenue from PBS cost recovery will depend on the number and type of submissions brought to the PBAC for consideration. If the measure had started on 1 July 2008, as the government intended, revenue from fees in 2008-09 was expected to be around $9.4 million, rising to about $14 million in the following years. However, the referral to the committee meant that this measure did not commence on 1 July as planned. The delay has caused disruption to the government’s implementation plan and the government acknowledges that some pharmaceutical companies who had planned for the introduction of cost recovery have experienced confusion as a result of the referral of the bill to committee. The government has therefore asked the Department of Health and Ageing to liaise with industry before finalising an implementation date. That also takes into account the consultation process that will occur on the explanatory statement that goes with the regulations that I mentioned earlier.

The minister will announce the date of implementation, following passage of the legislation, as soon as practicable to allow industry time to prepare. The financial consequences of not implementing this measure as originally announced are significant, with savings identified in the budget through this measure being short by several million dollars.

There are a couple of other issues that various senators addressed in their contribution, which I want to respond to. Senator Humphries suggested that pharmaceutical companies would not apply to have medicines or vaccines listed on the PBAC, the PBS or the NIP at all if they did not know, prior to the application, if the fee would be waived. Can I put his mind at rest. The application for a waiver is made at the same time as a submission is made. The department would then consider and advise the applicants of the waiver of a fee if it was applicable, and then the applicant has 14 days, from the advice about whether the fee will be applied, to withdraw their application. In terms of that suggestion, I do not think that is an issue that would stop anyone accessing a medicine or anything being listed. He also asked the question, ‘Why do the regulations say that the fee may be waived?’ He was suggesting that it should say in the regulations that the fee ‘must’ be waived, rather than, as it says currently, that it ‘may’ be waived. Part 4, section 14 indicates what fees are exempt, and section 15 indicates where the waivers will be. I say to Senator Humphries that that is normal drafting language; that is what you say. We cannot say that you must waive a fee when the application has not been received or even assessed. I think that Senator Humphries is trying to find another argument to fill up his page rather than something that truly is a problem. You cannot say that you will waive a fee without doing an assessment of the application.

Senator Siewert requested an interpretation or a definition of the words ‘substantive’, ‘major’ and ‘minor’ change. I direct Senator Siewert to pages 2 and 3 of the regulations, in the listing of the definitions, where the words ‘minor’, ‘major’ and ‘substantive’ are indicated. These words come directly from the PBAC guidelines of several years, and industry is very familiar with them. The Department of Health and Ageing and industry, in fact, developed these guidelines together. Finally, this is an important piece of legislation— (Time expired)

Question put:

That this bill be now read a second time.