Katy Gallagher (ACT, Australian Labor Party, Shadow Minister for Finance) Share this | Hansard source

Labor will be supporting the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021. This bill flows from the conclusion of the latest round of strategic agreements between the Commonwealth; the pharmaceutical industry, represented by Medicines Australia, which represents the innovative part of the industry; and the Generic Biosimilar Medicines Association, GBMA, which represents the generics and biosimilars part of the industry. This is a process that has been underway now for some time. It started largely in response to the projections contained in the first Intergenerational report, which was published by then Treasurer Peter Costello in 2002. It projected that PBS costs would climb quite dramatically over the 40-year period that each of the IGRs contemplates.

The process that has been undertaken through governments of both political persuasions, including the Rudd and Gillard governments, to come to an agreement that balances the viability of this critically important sector to bring medicines that are often developed overseas to Australian patients and to ensure that Australian patients have a ready, dependable and affordable supply of the best medicines in the world is, on the one hand, a key objective. On the other hand, the fiscal sustainability has been essentially a balance to be achieved through a series of strategic agreements. This is the latest one and it follows a lengthy negotiation between the Commonwealth and the industry. The agreement contains a number of other very important measures that are not reflected in this bill because they will largely be measures implemented through executive government and industry.

We take the view that agreements concluded in good faith between the Commonwealth government and industry, as in this case, must be respected by an incoming government. If we're lucky enough to be an incoming government next year, our approach to the conclusion of this agreement, which we've indicated publicly we support, extends to our support for this bill.

This bill covers two important measures contained in the strategic agreements. The first is to amend the price reduction system that has been a feature of the strategic agreements going back to the first decade of the century, to ensure that some of the anomalies are fixed in favour of taxpayers in the budget, particularly through catch-up steps through price reductions. Secondly, the agreements in this bill also put in place measures to deal with the insecurity of supply of a range of medicines that had already started to become an issue in Australia, and has been greatly exacerbated by the supply chain shock that we've seen through COVID. I'll deal with that measure first.

At the moment, there are 263 medicines that are listed by the TGA that are experiencing shortages in Australia, with a further 54 medicines that have anticipated shortages, so well over 300 therapeutically listed medicines in Australia do not have secure supply. I'm sure all senators have been receiving substantial feedback from patients, constituents and pharmacies about the difficulty they've been having—some of that was already happening before COVID—accessing supplies of very standard, important medicines: medicines for cardiovascular disease, diabetes, epilepsy, high cholesterol, pain management, particularly for severe pain, as well as a range of medicines for mental health conditions, including depression, bipolar disorder and schizophrenia. These are obviously very important issues for the delivery of good health care to the Australian community.

This agreement contains a number of measures to essentially put in place an obligation on industry to guarantee security of supply of a range of medicines, particularly those that are at risk of supply shortage—a security of supply of four to six months stockholding. This is a measure that we support. We think it's a proportionate, measured response to the shortages we've seen, particularly over the last two years but some of which, as I said, predated COVID. It's a measure we welcome.

Regarding return for the obligations that industry has taken on through the signing of the agreement, I make the point, firstly, that this is largely a supply guarantee that will fall on genericised medicines, because they are the medicines that are usually subject to insecurity of supply. In return for that guarantee, the government has agreed to a modest price support for these medicines. This itself, frankly, should ensure a greater willingness on the part of the global industry to ensure that the Australian market is properly supplied. That is the first technical measure contemplated by this bill and a measure which we support.

The bill also implements a number of important measures designed to deliver price reductions for medicines. These new measures include catch-up price provisions that deliver price reductions for medicines that have thus far avoided price reductions commensurate with what we would expect in the functioning of a competitive market. It is through these catch-up price reductions that the bill delivers around $1.9 billion in savings to the PBS, which will be reinvested in the PBS through new listings. The full schedule of statutory price reductions is very large and complex and doesn't need detailing in this speech, but it's worth the chamber noting some of the more prominent of these details. These reductions will ensure that, on the fifth and 10th anniversary of a drug being listed on the PBS, the drug will see a five per cent reduction on each of the two anniversaries. This price reduction increases to over 26 per cent on the 15th year of a listing. In 2027, towards the end of the agreement, this 26 per cent reduction for the 15th anniversary will increase to 30 per cent price reduction, a very substantial saving to taxpayers, which again will be reinvested in new listings on the PBS.

The bill maintains the first new brand price reduction of 25 per cent, which applies with a first new brand, which will usually be a generic. Again, that is a substantial saving. The five-, 10- and 15-year anniversary statutory price reductions only apply if a drug has no competitors listed on the PBS and, as a result, has not been subject to a first new brand price reduction. Some drugs that have been listed on the PBS for over 15 years have not been subject to price disclosure reductions that are designed to ensure the PBS can adjust and see those decreasing costs over time. These drugs will now be subject to catch-up price reductions equal to the cumulative statutory reductions that would have applied over the period of their listing. That means that, for a drug listed for 15 years that so far has not seen any price reductions, we will see a price reduction of almost 37 per cent by 1 April 2023. It should be noted that the 25 per cent first new brand price reduction will not apply if the 15-year anniversary price reduction has been applied.

Again, we welcome the agreement between industry and the government on these catch-up price reductions. We think they're a proportionate, measured response to the circumstances surrounding some of the drugs that have not been subject to price disclosure reductions over 15 years. They seek to balance that need around access to new medicines for Australian patients with the sustainability of the PBS budget elements of the budget.

The intent of the bill, which we support, is to give effect to a broad objective in ensuring the sustainability of the PBS while safeguarding medicine supply for the Australian population. It includes making sure that the statutory price reductions do not have an unintended consequence that results in the withdrawal of supply of important medicines from the Australian market. We have a strong view, and I imagine the government shares it, that statutory price reductions should not be allowed to undermine medicine supply.

As a result of this shared objective, we note the important role that ministerial discretion has in determining how price reductions are applied in order to ensure that supply of medicines is maintained along with the financial viability of medicine suppliers. We know that the government shares that view and, to that effect, we understand that it has committed to bringing forward an update of the ministerial discretion guidance material and to engage companies that are potentially affected in that process of an update.

This is an important agreement that has been struck between the government and the pharmaceutical industry. It follows a series of agreements that have been struck for some years and it's clear that predictions contained in the 2002 IGR around increases in the PBS budget have not come to pass. We're only halfway through the 40 years that the then Treasurer Costello was looking at at that time, and Labor will be supporting the bill.