Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Hansard source

I rise to speak on the National Health Amendment (Pharmaceutical Benefits) Bill 2015. This bill seeks to amend the National Health Act 1953 to implement measures in the PBS Access and Sustainability Package. My colleagues in the other place have talked about the failure of this government to consult Labor over substantial amendments to this legislation. In the time the legislation has moved from that place to this one, the level of consultation has not improved at all. So I am glad that the economics committee did have the opportunity, albeit a very short one, to have a look at the bill in more detail. This is an important piece of legislation because it includes changes to the Pharmaceutical Benefits Scheme and it includes measures that give effect to agreements with the generic medicines industry of Australia and Medicines Australia and, of course, the Sixth Community Pharmacy Agreement, the new five-year agreement with the Pharmacy Guild of Australia.

Labor is rightly concerned about potential unintended consequences because of the lack of consultation and the lack of scrutiny. This is becoming typical of this government; it is their way of operating. They make changes to legislation that have the potential to harm some of our most vulnerable Australians, but they shut down conversation until the very last minute and then try and ram it through an hour before midnight. In the case of this bill, Labor was only made aware of the detail the night before it was tabled in a briefing from the department. The government knew that the existing pharmacy agreement was to expire on 30 June but have yet again shown their inability to have good-faith negotiations with those they need to. This incompetent and chaotic government has had 12 months to negotiate a new pharmacy agreement. The Fifth Community Pharmacy Agreement clearly sets this out. It says: ''Negotiations for a new community pharmacy agreement will commence 12 months prior to the expiry of the agreement and will conclude by 31 March 2015.' But we know that negotiations did not start until just four months ago and only concluded earlier this month, just one day before the bill was rushed into parliament. And now we have just seven days to give this important legislation, a commitment to spend $18.9 billion, the attention it deserves in the Senate before it is passed. As you would expect from an opposition which is reasonable and responsible, Labor believes it is worth taking the time to have a good look at the detail of this bill in the Senate as we did in the other place.

I now go to the elements of the bill—the PBS package initially. Unlike previous pharmacy agreements this bill seeks to bundle up a series of other measures not directly linked to the remuneration of pharmacists. This is called the PBS Access and Sustainability Package. The government says that this package of measures is designed to deliver 'a more sustainable pharmaceutical benefits scheme with better value for taxpayers, cheaper medicines for consumers and approved access to innovative medicines'. Labor is always concerned when the government talks about sustainability because, as night follows day, it almost always results in massive cuts such as their cuts of almost $800 million to the flexible funds or new taxes such as the current GP tax, which is in fact worse than the original proposal for a GP tax. We know that the government is cutting $800 million from the flexible funds that support vital programs such as drug and alcohol rehabilitation services, mental health services and peak organisations like Mental Health Australia and the Consumer Health Forum. It is also cutting more than $2 billion in Medicare rebates over the forward estimates, something we know from health professionals will see bulk-billing rates decline and many more vulnerable patients facing not insignificant out-of-pocket costs.

According to the government, this access and sustainability package contains more than 20 measures and is designed to achieve $3.7 billion in net savings over five years. It includes $6.6 billion in savings 'across the entire pharmaceutical supply chain', partially offset by $2.8 billion of these savings going back into pharmacies as part of the Sixth Community Pharmacy Agreement. Of the remaining $3.7 billion, the government is promising, though not budgeting for at this stage, that some of this money will be invested in new drug listings. In other words, cuts to the prices paid to drug companies are being used to both prop up the budget and fund the additional money going into the Sixth Community Pharmacy Agreement. The industry newsletter Pharma in Focus declared that 'research pharma companies are by far the hardest hit in contributing to the $6.6 billion in total savings'.

The key components of this package are new PBS pricing policies to reduce the price paid by the Commonwealth for innovative medicines—that is, F1 or formulary 1 medicines—and generic F2 medicines; a supposed increase in pharmacy competition by allowing pharmacies to discount the co-payment; the removal of some over-the-counter medicines from the PBS, which I note may see some patients paying more in out-of-pocket costs; a change in the structure of pharmacy remuneration to remove the link to PBS prices, something that also may increase out-of-pocket costs for some patients; and a provision for pharmacy to expand its role into the community. The government expects the majority of savings achieved by these measures to come from PBS pricing changes.

Firstly, I go to the F1 five per cent reduction issue. Around $1 billion of the cuts from this package come from the inclusion, for the first time, of a statutory price reduction for patented or F1 medicines. The price paid for all patented medicines that have been listed on the PBS for at least five years will be cut by five per cent on 1 April 2016. This is expected to affect 400 medicines. Newer medicines that reach their five-year anniversary on the PBS following that date will take a five per cent price cut on the following April.

The government argues that delaying the price reduction for five years after listing is intended to give manufacturers time to recoup their investment cost. Prior to this agreement, Medicines Australia argued that drug companies had been forced to take significant cuts in recent years, most notably as a result of expanded and accelerated price disclosure, and reductions could put at risk Australia's access to innovative new medicines. The industry argues that it is in the F1 phase that it recoups its research investment. It says it would affect the listing price of new drugs, because part of the price struck was directly related to the price of comparable drugs. It also warned that the proposals made it more likely that some medicines would be delisted and could impact on research and development worth over $1 billion.

However, the 2013 report by the Grattan Institute found the opposite—that Australia is paying more than many Western countries for pharmaceuticals in general and more than New Zealand for patented as well as generic drugs. I also note that there is some uncertainty about the status of the agreement with Medicines Australia, largely due to the incompetence of this government and its obvious inability to work with industry collaboratively or negotiate in good faith.

Secondly, I go to the question of F2 price disclosure. Generic and off-patent medicines, also referred to as F2 drugs, are, as a result of Labor's reforms, subject to accelerated price disclosure, which requires the suppliers of these medicines to advise the Department of Health of the prices at which they are selling their brands. The government then uses this information to move the price paid by the government closer to the price at which the drugs are supplied in the market.

Under these changes, expected to save $2 billion, from 1 October next year the market price of medicines listed on F2 for three years or more will no longer take into account the originator brand of the drug. This should see lower prices for both government and consumers, as originator or premium brand names tend to maintain higher prices than generic competitors, which draws the average price up. As well as an expected 50 per cent reduction in the price of generic medicines, prices should also fall for general patients, though not for concessional patients, who make up around 80 per cent of PBS prescriptions, as all PBS prescriptions are priced above the concessional co-payment of $6.10.

The third issue is price disclosure. Another change, expected to save $610 million over five years, is the closing of a loophole relating to combination drugs that allows them to avoid price cuts from price disclosure in certain circumstances. The bill has provisions to close this loophole so that price disclosure reductions for component drugs of combination drugs on F2 will flow on to the combination drugs, starting on 1 April 2016.

Perhaps the most significant and the least understood change in the package is what is referred to as a technical amendment relating to 'PBS listing for bioequivalent and biosimilar medicines', which is expected to save the Commonwealth another $880 million. This continues to be an area of significant contention. It involves the insertion of a new subsection into the act allowing bioequivalent or biosimilar medicines to be taken as having the same drug effect as a listed brand.

Another technical amendment allows the minister to determine that a brand is equivalent to another brand for the purposes of substitution by a pharmacist and requires the minister to have regard to any advice on equivalence given by the PBAC. Exactly how this will operate is still unclear, with even the industry at this stage unsure as to the full details of the move. However, on the surface it does appear to be designed to promote across-the-board substitution. This appears to contradict the TGA's biosimilar guideline. While this is currently under review, the existing July 2013 guideline specifically says that a biosimilar's product information should include a statement ruling out substitution. Labor will always support moves to make the PBS sustainable and medicines cheaper for patients, but this issue has not been explained well by the government. In fact, the government has handled this issue very, very poorly indeed.

All of the measures that I have detailed to this point are, in effect, the lead-in to the real reason for the legislation: the Sixth Community Pharmacy Agreement. This legislation encapsulates how the government has, in the words of one commentator, basically raided the drug companies to pay for the additional funding promised as part of the sixth agreement. However, it is deeply disappointing and of great concern to Labor that, while the government boasts of how it has ripped $6.6 billion out of health as a result of these cuts across the pharmaceutical chain, just $2.8 billion is going back into the health system by way of increased payments to pharmacists. The government has made vague promises about some of that money being made available for new drugs, but there is no mention of that in the legislation.

I now move to the pharmacy location rules. A key component of the National Health Amendment (Pharmaceutical Benefits) Bill is the extension of the pharmacy location rules for another five years. These rules generally restrict a new pharmacy from opening within a certain distance of an existing pharmacy—usually 1.5 kilometres in metro areas or 10 kilometres in more remote locations. These rules prevent pharmacies from being placed either within or in a position directly accessible from a supermarket. I do understand the arguments about competition and prices, but Labor believe that community pharmacy plays an important role in our society that goes beyond dollars and cents and, therefore, the location rules deserve our support. As such, Labor do support amending the existing legislation, which sets a 30 June 2015 expiry date for the location rules, to 30 June 2020, but we do so in the context that these rules will be reviewed independently over the course of the next two years. This, of course, is the main reason this bill is now being forced on the parliament with such haste. Were this bill not to pass this month, the location rules notionally would expire on 30 June and, in theory, anyone could apply for the right to open a new pharmacy in any location.

Easily the most contentious part of this legislation is the proposal to allow pharmacists to be allowed to discount the PBS co-payment by up to one dollar for every dispensed medicine from 1 January next year. From the moment this proposal first became public, it prompted a furious backlash from pharmacists, who have argued that it will harm chronically ill patients as it will take them longer to reach the PBS safety net and they will thus be paying for medications for a longer period. This is because the safety net is not, as many have assumed, set at a certain number of prescriptions but set at a dollar amount. In the case of a concession card holder, for example, that is $366. Therefore, with cheaper drugs it means it will take longer to reach the safety net. It is this delay which explains how the government expects to save more than $360 million over five years through this measure.

A couple of points can be made here. First of all, the discount is entirely voluntary. Unlike the cuts applied to drug companies, chemists can choose whether or not to offer this discount to their customers. As the safety net is unchanged, ultimately no-one can be worse off. No patients can pay a cent more for their prescriptions under this proposal, and many, indeed, may pay a bit less. The average concession card holder fills 40 scripts a year, and 80 per cent do not reach the safety net. If their prescriptions were all filled by a chemist offering the discount, that is a saving of $40 a year, which, for many pensioners, is quite a significant amount. I note that the Pharmacy Guild has indicated that it supports the package, 'with the exception of the discounted co-payment, which is a matter for government'. But the fact is that this co-payment is embedded in the package and cannot be dealt with in isolation.

One thing that concerns me about these changes is that people living in rural and regional areas may end up paying more because pharmacists are less likely to discount co-payments where the costs of doing business are higher and competition is lower. No-one will doubt that the costs of living for everyone are higher in rural, remote and regional Australia, but the government are happy to drive costs up even further because, despite the rhetoric, they, frankly, just do not care. I also am concerned about the impacts for Aboriginal and Torres Strait Islander people living in remote areas.

Finally, I wish to go to the question of pharmacy payments. The previous five-year agreement was costed at $15.4 billion; this one, we are told, will cost $18.9 billion over the next five years. That is an increase of $3.5 billion, or 22 per cent, at a time when every other part of the health sector is being cut to the bone and forced to accept a freeze in indexation. This is an increase, but it is an increase in real terms, running at close to double what would have been the case had the amount been linked to inflation; and this does not include an estimated $4.8 billion paid direct to chemists for scripts at below the PBS charge. In total, the government therefore estimates the potential revenue for this sector from the PBS to be $23.7 billion over the next five years. As the Australian Medical Association has pointed out, at the same time as pharmacists are receiving a significant increase in funding and a dispensing fee that for the first time will be indexed to inflation, GPs are being asked to accept no indexation and no increase to their funding for four years, while other sectors such as specialists and radiographers could see their income frozen for five years or more.

This is a proposal that just does not make sense. The government recognises that chemists cannot be viable without a significant increase in funding, while other parts of the medical profession can get by with no change in income for four or five years. The answer, of course, is that they cannot, and it is patients who will pay the cost, either through even higher gap payments or by being denied bulk-billing. This is, of course, just the GP tax by another name. Instead of an up-front charge of $7, it is now a back-door charge of over $8—according to the Medical Journal of Australia—by freezing doctors' incomes and forcing them to pass on the cost to their patients.

Labor welcomes the decision to recognise the work done by chemists and reward them with a living wage, but it is the height of hypocrisy for the government to recognise this in one sector of the health profession while denying such recognition for everyone else. (Time expired)