Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Ageing, Disabilities and Carers) Share this | Link to this | Hansard source

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 has of course been the subject of a fair bit of attention in recent days, although Labor certainly would have welcomed greater scrutiny of such a significant change to the legislation which manages the PBS. Given the fundamental importance of the Pharmaceutical Benefits Scheme to the health of Australians, Labor would have appreciated more time for the parliament to undertake a longer and more substantial analysis of such complex and fundamental changes and to allow for improvements to be debated. For legislation that was flagged last November, it is extremely disappointing that the government was not able to make draft legislation available to the parliament or to key stakeholders until early May and only introduced this bill on 24 May. Then, without so much as a courtesy call to the shadow minister, the Minister for Health and Ageing threw some amendments to the bill into the mix a week later. Finally—with all respect to my colleagues on the Senate Standing Committee on Community Affairs, who did very well within the constraints served up to them—we saw what can only be described as an extremely truncated Senate inquiry process. The Howard government, I am afraid, makes a mockery of this parliament when it refers a bill to a committee on a Thursday, holds a hearing for half a day on the Friday and expects a report scrutinising the bill to be tabled the following Monday—but that is exactly what we saw with this bill.

While Labor acknowledges that there have been many months worth of planning and discussion about these changes and that industry has been well consulted, there has been too little time available with the legislation before us to really examine the impact of these changes. And, while industry has been generally supportive of the package, consumer groups, academics and other advocates have expressed concerns, too few of which have been adequately examined in recent weeks. The sort of time frame imposed on the Senate committee severely curtailed its capacity to perform the tasks charged to it. As the community affairs committee itself recorded in its report in respect of this bill:

... this very short inquiry has provided insufficient time to analyse the specifics of some concerns raised in evidence, especially in relation to longer term possible impact of these reforms.

Of course, this approach to legislation and long-term reform is exactly what we have come to expect from this government and from this minister. Yet again we are in the position of having to ram through another significant piece of legislation with what many of us feel is totally inadequate analysis or scrutiny.

As my colleague the shadow minister for health emphasised in the other place, Labor knows that the PBS has been the envy of other countries around the world for its ability to control the cost to consumers yet also be a workable and predictable system for the industry. There is no doubt that the changes proposed in this bill are some of the most significant changes since Labor created the PBS. We want to be confident that this is the right step—something that this process has not allowed any participant to feel.

My colleague the shadow minister for health outlined a number of Labor’s concerns in her second reading speech. Firstly, the government asserts that this bill will deliver massive savings—some $3 billion over 10 years. Labor has been trying for months, without success, to uncover exactly where these savings will be drawn from. The government is hiding behind the general idea of ‘savings’ without explaining that the savings are to government, not consumers, and, in the worst-case scenario, may be at the expense of the consumer. These issues were not clarified to Labor’s satisfaction in the Senate committee process, which actually heard evidence from the Generic Medicines Industry Association, or GMiA, which completely contradicted the government’s claim.

The stated aim of the PBS reforms, of which this bill is part, is to ‘give Australians continued access to new and expensive medicines while ensuring that the PBS remains economically sustainable into the future’. This is an aim which, of course, Labor endorses. The shadow minister for health outlined Labor’s concerns in her second reading contribution when she stated that we wanted ‘to be assured and convinced that there were adequate protections for consumers within this package so that family budgets do not bear the brunt of the price reductions to government through increased costs at the pharmacy counter’. When the Senate Standing Committee on Community Affairs asked the department what savings from these changes might be expected to accrue into the hands of the customers of pharmacies, it was told that, while the department was aware of the Pharmacy Guild’s estimates, the department itself had not done any independent modelling. Labor remains concerned that the impacts on consumers have not been satisfactorily explored. The committee itself recognised its own concerns in this regard. In its report on the inquiry into the bill, it stated:

The Committee considers that as the changes implemented by the Bill will have major implications for the sustainability of the PBS and will impact on consumers and taxpayers, the Government should monitor the reforms as they are being progressively implemented and make as much information publicly available as possible.

The committee recommended that, 12 months after the implementation of the reforms, the minister report to the Senate on the impact of those changes, particularly the cost of medicines to consumers. Labor supports this recommendation and will move amendments to this effect.

The second area of concern is the impact of these legislative changes on the generics industry. As was noted in the committee’s hearings, generics have not had the market share in Australia that they have had in other countries, and the changes in this legislation do not provide any price signal to consumers to encourage greater use of generics. The common theme and criticism of this reform is that it does not do enough to facilitate the development of—and, indeed, may lead to the erosion of—the Australian generic medicines sector. Labor has always seen a strong generic sector as essential to increasing price competition in the Australian medicines sector, to reduce the cost to government and to ensure the future sustainability of the PBS. Labor would have welcomed a greater opportunity to explore some of these suggestions put forward by representatives of the generics industry at the Senate inquiry—for example, the use of financial incentives for consumers to use generic medicines—but, as I have already commented, the time frame in which we have been operating has severely curtailed any investigations of this nature. The government did announce in the budget a $20 million public awareness campaign to promote the use of generic medicines. Labor supports this campaign and will be monitoring its rollout to ensure that it is effectively targeted.

In addition to the issues already raised by Labor, a number of additional issues were explored in the Senate inquiry—firstly, concerning the transparency of processes being implemented by the department. As I noted earlier, the industry has been well consulted with regard to this package and is generally supportive of the reforms. However, it seems that not all have been equally consulted in the negotiations. Concerns have been expressed by the generics industry, consumer groups, academics and other advocates that they have been locked out of some discussions, with particular concern regarding the composition of the Access to Medicines Working Group. While the department argued that this working group essentially formalises the long-term, frequent and informal relations between the Department of Health and Ageing and Medicines Australia, and sometimes also the PBAC, concerns remain among other stakeholders that this group would inform decision making and that those stakeholders excluded from the group would also be excluded from the decision-making process. While representatives of the department argued that there would be a process of consulting and engaging with other stakeholders if anything were to come out of this group that would affect others, concerns around the transparency of the body remain. The Senate committee recognised these concerns in its third recommendation, which was that the department make publicly available information on the outcomes of the process being employed to effect the changes contained in the bill.

The treatment of combination products was another area of considerable discussion in the committee process. Combination products are products made up of more than one chemical, where pricing is usually based on the sum of the cost of the individual components, in accordance with PBS guidelines. The bill proposed a separate list for single brand fixed dose combination products and states that the price of these products would be linked to the price of the component parts. This would mean that the price of the combination products would fall in accordance with the mandatory price reductions for the component parts of the products. As I said, this is a complex piece of legislation and a half-day inquiry is not enough to be able to get your head around these sorts of issues.

Medicines Australia suggested to the Senate committee that the reform package could be improved by amendment to the way in which combination products were treated, recommending that single brand combination products should be classified into the F1 formulary, where they would effectively be protected from the mandatory price reductions to the F2 formulary. The department in turn argued that ‘the treatment of single brand combination products under these proposed reforms is highly consistent with the way in which combination products are currently priced’ and would ensure that the combination products would not be ‘priced in a different way to the component parts’. The committee considered this evidence and in its conclusions acknowledged the need to ensure that, ‘when a combination drug has been demonstrated to be no more effective than its component drugs, the level of the subsidy for the combination drug should be no more than that justified on the basis of its components’.

The committee subsequently recommended that the bill be amended to allow the minister, in determining the price of a combination drug when a statutory price reduction applies to its component drugs, to take into account the advice of the PBAC on whether the combination drug has advantages over its component drugs or other alternative therapies. In providing such advice the PBAC should consider evidence of significant improvements in compliance, clinical benefit or reduced toxicity associated with the combination drug compared to alternative therapies.

The government has moved amendments to the bill to reflect this recommendation. The amendments essentially represent a compromise between the proposed approach in the bill and Medicine Australia’s argument that combination products which provide an intrinsic value over and above their component parts should be treated differently in the formularies framework. Labor supports the government amendments, which will require PBAC to determine and advise the minister whether a combination product itself has an intrinsic value over its component parts which compels that the combination product should have a price advantage.

New section 101(4A6) provides guidance to the committee as to the factors it should consider when determining whether a therapy involving a combination item provides greater intrinsic value than its component parts. These factors include a significant improvement in patient compliance with the therapy or a significant improvement in efficacy or reduction in toxicity.

The department has noted that there are currently around 50 combination products on the PBS and that it is their inclination to send this entire list to the PBAC for assessment prior to the implementation of the 1 August 2008 price reductions. Labor believes that this is a sensible approach which will provide certainty to the pharmaceutical industry and flexibility to government.

A further area of concern noted in the Senate inquiry process but not explored sufficiently was around the concept of interchangeability. The bill adds a new provision in section 101(3BA) requiring the PBAC to consider whether or not a drug is ‘interchangeable on an individual patient basis’ and inform the minister. Dr Thomas Faunce, who appeared before the committee, argued that this new concept should be defined in the legislation. Departmental representatives argued before the committee that interchangeability:

... means that these drugs are pharmaceutically related, have the same mechanism of action and provide similar therapeutic outcomes at equivalent doses at the individual patient level.

While departmental officers were able to provide this definition verbally before the committee, it was a more complex exercise locating exactly where this definition was located. The department has argued that there is no need for a definition in the legislation as this is:

... one of the things that the PBAC looks at ... it is really formalising a role that the PBAC already has that has not really been mentioned.

However, the lack of transparency around the concept remains a concern to Labor, particularly as critics of this change maintain that this new concept of interchangeability will raise the burden of proof required to list a drug in the new F2 formulary, creating an opening for dug companies to argue that their drugs are not interchangeable and hence that they should remain in the F1 formulary. Labor remains concerned that this area remains unresolved—and we will keep an eye on how the legislation plays out in this area.

Labor’s approach to health is a compassionate one—we must care for those around us who are ill and need our support. But our approach is also one that goes hand in hand with our economic strategy. Clever health spending cannot and should not been seen merely as a cost but also as an investment in the nation’s future. Drugs play an important role in chronic disease management—they always have and they increasingly will.

Medicines funded under the PBS play a vital role in prolonging the active working lives of Australians. Used responsibly, medicines have the potential to improve both workforce productivity and participation, in addition to saving money in other parts of the health system. Responsible spending on the PBS contributes to improved economic growth and should be seen as an investment, not simply a cost.

To continue to improve participation in the workforce, we will need to maintain and enhance the health of our ageing Australian population. Continued access to medicines through the PBS will play a significant role in improving productivity. Medicines can positively contribute to workplace productivity and economic growth. By treating symptoms and extending life, medicines improve peoples’ activities and functions in daily life, including their physical, social, emotional and cognitive wellbeing. These all contribute to a person’s ability to participate in the community and in the economy—a value we must not forget. Labor will support this bill and the amendments that I have highlighted, but, as I say, we will continue to keep a close eye on how the legislation plays out.

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

We have heard and we will continue to hear just how complex the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 is. I am not going to take time up in the chamber today working through the various technical aspects of this bill. We have had that and we will continue to have that, and Senator McLucas has passed on a few of the issues that are important for us to consider. But I felt I needed to put some statement on record today as a member of the Senate Standing Committee on Community Affairs, which considered this bill.

I know that Senator McLucas mentioned our concerns about the focus and the process of our legislative committee, but I think it is essential to put on record the fear and anger that I have as a member at the lost opportunity that has been inflicted on the Senate and the wider community to effectively consider the impact of the PBS changes that are before us today. I do not pretend that there will be a large number of individual citizens in our community who will want to know every detail of the changes that are proposed in this legislation, but there are some who will. Even with the outrageous time frame that the government imposed on this committee, we were able to receive nine full submissions, and a number of other organisations and individuals made phone inquiries and raised concerns.

What was clear and what continues to be clear to all of us is that the Australian medical industry, the Australian pharmaceutical industry and many individual Australians have a great deal of regard for our PBS system. We have heard before here and we have seen in the literature and in the academic institution research that there is wide respect for the PBS. There is almost an individual relationship between people in our community and this system. It has been respected, it has grown with people over the last 40 years and there is a sense of ownership around the way it operates. People understand that there is a system provided by their government which gives them support to obtain safe, effective and cost-effective medicines in this country. So, when it is proposed that complex changes be introduced to this legislation, people demand to be advised about what is happening; they need to know what the impact on their own processes and on their safety is going to be.

When we had the American free trade agreement discussions, I think two years ago now, there was a huge component of public interest, media interest and also industry interest about whether that free trade agreement would have an impact on the PBS system. You would remember that there was extensive discussion in this place that varied between fear about what may happen and a commitment to ensure that the core values of the PBS would be retained by all governments into the future. That was a promise that was made. Now, as always, as legislation is introduced down the track, people need to know what is going on, and they are asking the questions.

We know that there is an ongoing process—no legislation remains untouched—and, particularly with the PBS, ongoing attempts need to be made to ensure that cost effectiveness is not only maintained but also backed up by an absolute security in the safety of all pharmacy products that are put before the Australian public. We have had that. There has been a sense of security in the process. All discussions around the, I think, almost iconic institution of the PBS must be based on safety being the No. 1 consideration, and after that comes the cost effectiveness of the process. Of course, we know that every system must be economically viable, and the cost effectiveness of the PBS to the government must be maintained. There is a shared commitment to that. Everyone understands that we must have the best possible way of ensuring that best prices are maintained so that effective innovation in the industry can continue. When people start talking about the figures involved in the cost of drug innovation and exploration, I get completely overwhelmed, because it does cost a lot of money for organisations to scientifically research and develop effective medications. We need to understand that, and we do. There is no question about the need to have the best spend for the Australian taxpayers’ dollar around ensuring that the PBS system is strengthened and maintained.

Underlying that, there must be a sense that the consumer is going to receive the best possible product. That is not just with the ongoing debate around this legislation, with the difference between drugs that have patents on them and the time when they come off patent, and we have that wide, burgeoning industry of generic medicines. A lot of the debate around these particular changes before us today is about the process of maintaining that, so that we are able to ensure that drugs are assessed adequately and that, when there are options, people are made aware of those options and the costs are maintained so that we are able to keep a solid base cost and people can receive good medication without either themselves or the government overpaying for it.

The various technical aspects of the different formularies and what drugs are going to go into them will be spelt out in detail in the legislation. What detail is not in the legislation is going to be placed in regulations that will evolve as the process continues. I want to say yet again, as I do consistently, that, when we have complex legislation before us which indicates that a lot of the detail is going to be in regulations and we have not got the regulations, I always have trouble. I cannot guarantee that I would understand all the regulations, but I am sure I would be able to get effective advice so that at least I would be able to see how the whole package operates. Very rarely can one stream in health legislation work by itself. We have the core legislation and then the regulation that works with it that allows the flexibility for things to be amended more quickly.

People in the industry do understand this legislation. They do study it, as we have found out through our committee process and through the range of visits that we have all had from people representing different areas of the industry. They do read and understand every element of the debate and they have quite specific questions, which they raised with us in the committee process. I return to my overwhelming concern of losing the valuable opportunity, through examining this bill in the committee process, to assuage some of the fears, to address some of the concerns and, most importantly, to keep the open discussion going. On a number of issues that came up in the committee process, we heard quite determined evidence by people who felt that things could be done better, who felt that there were threats to the PBS; there were specific allegations that things were put in the wrong area under the PBS. That came out in the committee process and the detail is available, for those who wish to read it, in Hansard and in our committee report.

When we were able to receive professional information from the department, when they came as witnesses to the committee, we were able to directly clear up a number of the issues. This is the value of the committee process: getting people together, making sure—through evidence, through submissions and through responses—that we are able to work effectively, through the Senate, to ensure that issues are clarified. It does not guarantee agreement, and we will probably see that when we go through the amendment process today. But nonetheless, we are able to work effectively towards coming to some understandings that make the legislation better. And we saw that even in the one-day process that we had on this bill. A number of the concerns that were raised about how people thought this legislation would work were cleared up simply by having that before us and being able to work through it. This is why I am disappointed. If we had had more time to get more discussion going, we may then have been able to have a stronger basis on which to move forward in this area. It is disappointing that, even at this stage of the process, we are still arguing about the lack of effective communication and consultation.

Now we know that the government, through the departmental processes, have regular meetings with the key stakeholders and certainly with the Pharmacy Guild. It was in evidence that there has been ongoing discussion with the Pharmacy Guild and their members about their role in this process, and we know there is a specialist agreement with the Pharmacy Guild and the government. That is strong and that should be maintained. We also had the same discussion with Medicine Australia and also with consumers in different times at different places. But there must be an opportunity for all of the stakeholders to get together at different times, to be able to at least hear—sometimes hear again, because there are certain people who do not move forward with their arguments, but nonetheless to get on the table again—what the key issues are.

Certainly a couple of the amendments that we have wanted to discuss with the government have been looking at that. We have been looking at clear definitions in the process. We have also been looking at a kind of monitoring process that would re-establish the role of the consumer, because, as I have said, from my point of view the role of the consumer must be absolutely valued in anything to do with our health system and in particular with the PBS. We had evidence from health consumers during the committee hearings that they were keen to continue in this way, in particular to see exactly what the impact of changes would be on the cost to people across Australia of their medicines. We have seen over the last decade an enormous rise in the co-contributions, and that has gone through this place in terms of exactly how the PBS operates for people who are going to purchase drugs at their pharmacies. The co-contributions have risen dramatically over last few years, but generally when people have understood how the process works they have understood the cost of the development of medication and they have had the security that the drugs they are going to be receiving on the Australian market are absolutely safe, that they are the best in the world that can be available.

They also understand that there is a genuine commitment from the government to minimise the cost and also to ensure access to generic brands. This is an industry that has risen in our country, as it has across the world. Generic products give people a choice at every level about the purchase of the medication that they going to receive. This is something that we on this side of the chamber celebrate with the government—that is, the decision to have the education campaign about the best use of generic products. There was some discussion at the committee about the best way of doing the program, and of course that is something that will evolve as it develops. But it seems to me one of the absolutely critical elements of how this legislation is going to work is the community understanding of exactly how the process operates, their understanding about the safety elements of using generic products, their understanding of their rights as consumers to work with their doctors so that they have some ownership over the types of medications they are purchasing and to be able to question that. It is part of the ongoing education process, which we have talked about many times, that an individual takes ownership of their own health, and the individual ownership of their health extends to the PBS process because this is an area where, once again, the person who is having treatment should have the knowledge about the treatment they are receiving and be able to engage effectively with the health providers who prescribe the medication as well as those who give it out at the pharmacy. That is something that we do celebrate, and it is an ongoing aspect of the legislation.

We are disappointed that there has not been more open dialogue about the process. We hope that, once again, that is a message we can take into the future. We are supporting the recommendation about the combination drugs because that came out clearly in the evidence, both in the written submissions, particularly from Medicine Australia, and in the evidence given before us at the committee. This is an aspect that can be looked at, and we are looking forward to the government’s response on that.

We acknowledge, as part of the government and also as health consumers, that the PBS is something that should be valued in our community. It is at many levels. We do expect that there is an increased understanding in the community about the way it works, and that came out consistently. Over the last 15 years there has been a growth in understanding of the way it operates and more questions are being asked by consumers about their rights in the system about not only the co-payment but also their right to question the way it works and to question what processes are put before them.

I would like to thank the organisations who gave their time and who responded so quickly to our committee requests. They came up with extremely detailed submissions. I would like to thank the department in particular and the officers of the department who gave their time to brief the committee. We could have done with a lot more, and we will continue to ask for this support, because, as we know, the PBS changes will continue. This is not a finite process; it will continue. I particularly note the speed with which they came back to the committee with responses to question that were raised. I also want to take this opportunity to thank the secretariat for helping us put together this report so quickly. We had the committee hearing and very detailed questions and comments came out and then we were reporting back to this place on Monday. If you do the maths, you can understand how speedily people had to get their heads across the process and get responses back. We are supporting the legislation, as Senator McLucas has said. There is a shared commitment to ensuring that the PBS is maintained and valued in this community. We do expect that there will be close monitoring of the impact on all stakeholders in this process and we do expect that, as changes continue to happen in this legislation, there will be a definite attempt to engage all of us so that we can work together to make this the best possible system we can have.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Before I begin I would like to acknowledge Senator Moore’s wonderfully informative and passionate contribution to this debate. I rise to speak on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007.There are a number of matters in respect of this bill which deserve the attention of the Senate and the concern of members of the community. As senators will be aware by now, I take particular interest in the government’s actions when they concern the integrity of Australia’s universal health system, Medicare.

This government is full of rhetoric about its ongoing commitment to Medicare; however, when its actions over the past 11 years with regard to health are looked at closely there is a huge chasm between rhetoric and reality. For example, in its 11 years in office the Howard government has presided over the greatest stuff-up of medical practitioner training this country has ever experienced. No amount of self-serving spin will explain away the critical shortage of doctors created by the Howard government, particularly as it will take a decade or more to recover from it. As a result of the Howard government’s mismanagement, small country towns have now been forced down the path of incredible incentive payments to get a doctor into their town. Just last week the story made the news that one local shire is supporting a payment of up to half a million dollars—and that is on top of a salary of almost a quarter of a million dollars—to get a doctor. The Howard government has betrayed rural communities on a scale never witnessed before. The outcome is that rural Australia is now paying big time for the Howard government’s ‘she’ll be right because the market will deliver’ attitude. When is the Prime Minister going to wake up and work out that market forces alone are not going to deliver medical services to rural Australia?

What is more important than having access to life-saving medical care? There is no alternative. The Commonwealth government has a responsibility to do something about this sorry state of affairs. In my view, this bill is setting up Australia’s highly regarded universal health system for another hit courtesy of the Howard government. Already we are seeing patients having to meet an increasing share of the cost of PBS medicines as the gap between the cost of PBS medicines and PBS benefits widens.

There is now a real suspicion that the most significant changes to the PBS proposed in this bill have been driven by a need for the Australian government to appease US interests following Australia’s signing of the free trade agreement with America. We should be under no illusion: the pressure is on from the US drug manufacturers to bring about an increase in the price of PBS medicines in Australia. US drug companies and players in the US administration are very antagonistic to the fact that the prices of many medicines in Australia are significantly lower than they are in the US. For the US drug manufacturers, free trade with the US translates to Australians paying the same exorbitant prices for medicines as do US citizens.

Historically, the actions of our nation’s government have ensured that all Australians have affordable access to world’s best practice pharmaceutical treatments. This is something we cannot afford to have put at risk. Government involvement in the pricing and availability of PBS medicines extends to ensuring that Australians, regardless of where they live, are able to access required medical and pharmaceutical services. We know that the availability of medical practitioners, particularly GPs, often depends on where you live. We also know that, despite progressive improvements in average health status and longevity, there are far too many Australians whose health status and longevity remain well below those of the rest of the population.

Australians have a right to know how much of this difference can be attributed to sharp differences across the country in access to medical services. Available statistics indicate that people living in the mining and pastoral electorate of Kalgoorlie, which takes in all the Kimberley and the Pilbara, have half the access to Medicare GP services of people living in the leafy harbour side and North Shore electorates of Sydney. On a population basis, the Howard government spends in the order of $50 million to $60 million per annum less on Medicare GP services in the electorate of Kalgoorlie than what it is prepared to spend on Medicare GP services for people living in the well-heeled suburbs of Sydney. The statistics are not available but I suspect that the story with regard to access to PBS medicines would be similar.

The fact is that, the further from the centre of a capital city or the eastern seaboard you live, the more difficult it is to get timely access to comprehensive medical care when you need it. Take my home state of Western Australia as an example: the average per capita Medicare medical and PBS services are well below the national average. In other words, Western Australians on average have significantly less access to medical and PBS services than do other Australians. Lack of access to medical practitioner services inevitably results in lower levels of access to PBS medicines. It is difficult not to conclude that the lower health status and higher death rates of many people living in the Pilbara and Kimberley, particularly Indigenous Australians, are related in large part to poor access to Medicare medical practitioner services and PBS medicines. There is absolutely no point in the government claiming to be a supporter of Australia’s universal health system when it has allowed such uneven access to Medicare services to remain unaddressed after over a decade in government.

The truth is that the Howard government has no real commitment to protecting the rights of all Australians, no matter where they live in Australia, to access high-quality health care under the Medicare scheme. In 2005-06, average national per capita access to Medicare, medical and PBS services was, respectively, 14 per cent and 16 per cent higher than in Western Australia. Clearly, Western Australians are not receiving the same level of medical care as other Australians are. In 2005-06 the figures show Western Australians received three million fewer medical practitioner services and 2½ million fewer pharmaceutical services than the rest of the country. The provision of a lower level of Medicare, medical and PBS services to Western Australians saves the Howard government approximately $250 million annually. No wonder the Howard government has got hundreds of millions of taxpayer dollars to splash around on blatant, self-serving propaganda in the run-up to an election.

There are other examples that show how the Howard government is all talk and no substance when it comes to ensuring that all Australians have access to a fair and universal health system. The Howard government’s callous disregard to ensuring all Australians have universal and comparable access to needed medical and pharmaceutical services falls most heavily on, sadly, Indigenous Australians. Approximately 26 per cent of Indigenous Australians live in remote or very remote parts of Australia. I do not need to remind senators that Indigenous Australians continue to experience on average an appalling health status compared to other Australians who live in Australia’s capital cities and who have ready access to medical practitioners and required medicines. As the Australian Institute of Health and Welfare has reported, the death rate of Indigenous Australians is over 1.4 times that of non-Indigenous Australians. Even worse, the death rate of Indigenous infants is 3.1 times greater than that of non-Indigenous infants.

These are scandalous figures when put against the relatively lavish way the Howard government is prepared to fund Medicare medical services in the well-off electorates of Sydney. Take for example access to Medicare safety net payments. I draw your attention to the Medicare safety net payment figures for 2005-06. To cite an example, the New South Wales electorate of Wentworth received $7.8 million in safety net payments. This was 16 times more than the total Medicare safety net payments received by people living in the large rural federal seat of O’Connor in Western Australia, despite the electorates having similar populations. The median annual family income in the Wentworth electorate at the 2001 census was no less than $86,000; however, in 2001 the median annual family income in the electorate of O’Connor was $38,000. In the electorate of Wentworth, only 10.5 per cent of families had a weekly income of $500 or less, while in the electorate of O’Connor 32.3 per cent of families were living on a family income of $500 or less. Under the Howard government, the higher your income, the better access you have to medical and PBS services.

On top of that, if you live in a higher income area you get a Medicare safety net bonus. In 2005-06 the top 10 Medicare safety net electorates with a total resident population in excess of one million people, and who in 2001 had a median family income of approximately $80,000, received in total over $50 million in Medicare safety net payments. In comparison, the bottom 10 Medicare safety net electorates—located almost exclusively in Western Australia, South Australia, Tasmania and the Northern Territory, with an average median family income of approximately $40,000—received in total only $3.7 million. That is 13 times less than the top 10 Medicare safety net electorates. Where is the universal access in that? Where is the equity for all Australians? I will tell you where it is—out the window; unless you reside in the leafy Sydney harbour-side suburbs or on the North Shore, which includes the electorates of Wentworth, North Sydney, Bradfield, Warringah and Mackellar.

Australian patients, and patients throughout the world, deserve to have the best treatment options made available to them. One way to ensure this remains the case is for publicly employed Australian medical practitioners and researchers to continue to be actively supported by the Commonwealth—both on our shores and within the global pharmaceutical market. Australia’s public health system and its publicly funded medical researchers are, and continue to be, significant contributors in the advancement, development and use of therapeutic pharmaceuticals. Very recently, two Western Australian medical researchers who worked in Perth’s public teaching hospitals were awarded a Nobel Prize for their outstanding contribution to medical science. It is, therefore, well to remember that it is not unusual for advances in drug therapies to have come from research conducted in research laboratories attached to the country’s major public teaching hospitals, not just from laboratories of transnational pharmaceutical companies.

This bill has neatly packaged two important changes to the PBS arrangements. Firstly, it contains a measure that should have the effect of putting downward pressure on the prices of generic drugs. This is a good thing. Secondly, it contains a measure that may seriously weaken price competition between generic medicines and branded medicines. It would be a rather pointless exercise if this bill opened the door for drug companies to exploit the PBS to reduce price competition, rather than consumers getting the benefit from the lower cost generic medicines that the bill professes to support. In regard to generic drug pricing, I think it is true to say that the major pharmaceutical companies are not very supportive of the encroachments of generic medicines into the lucrative branded medicines market. I might also add that the medical profession have not been great advocates of prescribing generic medicines to their patients. It is typically pharmacists, rather than doctors, who are more likely to bring a patient’s attention to a lower priced equivalent generic medicine as a substitute for the brand name medicine on the doctor’s prescription.

This bill purports to strengthen the government’s stance on the pricing of generic medicines and, if all goes to plan, it could result in substantial savings to the government in respect to the cost of the PBS. That is good news. The bad news is that these savings will only be passed on in full measure to patients if doctors prescribe generic medicines where these are available for the required treatment. That is because the government subsidises a PBS listed medicine based on the competitive pricing of multi-brand medicines available in the market. When a medicine comes out of a patent and is able to be manufactured by multiple drug companies, this invariably has the effect of reducing the price of the drug due to competition. If doctors fail to prescribe the lower priced generic medicines and patients are not offered an alternative at the point of sale, patients will end up having to pay a larger gap for medications.

There is evidence that this may already be occurring. In the period from 2002-03 to 2005-06, the direct cost to patients of PBS listed drugs increased by 30.7 per cent, while the cost to the government increased by only 17.7 per cent. In other words, there has been a significant shift in PBS cost from the government to individuals in recent years. The question arises as to whether the legislative changes proposed in this bill will increase the incentive for the Liberal coalition government to shift an even greater share of the cost of PBS to individual patients. It will hardly be a great outcome for patients if the main result of the government’s proposed amendments to the PBS legislation is to shift more of the cost of medicines from the government to individual patients. Ultimately, the government’s attempt to reap the economic benefits of multibrand medicine price competition will only flow to patients if doctors are conscientious in their prescribing habits. The Australian Medical Association would do well to take this point to heart and aggressively encourage its members to help drive taxpayer health dollars further by prescribing generic medicines wherever possible as a valid substitute to a brand name medicine.

I would now like to move on to the measure contained in this bill that proposes two separate lists of PBS drugs: one for single brand medicines—medicines regarded as not interchangeable with any other; and one for multibrand, or generic, medicines. In Australia, as the government has stated, generic medicines account for approximately 18 per cent of medicines dispensed under the PBS. This is less than half the market share of generic medicines in the United States and the United Kingdom. The pharmaceutical industry knows full well that any substantial expansion in the number of generic drugs dispensed in Australia through the PBS will see a financial loss for them.

In the Weekend Australian of 9 June 2007, Professor David Henry, an expert in clinical pharmacology from the University of Newcastle, had this to say:

While accepting that a drug, on average, is no better than an older product, a doctor can often find a reason why a new product is not strictly interchangeable in every patient. As a consequence companies will likely argue for higher prices for drugs that do not offer better measurable performance, on the grounds that someone, somewhere, has a unique need for their products.

If the proportion of generic medicines used in Australia was in line with the US and the UK, this would reduce Australian taxpayer payments to pharmaceutical companies by several hundreds of millions of dollars annually. Hence, it is logical that the pharmaceutical industry is keen to see measures enacted which have the potential to lessen competition from generic drugs.

The Department of Health and Ageing has estimated that patents of over 100 medicines are due to expire over the next 10 years. With the enactment of this bill as it is, a new game will come to town: when is a generic medicine a generic medicine? I refer again to Professor David Henry in the Weekend Australia where, in referring to the amendments in this bill, he says:

On the one hand these aim (laudably) to cheapen generic drugs. On the other hand they appear to be designed to protect the patented products of the big drug manufacturers from having their newer products compared, for pricing purposes, with cheaper older products that work just as well.

He goes on to say:

The first formulary (Fl) will list drugs that are only available as a single brand and are not considered “interchangeable” at the patient level. The drugs listed in F1 will not be pricelinked to the drugs in the second formulary (F2), which will mainly be older drugs available in multiple brands. By requesting that drugs be proven “interchangeable” before they are priced down to the level of older equally effective products, the industry has made it harder for the Pharmaceutical Benefits Advisory Committee to base their decisions on the results of clinical trials. This is a move away from evidence-based medicine, which has become a major driving force in modern clinical care.

The idea of the two lists seems to have been adopted by the government following concerns from the pharmaceutical industry that, in certain low-volume situations, it is therapeutically useful for a relatively small number of patients to have access to a particular brand name medicine rather than to a very closely related generic substitute. In other words, the bill contains a device whereby medicine manufacturers may be able to significantly reduce competition from generic medicines.

As medical patents expire, drug manufacturers may be inclined to tinker with the formulation of particular brand name medicines on the pretext of unique therapeutic benefit for particular patients. Given the hundreds of millions of dollars of sales revenue at stake from the expansion of generic medicine use in Australia, it is inevitable that drug manufacturers will have a strong incentive to test the government’s capacity to manage this device. I think it is alarming that experts in the field of pharmacology, such as Professor Henry, have identified the real possibility for drug manufacturers to protect their products from competition, yet the government seems oblivious to the problem.

This has already been pointed out in the other place but it needs to be stated again: Labor’s approach to the PBS is based on three core principles. I encourage the government to adopt the same principles. I know that the member for Warringah pays attention to my speeches about health. I hope he is tuned in on the other side. I am sure he will be paying attention to this contribution. The question is: will he and the government act? Sadly, I doubt it.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The Greens have real concerns about the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007. In many ways, those concerns have been outlined by Senator Moore and Senator Sterle in the incisive speeches they just delivered to the chamber. This is very complicated territory, which is where we all need to concentrate a little more because otherwise it can lead to legislation that is not in the public interest getting through simply because it is not understood by the body politic.

The Pharmaceutical Benefits Scheme is an Australian institution which has been envied by countries around the world, but is also a matter of some chagrin for the globally big pharmaceutical companies which want to make more out of drugs. They are amongst the biggest income earners in the world. They earn phenomenal profits and they have huge political clout and the last thing they want to see is the Pharmaceutical Benefits Scheme as practiced in Australia, which is aimed at getting value for money in dispensing clinically effective drugs to the Australian community, spread elsewhere. Australians voted for this scheme in a 1946 constitutional referendum and therefore it has an unequivocal democratic mandate. The PBS provides universal subsidised access to medicines to the Australian community. Along with Medicare and the public hospital system, it forms a central component of Australia’s much envied health system.

The PBS has been in operation for almost 60 years, and some of the benefits were first made available way back in June 1948. It has evolved, from supplying a limited number of life-saving and disease-preventing drugs free of charge to the community, into a broader subsidised scheme. Currently the PBS subsidises access to more than 600 medicines available in 1,800 forms and marketed as 2,600 differently branded items. The PBS covered around 168 million prescriptions in the year to June 2006. That is about eight prescriptions per Australian. It covers all Australian residents when they fill a prescription for a medicine listed on the schedule. So it would be a very rare person indeed who has not, in some way or other, benefited from the scheme—and known about the benefit of the scheme.

General patients pay up to $30.70 for PBS medicines, while those with concession cards—over a million people on low incomes—pay up to $4.90. These payments are called patient contributions or co-payments and they are revised annually, in line with the consumer price index, and on other occasions when the government seeks to further increase the share of the cost of the PBS borne by individual patients. For example, there was a 30 per cent increase in co-payments on 1 January 2005 which, you will remember, we opposed.

Government expenditure on the PBS for the year ending 30 June 2006—the last full year for which there are accounts—totalled $6.16 billion, compared with $6 billion for the previous years. That is up by 2.7 per cent. That amounts to about 83 per cent of the total cost of PBS prescriptions. The remainder of PBS expenditure is made up from those patient contributions—and that is increasing too. In this financial year’s budget papers it is suggested that PBS expenditure will increase to $6.433 billion in the current year and $7.279 billion the next year. Other governments are looking at this, and it worries the pharmaceutical industry greatly. I understand the Korean government is one of those that are studying the system at the moment.

The bill before us seeks to create a distinction between the way that generic drugs are priced and the way that new drugs with patent protection are priced. If the bill goes through, the US negotiators under the United States-Australia Free Trade Agreement—we warned about this during the debate some years ago in this chamber—will have taken a step towards cutting the nexus between the price that will be paid for new patent protected drugs, largely coming from the big international corporations, and the existing drugs that deliver the same benefits. The result will be that Australian consumers and taxpayers will be paying higher prices for new drugs that are yet to be listed or that come on to the listing in Australia.

We were the only party to unequivocally oppose the inclusion of the PBS in the United States-Australia Free Trade Agreement, which we opposed generally, because of its impact on a whole range of Australian economic and social considerations, from the agricultural industry right through to the health industry and the matter before us today. We predicted that the very thing that is happening in this bill would happen. In 2004, the chamber was told that the PBS would never be included in the free trade agreement. Then, after it was included almost from the start of negotiations, we were informed that no fundamental aspects of the PBS would change as a result. With the furore that arose through the passage of the evergreening amendment, little attention was paid to the creation of the medicines working group. I will be asking the government about that during the debate in the committee stages of this bill. Two key issues to focus on were the removal of the reference pricing and the role of the Medicines Working Group.

When it comes to reference pricing—as the previous two speakers from the opposition have made clear—Australia’s PBS is underpinned by this reference pricing system which links the amount paid for a drug by the Commonwealth on behalf of the Australian people to the relative effectiveness of that drug compared to drugs already available on the market and doing the same job. The US companies loathe reference pricing as they make their money inventing new drugs, patenting them and bringing them onto the market. I do not think things have changed since I was a general practitioner. I well recollect the bombarding of busy medical practitioners with information about new drugs—branding them as the thing your patients should have—and in practice finding no benefit over that available through other treatments or, if they had to be resorted to, from drugs already available on the market.

The notion that a drug should be priced according to what it can do to help patients rather than how much they claim it costs to produce is anathema to the big drug companies. They want to talk about getting a return on their investment and their research and development. That is how corporations work—they look at the bottom line—but the PBS is designed to give maximum benefit at the cheapest price to the Australian public. That is quite a different philosophy, and it clashes with the corporate philosophy. We will see the corporate philosophy have a win through the legislation before us, if it goes through this chamber.

Three years ago, when the US-Australia Free Trade Agreement was being negotiated, the US companies wanted reference pricing abolished. I have seen no evidence to say that they do not still want to see reference pricing abolished. Both governments on either side of the Pacific denied that this was a United States government objective. Mr Vaile, the then Minister for Trade, said:

... the Labor Party still cannot get the message. They cannot understand simple English: they are not going after the PBS.

That is, the drug companies are not going after the PBS. After it became clear that the drug companies were going after the PBS, the Prime Minister denied that they had succeeded. He said:

We have secured an absolute protection of the Pharmaceutical Benefits Scheme. Yes, some of the American drug companies did try and get in under the radar on that subject, but we didn’t agree.

But it appears that the US drug companies are winning. They are getting their way. It is not a lay-down misere yet. This is a gradual process. However, we are seeing evidence of that in the legislation before us today. At the end of the day, it will be Australia’s pensioners and, indeed, all Australians who rely heavily on pharmaceuticals who will be paying the biggest price, or the taxpayers through the subsidy to the scheme paid by the government itself.

The Australia-US Free Trade Agreement included the formation of the access to medicines working group, which is made up of Medicines Australia and health department bureaucrats, to continue discussions about changes to the PBS. I will be asking some questions about this group, their role, where they are headed and what their philosophy is. The only substantive agenda item on the meeting of the first medicines working group that I am aware of was concerned with the pricing of pharmaceuticals.

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007, which is now before the Senate, undermines the reference pricing system that underpins and is a heartland to the success of the Pharmaceutical Benefits Scheme, going back for decades. The changes proposed in this legislation are exactly what the US drug companies are after and what they were after back in 2004. My questions about the Medicines Working Group include: isn’t this group and the department working closely and secretively—where are their minutes?—to change the nature of the Pharmaceutical Benefits Scheme to the detriment of all Australian consumers? The process is effectively outsourcing policy development on medicines in the PBS. Medicines Australia is the pharmaceutical equivalent of those policy working groups that benefit big corporations in other matters such as coal, tobacco, uranium and a whole range of other industry outcomes. I am putting that proposition, and I want to hear the government’s response to it, because we are here not to protect the interests of big pharmaceutical corporations but to protect the interests of Australians who are prescribed medicines for their health and at the lowest price possible. Where is the transparency in this process?

Let me finish with this: we trenchantly opposed the US-Australia Free Trade Agreement. One of its problems is that, where there is a dispute between Australia and the US, arbitration goes to faceless organisations which are not obliged to report to this parliament. During that debate it was made abundantly clear that, when it came to arbitration, the appointees—three by the Minister for Trade in Australia and three by the President of the US—made a determination that there would be no input from this parliament or from the Australian public without their leave and that there would be no report back to this parliament, no transparency and no minutes. Even if there were a report to this parliament, it has no power left. This parliament was disempowered by that legislation, which was supported by both the big parties, from reviewing what those faceless arbiters would do and the impact that would have on Australians, whether they be in agriculture, in manufacturing, in the workplace or in issues like this.

This is not a dispute mechanism that we are talking about here; it is a policy development mechanism. This group ought to be accountable to this place. I will be asking the minister to table the minutes of this group so that we and the public are able to see how it functions, what it discusses, how its decisions are made and what its outcomes are. And if not, why not? Why the secrecy? This group is supposed to be acting on behalf of the Australian people. The Australian people cannot have faith in a process that is secret or when FOI applications have to be made to find out what it is doing. The deliberations and outcomes of this group should automatically come to this parliament for us and the people of Australia to investigate.

There are real concerns about this legislation and about the process that we are having in this place at the moment. Senator Moore spoke about how truncated the committee process was. That has been happening to everything since the government got control of the Senate and turned it into a rubber stamp for decisions made in the Prime Minister’s office and around the cabinet table. There will be an opportunity for Australians to change that and to take away that government majority at the election which is coming up later this year. But, for now, we are dealing with a situation where the government has the numbers to ram this legislation through, regardless of what the debate is. However, let us get more information about this matter and make sure that it is an informed chamber before this legislation comes to a vote, presumably later today.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Minister Brandis, if you do not have a speech on the second reading, I will put the question. The question before us is that the second reading motion be agreed to.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I would just like it recorded that the Australian Greens oppose the motion.

The Acting Deputy President:

That will be done, Senator Brown.

Question agreed to.

Bill read a second time.