Richard Colbeck (Tasmania, Liberal Party, Shadow Parliamentary Secretary for Health) Share this | Link to this | Hansard source

To continue from where we were yesterday in the debate with respect to the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008, I was talking about, in particular, the concern of the committee and many in the medical profession in relation to the use of pharmaceuticals off label. It was quite disturbing to hear in that inquiry, in the day of hearings, that in paediatrics nearly all medicines are used off label. I acknowledged the work of the advisory groups in working with palliative care particularly to the extent where once upon a time in palliative care nearly all medicines used were off label. That is now down to something in the order of 50 per cent. But there still remains a lot of work to be done for Indigenous people.

Obviously if a medicine is not licensed to be used for a particular indication, the pharmaceutical companies cannot promote a medicine for that particular use. That does not mean that a doctor cannot necessarily provide a prescription for that medicine, and that is quite often the case, but technically under the Pharmaceutical Benefits Scheme it should not be provided under the scheme for those off-use indications.

So you have in paediatrics almost all medicines used being off label; in palliative care it is 50 per cent; and there is an unknown number—but most, I think—with respect to Indigenous people. Again, I commend this government, the previous government and the PBAC for the work that they are doing to try to resolve that, but I do express some concern that fees for the additional indications may provide a significant disincentive for companies to put some of these products up for additional approvals.

It is also important to note that it is not just the pharmaceutical companies that provide submissions for these indications. You are put in a situation where sometimes small groups of individuals in the community or professional bodies decide that it is important that they put a submission in for listing for a medicine for a certain use, and at this point in time it is not specifically clear how those are going to be treated.

We know that there is some discretion in the regulations. The committee has had those regulations only for a week and, as I mentioned earlier in my presentation, the committee was effectively prohibited from completely interrogating this measure because the real workings of it are in the regulations. Even the industry, which has had them for only a week, has not had a chance to look in detail at the regulations, so they cannot tell us yet what their implications will be. That again demonstrates quite a disturbing element in this whole process.

The government seems to be very keen to have this legislation passed; as we heard during the inquiry and as has been indicated during the debate so far, it was announced without warning and without consultation on budget night for implementation on 1 July. The government is now trying to have the legislation passed through the Senate when the real workings of the measure are in fact in the regulations, which we received last Friday afternoon after the report that criticised the government for not releasing the regulations or using the regulations in their consultations with industry was tabled. The question on notice came to the committee after the report was tabled. Now the government wants the legislation put through the parliament this week without the opportunity for the industry, much less the parliament, to effectively scrutinise the regulations. It is very disappointing that we have been put in this position. The consultation was, I think, insufficient. I do not believe that the government could simply pick up this measure as if nothing had happened. The only indication the industry had from the government was the statement from the minister that I read out earlier.

The other concern is how this measure fits in respect of cost recovery. There were a number of submissions from industry, not necessarily from the manufacturers but from the College of Physicians, Palliative Care Australia and the Pharmacy Guild, who indicated their concerns about how this particular measure fits in with the government’s cost recovery guidelines. The government obviously continues to maintain that it does, but I think that good evidence was given to the committee that it does not meet the cost recovery guidelines. It certainly does not meet the cost recovery guidelines when it comes to consultation because one of the key elements in the cost recovery guidelines actually relates to consultation with industry. So the government clearly have not done that. They seem to be trying to rely very heavily on guidelines from the Productivity Commission rather than on their own published cost recovery guidelines. I find that of concern. Cost recovery guidelines have been submitted for consideration by the public, by industry and by people who might have those measures imposed on them, and yet the government are relying on some guidelines put out by the Productivity Commission—and that is relied on very heavily in their report.

I believe that the government needs to give the industry some time to satisfactorily look through the regulations. I would not rule out the possibility that the Senate will want to have another look at the regulations. That could be potentially a reasonable aspect for us to consider. I know that we were not able to properly consider this measure when it came before the committee because we did not have the regulations. Effectively, all we had was the product of some consultation between government and industry since the budget. There were some promises to consider these particular matters—things like additional indications being registered and the way that certain medicines would be considered with respect to fees—but all of this leads to considerable uncertainty, particularly for those who are looking for quick access to the pharmaceuticals.

I am not convinced that this additional layer of costs will not prohibit medicines from being brought to the market or to the PBS in a timely way. I think that this additional layer of red tape is going to take additional time, despite the department saying that they do not believe that it will. I do not believe that that is the case. Any additional work that has to be done and any negotiation over what classification the medicines may have when applications are submitted will take additional time.

On my reading of the regulations at this point in time I think that there is scope for them to be amended. I know that the Senate does not have the opportunity to amend the regulations; that has to be done through a negotiated process between the government, the industry and perhaps even the Senate itself. We can disallow parts of a regulation or disallow or approve the whole regulation, but we cannot amend them. This approach of putting up a bill that allows for the implementation of regulations really does prevent the Senate from doing its job in respect of making modifications to the measure. I would like to see the industry given some time.

I am not sure exactly what the government’s intentions are with respect to the legislation at this point in time, and I would appreciate their letting us know that. I think we need more time for proper assessment of the regulations that were released but, as I said earlier in my presentation, I do give the government credit for doing that. I would have appreciated it having occurred much earlier in the process so that we could have looked at it through the Senate process. That would have been very helpful. But we do need time to understand properly what the impact of these regulations will be if the legislation is passed. I would prefer that the legislation not be passed until we and the industry have had the opportunity to properly interrogate the measures. In that circumstance, I indicate that the opposition will not be supporting the legislation at this time. We believe that there is real scope for additional work to be done on this particular measure, and that needs to be done before we could support it.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 seeks to amend the National Health Act 1953 to allow the recovery of costs incurred by the process of listing medicines on the Pharmaceutical Benefits Scheme, commonly known as the PBS. The Australian Greens have a long history in this chamber of defending the public health system and its three main pillars: public hospitals, Medicare and the PBS. It is a firmly held belief of the Australian Greens that we need to enhance and protect the Pharmaceutical Benefits Scheme. The PBS is an essential pillar of the public health system, and it must remain viable so that it continues to deliver to the community the drugs and medicines that we require to maintain our health, to treat serious disease and to reduce suffering. These drugs must be accessible to all in the community who need them.

The Australian Greens also wish to see the ongoing independence of the Pharmaceutical Benefits Advisory Committee, commonly known as the PABC, and we believe it must be able to operate in a transparent way that inspires confidence in its integrity. We therefore frame our concerns regarding this move towards cost recovery measures in the context of our commitment to the public health system and the guaranteed availability on the PBS of listed drugs to people who need them. The Australian Greens commitment to preserve and enhance our public health system and to guarantee the necessary medicines are listed on the PBS and are available to those who need them is fundamental to our approach on measures that affect the public health system. Our evaluation of these measures and the concerns we express about the implementation of this scheme are firmly grounded in these key objectives.

Treasury spending projections indicate that the cost of the PBS will grow over the next 40 years to become the single greatest item of health expenditure. That was articulated in the Intergenerational report of 2007. The people of Australia have every right, therefore, to know and expect that the money is being spent wisely and to the benefit of those who need those items. Any change that may impact on the viability and the integrity of the PBS must therefore, we believe, be very carefully considered. As the Minister for Health and Ageing explained in her second reading speech on 29 May this year, gaining a listing on the PBS delivers a high degree of commercial certainty to pharmaceutical companies. According to the minister, the top 20 pharmaceutical companies in Australia each receive, on average, $223 million from each product successfully listed on the PBS scheme. The Australian Greens therefore welcome the move towards cost recovery in the case of high-volume commercial applications for drugs and medicines, believing that that is a cost of producing the drug.

However, pharmaceutical companies are also involved in developing other medicines that are less commercially successful but are of great need to our community. These drugs may be of benefit to only a small proportion of the population, often those people who are the most vulnerable in our community and those who would be least able to meet the full cost of these medicines if they were not listed on the PBS. They may be people, for example, who need a specialist drug in palliative care. They may be Indigenous Australians, many of whom live in remote areas that do not have good access to ongoing medical care and need their medicine delivered in different forms. Or they may be children suffering from rare forms of cancer. These drugs are specialist drugs and are only made in low volumes. We do not want to put those people’s health and wellbeing at risk, and we expect our government to make sure that they are not put at risk by the move towards cost recovery.

The Senate Community Affairs Committee inquiry into the bill heard evidence from Palliative Care Australia, who were understandably concerned for the people they represent. Their submission stated, in part:

Palliative medicines, and palliative care, have some important differences from many other medicines and types of health care, in that their purpose is fundamentally not to seek a cure, but to seek relief from pain and other symptoms associated with terminal conditions.

The Australian Greens want to be, and through the inquiry process sought to be, reassured that the development and availability of drugs such as these are not put at risk by the imposition of application fees. To this end, the Australian Greens support an approach to cost recovery that recovers costs from profitable pharmaceuticals but protects the availability of those less commercial medicines that are of great need to the community—in other words, those highly specialised, low-volume and, we acknowledge, sometimes very high cost medicines. We still think that they should be made available.

The Greens sought to scrutinise this legislation so that we could be reassured that these measures were in fact in place. Unfortunately, as Senator Colbeck has articulated, from the time of the inquiry up until only last Friday—six days ago—the draft regulations were not available. Committee members sought availability of those draft regulations through the inquiry process and they were made available on Friday afternoon. Therefore, the industry, the committee and the broader community did not have time to properly read those regulations. I acknowledge the fact that the minister subsequently provided a briefing on the draft regulations and I thank the minister.

It became apparent when we were reading those draft regulations that if you were knowledgeable and understood the dialogue and previous history then you could probably read the regulations. However, even some people in the industry had some misinterpretations of the draft regulations. So the Greens will seek from the government reassurance on record about some of the interpretations of those draft regulations. I understand that the explanatory memorandum or explanatory material that goes with the draft regulations is not available. That causes the Greens concern because if we pass this legislation only on an understanding that we have been given on the draft regulations, how are we to be reassured that in fact that will be what happens?

So we are seeking on record an interpretation of those draft regulations. For example, what does ‘substantive change’ mean in the draft regulations? This is a fundamental point in respect of drugs that are being put in for assessment through this process. What do ‘major change’ and ‘minor change’ mean? We are told, and I have no reason to doubt the department, that they are clearly understood by the industry. It sounds as if they are not clearly understood by some players in the industry, and they are certainly not clearly understood by community members. So we would like to be reassured as to what a major change and a minor change are, and we seek that on the public record.

As with much legislation in this place, and increasingly so, the trend is for details of legislation to be encompassed in the draft regulations. Unfortunately, as happened in this case, most of those draft regulations are not available for us to comment on at the time we were dealing with the legislation. I think it is a fundamental flaw in the legislative process that so much is now done by regulation and the legislators do not get to see the draft regulations. It was impossible to judge through the committee inquiry process on this legislation whether the issues that were raised and the issues that senators had with the bill were legitimate or whether the concerns were in effect unfounded.

The reason bills are referred to committees is so that we senators can look at them and see if there are unintended consequences and if they actually deliver the policy outcomes that the government is saying they are trying to deliver. How can we do our job properly as senators and as committees of inquiry—I have articulated this issue before—if we do not have all the information available? It also makes it a waste of time. Many people are now very deeply concerned about some of the implications of this bill. We are told that they are unfounded concerns; we have all been ‘getting our knickers a knot’, as they say, around some of these changes. The concerns could quite easily have been resolved if we had had the draft regulations at the time. We would potentially have been much further along in this debate and we could have dealt with the legislation in a much more expeditious manner.

The Greens were, as I have said, very concerned that the draft regulations were not available to the committee inquiry. As the majority report stated:

... in the absence of the regulations which contain the detail of the implementation and operation of the cost recovery arrangements, it has been difficult to appropriately assess the possible implications of the legislation.

As I have said, we do not believe this is good practice. As legislators we need to be assured that legislation is doing what it is supposed to do and not have unintended consequences. Fortunately, the regulations were provided, but only six days ago; not even a week. I hate to point that out to Senator Colbeck but it has not been quite a week since we saw the draft regulations. We have since heard, and I hope that this will be clarified during the ongoing debate, that the regulations are now to be made available for public consultation. I understand it was originally to be for two weeks but I think it is now to be for four weeks of consultation with the appropriate stakeholders, which is a very significant step in the right direction. This is an improvement, but it still means that in this place we are yet to be reassured publicly and on record that our concerns have been met.

I appreciate the fact that the government has given reassurances that orphan drugs and lifesaving drugs will not be affected by the move towards cost recovery. Orphan drugs are extremely low-volume, highly specialised drugs and are already protected by the TGA process. However, we are seeking to clarify the availability of some of the non-orphan drugs. These are particular drugs that do not automatically achieve orphan status but whose economic viability may be threatened by the imposition of application fees because they are being used for other purposes that are not necessarily those for which they were originally listed. They are subsequently used for other purposes and are extremely important, as I have said, for palliative care, rare cancers and those sorts of things. We are seeking to be reassured that those drugs will have protections under the draft regulations. Their use might benefit only a small population and at low volume, so they may not be commercially viable in that particular formulation or that particular use. The problem arises when these drugs are required to go through a second listing process when another use for these drugs is found.

Under these circumstances, while it is clearly in the interests of a small number of patients for the drugs to be listed, it might not be of commercial interest for pharmaceutical companies to go through this next process. So we are seeking a commitment from government that these drugs will also be covered under the regulations if this legislation is to pass prior to those regulations being finalised. I understand that the instrument is a disallowable instrument but, as I think Senator Colbeck also articulated, it is not amendable by this place. We can either disallow a regulation or let it go through. That is a very blunt instrument. I would prefer to see that the regulations were right from the start. Therefore, we are seeking reassurance from the government that these drugs will be protected. We need to be reassured about definitions of substantive change. While I understand the process, some in the community do not. We seek reassurance that there is a proper definition for what are major and minor changes, and that these particular types of drugs will be protected.

One of the other issues that came up during the committee process was the independence of the PBAC. We mentioned that in our minority report on this bill. We are reassured that there is a separation from the department in this process in terms of the independence of the PBAC. We would like to make sure that that is protected in the future. We have circulated an amendment in the chamber because we think that these changes could have some implications for the costs of drugs, which was raised during the committee inquiry. We are proposing that there be a review of this new process on the second anniversary of these changes and that review would look at the impact of the implementation of the cost recovery measures.

There are a number of issues listed that we think should be reviewed. We want to make sure that the cost recovery measures that are implemented are not having an adverse impact on the less commercially viable non-orphan drugs. We seek to make sure that in fact the cost recovery measures are not having an impact on the costs of medicines. That was raised in the committee. The department and the government say that it is not going to have an impact. We think that we need to review that to make sure that it is not having an impact into the future. We would also like to get the review to ensure the continued integrity and transparency of the PBAC. We also want to allow the community to have input into that review.

I will reiterate our concerns to ensure that the non-orphan, low-volume, high-cost drugs that are needed for specialist conditions are protected. We seek that assurance from government. We also seek a commitment from government to review this process in two years time to ensure that the policy outcomes the government desires to see from this legislation are achieved with no negative impact on the PBS or on those sections of our community that are the most vulnerable and need these low-volume, high-cost drugs. We need to ensure that they have been adequately protected by this legislation. If the government is confident that this legislation will do that, I do not see any reason why it would not support such a review to ensure confidence in the PBS, which every Australian places such a high value on.

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

I rise to speak in support of the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008. This bill amends the National Health Act 1953. Its purpose is to provide authority for the cost recovery of services provided by the Commonwealth in relation to the exercise of powers for listing medicines, vaccines and other products or services on the Pharmaceutical Benefits Scheme, the PBS, and designation of vaccines for the National Immunisation Program.

The PBS, which was a Labor initiative 60 years ago, is a vital element of Australia’s national health system. The PBS has been an outstanding success story. It has played an enormous part in ensuring that all Australians have benefited from the therapeutic advances in prescribed medicines and other PBS listed drugs that have occurred over the past 60 years. It is a scheme that has ensured that taxpayers’ money has been well spent.

Apart from the therapeutic benefits provided by the PBS, the scheme has been an essential factor in ensuring that the cost of prescribed pharmaceuticals in Australia has remained significantly lower than in many other developed nations. Figures published by the Department of Health and Ageing show that Australia’s pharmaceutical expenditure, as a percentage of total health expenditure, is only approximately 13 per cent compared, for example, with that of Canada, where the cost of pharmaceuticals makes up approximately 18 per cent of that country’s health expenditure. On a per capita basis, expenditure on pharmaceuticals in Canada is approximately 30 per cent higher than in Australia, and in the USA it is over 80 per cent higher. Similar levels of expenditure in Australia would add several billion dollars annually to Australia’s health budget and would undoubtedly put pressure on the funding of other essential health service needs.

In Australia, a new medicinal drug must gain approval for supply in accordance with the requirements of the Therapeutic Goods Act 1989. Approval is also required to extend the indications of an established drug. Applications are dealt with by the TGA, the Therapeutic Goods Administration. For prescription drugs, advice is sought from an expert committee known as the Australian Drug Evaluation Committee, the ADEC.

Once a prescription drug is approved for marketing, the company concerned usually applies to the Pharmaceutical Benefits Advisory Committee to have the drug listed on the PBS. The PBAC is an independent statutory body established under section 100A of the National Health Act 1953. Its members are selected from consumers, health economists, practising community pharmacists, general practitioners, clinical pharmacologists and other specialists. This remains unchanged.

The role of the PBAC is to make recommendations and give advice to the minister about which drugs and medicinal preparations should be made available as pharmaceutical benefits. No new drug may be made available as a pharmaceutical benefit unless the committee has so recommended. The committee is required by the act to consider the effectiveness and cost of a proposed benefit compared to alternative therapies. In making its recommendations, the committee, on the basis of community usage, recommends maximum quantities and repeats, and may also recommend restrictions as to the indications where PBS subsidy is available.

When recommending listings, the committee provides advice to the Pharmaceutical Benefits Pricing Authority, the PBPA, regarding comparison with alternatives or their cost effectiveness. It is the task of the Pharmaceutical Benefits Pricing Authority to negotiate the PBS price of the drug with the sponsor company. The Pharmaceutical Benefits Pricing Authority consists of government, industry and consumer representatives.

After agreement is reached, the Australian government considers the advice of both committees and makes a decision on whether the drug will be listed on the PBS. The processes for listing a drug on the PBS are rigorous and detailed, as they should be. These processes have served the Australian public exceedingly well over many years and are processes that the pharmaceutical industry is now well attuned to. They are of course not without significant cost to government.

For the pharmaceutical industry, achieving a product listing on the PBS is very valuable and provides a high level of commercial certainty to a company in relation to that product’s sales. It is worth noting, for example, that in 2006-07 the top 20 pharmaceutical companies, by total cost of payments, each received, on average, $223 million from the Commonwealth via the PBS subsidy. The government has therefore decided that the time has arrived when these costs should be recovered and should no longer be an impost on the taxpayer.

Cost recovery is not a new policy. Cost recovery arrangements have been applied with success to many departments and agencies at state and federal level including, for example, the Therapeutic Goods Administration, the Civil Aviation Safety Authority and the Australian Prudential Regulation Authority. The Productivity Commission has commented that, by ensuring those who use regulated services bear the costs, cost recovery can promote economic efficiency and equity by instilling cost consciousness among agencies and users. In this case it is expected that cost recovery will provide benefits to both government and industry—for example, potentially increasing the compliance of submissions with the PBAC guidelines and reducing time and costs associated with resubmissions.

Revenue from PBS cost recovery will depend on the number and type of submissions brought to the PBAC for consideration. As a general rule, the more complex and time consuming the evaluation and price negotiation, the higher the fees. Once fully operational, annual revenue from fees is expected to be about $9 million in 2008-09, rising to around $14 million a year in following years. It is expected that fees will be indexed annually and a full review undertaken within five years, in accordance with cost recovery guidelines.

The amount of cost recovery fees with respect to the listing of drugs on the PBS needs to be measured against the cost to government in providing subsidised medicines and fully funded vaccines to the Australian community. In 2006-07 the Commonwealth paid $6.4 billion to approved pharmacists, hospitals and medical practitioners for the subsidised supply of medicines under the PBS. This expenditure amounted to approximately 84 per cent of the total cost of prescribed PBS listed medicines. In this regard it is worth noting that over 70 per cent of the cost of the PBS is for the provision of prescribed medicines for the least well off in our community, including aged and disability pensioners. Without the PBS many people would not be able to obtain the drugs they need. In addition, in 2006-07 the Commonwealth provided a further $280 million to the states and territories for the fully funded supply of vaccines under the National Immunisation Program within their respective jurisdictions.

There has been some comment about the ability of drug companies to pay the fees to be set under PBS listing cost recovery arrangements without detriment to the availability and supply of prescribed pharmaceuticals. The pharmaceutical industry is by most standards a very profitable industry. In this regard it is relevant to compare the levels of drug company expenditure on what the drug companies refer to as ‘education events’ with total expected PBS cost recovery fees. Publicly available information suggests that in any one year drug companies spend well in excess of $60 million on educational and promotional activities. These activities are viewed by many people as being more akin to direct and active marketing to the medical profession of particular drugs than to simply educate. This expenditure has drawn the attention of the ACCC, which moved in 2006 to require much greater transparency from the pharmaceutical industry with regard to this expenditure.

A study undertaken in 2006 by University of New South Wales researchers, and reported as being the most comprehensive research ever conducted into the link between Australian medical professionals and drug companies, found that ethical guidelines were often breached. The survey of 823 medical specialists from across the country found that 96 per cent received offers of food, 94 percent were offered items for the office, 51 per cent reported offers of gifts for personal use and 52 per cent were offered travel support to attend conferences. As well, one in 20 reported offers of personal gifts or activities that were in clear breach of the guidelines, such as offers of wine, flowers, tickets to entertainment or sporting events and funds in exchange for accepting promotional visits. Other findings included that 52 percent of respondents were offered travel expenses to both international and national destinations, with a mean value of $7,559 for international travel and $1,395 for domestic travel. In some cases business class and first class airfares were provided. It was found that 15 per cent of specialists requested financial support from pharmaceutical companies for activities and items including conferences, travel, educational activities, salaries and donations to specific funds; and 18 percent were offered equipment, including video editing technology, cameras and blood pressure monitors. The lead author of the study commented:

Even though the majority of gifts and requests for support do comply with the guidelines, this research shows that the relationship between pharmaceutical companies and medical specialists is a very cosy one indeed.

He went on to say that previous research showed that doctors are influenced in their prescribing by gifts, even when they think they are not.

In 2006 the ACCC, in authorising Medicines Australia’s code of conduct, imposed a new requirement making it compulsory for Medicines Australia to provide six-monthly reports on behalf of its members detailing an itemisation of health professional educational events and expenditure. The latest report for the six months to 31 December 2007 shows that in total drug companies spent over $31 million on these events, including over $16 million on hospitality. While I am not suggesting that there is anything improper regarding this expenditure, it does indicate that there should be more than enough scope within the drug companies’ bottom lines to meet the costs associated with obtaining PBS listings. It is also worth noting as a matter of interest that in 2006-07 the Medicines Australia code of conduct committee imposed fines of approximately $1 million for breaches of the code of conduct. This money was used to defray the cost of monitoring the code of conduct—in other words, Medicines Australia, within its own operations, is committed to cost recovery and the user pays principle.

For its part, the Rudd Labor government is very attuned to the importance of a strong and growing pharmaceutical industry in this country. The Australian pharmaceuticals industry is Australia’s second largest manufactured goods exporter, with exports of almost $4 billion a year. The industry employs 34,000 people, spends $752 million a year on R&D and has a turnover of over $18 billion.

Senator Kim Carr, the Minister for Innovation, Industry, Science and Research, recently announced the establishment of a Pharmaceuticals Industry Strategy Group. The strategy group will be headed up by Dr Brian McNamee, the Chief Executive Officer of Australia’s largest pharmaceuticals company, CSL. The strategy group will examine the drivers and barriers to attracting new internationally competitive and sustainable manufacturing and R&D investment in the pharmaceuticals sector. It has been asked to present a draft report to the minister by September and a final report by the end of the year. Members of the strategy group will be drawn from all segments of the bio-pharmaceuticals value chain. Leaders from the pharmaceuticals, biotechnology and generic medicines industry have asked to participate, along with union representatives. The chief executives of Medicines Australia, AusBiotech and the Generics Medicines Industry of Australia will be members of the group.

As well, Senator Carr together with the Minister for Health and Ageing have committed to reconvening and revitalizing the Pharmaceuticals Industry Working Group. The working group is being co-chaired by the two ministers. The Rudd government wants the Pharmaceuticals Industry Working Group to become the premier forum of pharmaceuticals industry policy advice, which regularly discusses strategic issues and develops solutions to the challenges of tomorrow. In summary therefore, this bill needs to be seen in the context of the Rudd government’s commitment to the rigorous economic management of government funded health services and particularly the PBS, alongside its very strong commitment to encouraging and supporting the future development of Australia’s pharmaceutical manufacturing industry.

Finally, in the model reflected in the bill the independence of the PBAC is guaranteed. The government will continue to directly fund all the activities of the PBAC and its subcommittees. The PBAC will have no role in setting fees and it will not receive any revenue from industry. All revenue collected from cost recovery will be paid directly into consolidated revenue. As the minister in the another place has said, this bill is all about ensuring that the PBS continues to be able to provide reliable, timely and affordable access to a wide range of medicines for all Australians. I commend the bill to the Senate.

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

I rise to indicate a much greater level of uncertainty and concern about the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 than Senator Sterle seems to feel about it. I see a piece of legislation which has not been well consulted on, the effect of which is likely to be felt in the hip pockets of Australian consumers of pharmaceuticals, and which has not been handled in a way which I would consider to be a model for the way in which legislation should be brought forward. I am referring there particularly to the way in which the government has handled the question of tabling regulations—that they should give, in this case, the Senate Standing Committee on Community Affairs confidence that what is being done is appropriate and within the government’s own guidelines for cost recovery. I will come back and explain what I mean by that in a moment.

I will start by making the observation that before the federal election last year Labor made a great deal of its capacity to attack the waste and inefficiency in the way the Howard government ran agencies and departments. It claimed that there was a great deal of wasted expenditure, that we were spending profligately and that the cost of government could be reduced substantially by cutting back on this waste and efficiency without affecting the quality of services delivered to the Australian community. What we saw in the first Rudd-Swan budget was the eschewing of the clinical, surgical removal of fat. Instead, they went for the cutting off of whole limbs—measures which were crude, direct and which simply took out operations, irrespective of their efficiency or effectiveness—and the imposition of an increased efficiency dividend which, of course, was imposed equally on inefficient and efficient areas of government.

This legislation is an example, I think, of that crude policymaking. The previous government looked at the question of cost recovery. It undertook consultation to see whether cost recovery was a good idea. It came to the view, listening to that consultation and looking at all the evidence, that it was not a good idea and that it was not going to work.

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

You didn’t tell anybody.

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

Well, it did not proceed. We undertook the consultation in 2005 and there was no cost recovery pharmaceutical benefits bill, Senator. So I think it is fair to assume that we came to the view that it was not a good idea.

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

Senator McLucas interjecting—

The Acting Deputy President:

Senator McLucas, you have made your point.

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

I am surprised Senator McLucas could not work that out, but that is what happened. If Senator McLucas had sat through the evidence that was presented to the Senate Standing Committee on Community Affairs she would have seen very clearly that the stakeholders in this industry were concerned. I do not mean just the pharmaceutical companies themselves but people like those in the Australian Medical Association were concerned about the direction of this legislation and the impact that it might have on the availability particularly of low-volume drugs in the Australian marketplace and the off-label uses of a number of those drugs in all sorts of settings in Australian medicine. We discard or put aside those concerns expressed by industry at our peril.

Obviously the government has put forward legislation which seeks to increase the cost of delivering medicines to the marketplace. That is the inevitable effect of this legislation. The question is whether that additional cost will be absorbed by the pharmaceutical companies themselves or whether it will be passed on to the consumers. It would have been nice to hear, in the course the community affairs committee inquiry—perhaps we might hear it here it in the course of today’s debate—from the government that it has assurances of some sort that these measures will not translate into higher costs of medicines and that it has discussed this with the industry and has obtained such an assurance or that it has some other understanding of the economic modelling at work here which would lead us to believe that there would not be higher costs. But I have not heard that evidence as yet, and I frankly do not believe that evidence is available, because I do not think there is anything that would lead us to expect that these costs will not be passed on, ultimately, to Australian consumers.

As I have mentioned, the bill was analysed by the community affairs committee. The absence of draft regulations made it difficult to complete that task appropriately and to the standards which that committee has set in the past, and made it difficult to assess the extent to which the new arrangements would be capable of delivering medicines without increasing costs. One has to be just a little bit cynical about the timing of the tabling of the regulations. Had they been tabled a few days before last Friday, it might have been possible for the committee to look at those regulations and make some comments about them, however rudimentary. Had the regulations being tabled a few days after they were actually produced, it would not have allowed the committee to make the point that the inquiry was done without the exposure of the regulations. By tabling them on the day that the committee report was tabled, out of session, it allowed the government to say: ‘Oh, the regulations are there; we’ve made them available. We just didn’t get them to the committee in time for it to have a look at them as well.’ One can be a little bit cynical about that kind of process.

The other point about consultation that needs to be made is that since November 2007 there has been no indication, none whatsoever, that the government was going to change its policy on cost recovery or introduce this element of cost recovery into the operation of the Pharmaceutical Benefits Scheme—in fact, quite the contrary. The only public policy statement by the government prior to the budget announcement—which did not support the implementation of cost recovery—also places the measure at odds with the guidelines. Although the scheme was considered previously, in 2005, as I have said, the lack of consultation with industry in this case I think reinforces concern about whether this is actually based on a properly considered and consulted-on model or on an ideological view that the industry can just wear these extra costs, on a hope and a prayer that the costs will not be passed on to consumers.

Of course, since the former government undertook its consultation in 2005, there have been a number of key changes in this area. There has been a renegotiation of the prices that the government pays for PBS medication, for example. It was interesting to see the submissions and the line-up of witnesses to the inquiry almost unanimously opposing what the government was trying to do. There was one supporter of the government’s proposals, Professor Tom Faunce—only one—and even he made it clear that he felt that this was only going to work if the savings or extra revenue the government generated by this measure were ploughed back into measures to do with better health outcomes. The government has offered no assurance that that is going to be the case at all, and simply pointing to another area where more money is being spent is hardly the kind of hypothecation that I think Professor Faunce was really getting at.

A major concern is the lack of detail in the proposals, as mentioned by previous speakers, including Senator Colbeck. Drugs used for paediatrics, palliative care and in Indigenous settings may be hardest hit, as they often fall into the low-volume indications. Medicines Australia have indicated that the cost recovery measures may run counter to the government’s own cost recovery guidelines, including lack of consultation on them and their cost-effectiveness, and the fact that they would create an unnecessary delay in bringing drugs to market and stifle competition through exacerbation of ‘free-ride’ effects. Exemptions granted for listings for low-volume drugs or indication expansions might be passed on to other, non-exempt submissions, thus hiding the disincentive of this measure from the Australian public. As exemptions are in the regulations, the committee’s inability to scrutinise the regulations before the report was brought down was of concern.

And that is why the opposition has decided that it will not support this legislation. It is not simply a question of poor process, with the government having left the guts of the legislation off the table until it was too late for the parliamentary scrutiny process to do its job. It is also because fundamentally it betrays the concept of a Pharmaceutical Benefits Scheme which is capable of delivering medicines at the most affordable rates to the Australian community in a timely way—because, whatever you might say about this arrangement, it is an added cost to the cost of bringing a drug to market and, in my view, it is simply inconceivable that these costs will not be passed on to Australian consumers.

The fact is that this legislation betrays two elements of Labor policy announced before the last election. One was that Labor was going to look after Australian consumers. It was concerned about the rising cost of living in Australia. It wanted people to have some relief from the way in which costs were rising. Now, if this move does result in higher costing medicines—and it would be very hard indeed to measure; no-one can say with any certainty that it will, no-one can say with any certainty that it will not—then Labor has betrayed that promise it made to the Australian community about those costs. The other is that Labor made a quite explicit statement about its concern about the proposal for cost recovery in this area. The now minister said, on 31 May last year, when she was shadow minister:

The PBAC needs to be independent of government and of industry, and we cannot see the justification for this move to the cost-recovery model. I have asked the government to reconsider this approach given the risk to the independence of the PBAC, or even to consider if cost sharing, perhaps between the government and industry, being the major stakeholders in the PBAC, would be more appropriate. I note the AMA has recently backed this call to ensure that independence is maintained.

If independence were simply a matter of making a small change to the legislation then presumably the then opposition would have done that, or suggested or proposed that, but as far as I am aware they did not do that.

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

There was no legislation to do that.

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

Well, you did not put forward suggestions as to how you might do it, did you? You did not say, ‘We will support legislation—

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

Senator McLucas interjecting—

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

You could have gone back to the minister and said, ‘We will support legislation if you build in the independence of the PBAC.’

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

What, blanket approval?

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Order, Senator McLucas and Senator Humphries!

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

I have to say that I think that the government, the then opposition, wanted to obtain the assurance of the sector that it was against this dreadful cost recovery measure, wanted to neutralise opposition to it perhaps at the last election and then bring this measure forward subsequently when it was in government. It suddenly needed to find those dollars that it had promised were somewhere else, salted away in the bowels of an inefficient department of health, and then it discovered the dollars were not there at all when it got to the government benches. The other point of course is that this measure, to the extent that it adds to the cost of medicines, will fuel inflation. It has also claimed to be the low-inflation party. We have seen no indication of it actually honouring or supporting that claim in anything that has been done in its first budget.

I note that the Australian Greens have moved some amendments to the legislation. The opposition will be supporting those amendments. I am not sure that Australia needs another review but that is what an amendment does deliver. I will point out, however, that in reviewing the things that this amendment foreshadows—such as the average number of times a submission is presented before gaining approval, the average cost of submissions by type of submission, the number of applications received for non-orphan drugs et cetera—it does not, and obviously cannot, encompass a review of the number of drugs which are not presented for exemption. It cannot find out, by such a process in any case, how many times drug companies decide that particular drugs are too low-volume to warrant taking to the marketplace, if they have to meet a cost in actually bringing them to that marketplace.

I note that these late regulations provide a capacity to waive fees, and that is good, but my reading of these regulations—and perhaps the minister can indicate whether I have misread them in some way—is that the fee has to be paid at the time that the application is made, or shortly thereafter, and a decision is made independently as to whether the fee can be waived. If the fee is not waived after the application is made, there is no capacity by the applicant to withdraw the application on the basis that it would not be economic to proceed with that particular application. In other words, if you are a drug company and you have a low-volume drug that you want to introduce to the marketplace for a handful of people who happen to need that drug and you think, ‘It might be worth putting this forward, but we don’t have any certainty that we’re going to end up with the fee being waived,’ you might just as well say, ‘In that case, let’s not worry about it. It’s only a handful of people that this would benefit. We will leave the drug off the market altogether.’

The regulations say the department may waive a fee payable if the application involves the public interest and the payment of the fee would make the application financially unviable. I would like to know why the government has not said it will waive the fee in those circumstances. If it is in the public interest, why not make it compulsory to waive the fee? If it is in the public interest and the fee would make the application financially viable, why shouldn’t an applicant have the certainty that they will have the fee waived? I think this is an issue which again reinforces the sense that the government is after the money; it is not interested in the long-term Australian patient who uses drugs and the effect of the measures that it has introduced into the Senate.

I am concerned about this. I think that this is a leap in the wrong direction. It was considered by the previous government; it was not proceeded with for very good reasons. I think it is a little bit galling to have the new government, which continually criticised our lack of consultation and our inability to consult with people, now telling us that our consultation, which led to us not proceeding with this measure, was satisfactory for them to make a decision now, three years later, that this measure can go ahead, despite the obvious lack of support from any of the stakeholders in the sector. The Senate should reject this legislation. If it does support it, it should certainly support the amendments and should consider what direction the Labor Party is taking with these sorts of measures. Is it grabbing for the dollars or is it trying to improve health outcomes for the Australian people? The former conclusion is very hard to resist.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

I was interested to hear Senator Carol Brown tell us that the government is committed to due process in this move on PBS cost recovery. The government has a reputation for being all about process, for being about reviews, inquiries, workshops and talkfests. Yet, the opposition’s objection to this bill is about the lack of process. There are no draft regulations and still there is no explanatory memorandum for the draft regulations. Witness after witness when they spoke at our inquiry said that they had no idea what this was going to mean in practical terms. How was it going to work? No-one knew. Where were the draft regulations? It is a fundamental flaw in the legislative process of this government that there are no draft regulations. You only need to look at the government majority report from the Senate Standing Committee on Community Affairs inquiry. It says:

The committee shares stakeholders’ concerns that the proposed regulations, containing the detail of the implementation of the cost recovery arrangements, were not available for examination during the course of this inquiry. As a result, it has been difficult for the committee to appropriately assess the implications of the proposed arrangements.

Yet the government happily claims that it would be hypocritical not to vote for this legislation. The government majority committee report says, ‘We cannot appropriately assess the implications of the proposed arrangements.’ The report from the government members of the community affairs committee goes on to say:

The committee has raised concerns in previous reports regarding over-reliance on subordinate legislation to implement significant amendments and reform, and has ... noted the importance of timely provision of subordinate legislation for committee scrutiny.

Unfortunately—or perhaps I should say fortunately—the opposition is not about to simply accept the government’s view that they are committed to due process. The government say: ‘Don’t you worry about that. The regulations will be all right because we tell you so.’ As Senator Colbeck pointed out, there has not been time to properly scrutinise the regulations, nor were any of the witnesses in a position to comment on what they might have perceived as flaws in those regulations. These are the people who have some expertise in appearing before the PBAC and making submissions to the PBAC. They were all very concerned about what it would mean. For instance, I turn to comments by Professor Ravenscroft, from Palliative Care Australia. He said:

My personal comment is that to leave this open for the bureaucracy to make these decisions—

that is, about what constitutes an orphan drug, about what small volume drugs should have extensions to their indicator use—

may end up producing a result that is less than satisfactory for the patients who need these drugs.

The problem that has developed is that we have no idea how any of this will work in practice. The people who have the best expertise and the best chance to tell us how this would work in practice had no opportunity to tell us this information because it was not available. We are, I am afraid, somewhat cynical about the government telling us: ‘Don’t you worry about that. We’ll get it right.’

I would like to talk a little about the effects of this on the smaller groups such as the palliative care part of the health industry in Australia. There are 135,000 or so deaths in Australia every year. About 100,000 of those are related to people who have had an illness before they die. We know that presently 40,000 to 50,000 people a year in Australia need care in the terminal phase of their illness. Of those people, 25 per cent die at home being cared for by their families and loved ones. A perhaps more disturbing figure is that 80 per cent of those 50,000 people would like to stay at home, they would like to be treated at home, and yet only 25 per cent are. These are people suffering from a wide range of terminal illnesses and certainly in need of our support, our empathy and our help.

There was some evidence given during the inquiry that told us that many drugs that are currently used in large population groups, such as for epilepsy, could be of benefit being used for pain management purposes in the palliative care market. To do this requires a new submission, for an extension of the indicators, to the PBAC. Right now there are people with terminal illness being treated in hospitals because the drugs they need cannot be administered anywhere except in hospital because they are not on the PBS. We have that problem right now. How much worse can that get when orphan drugs, drugs for low-population groups, may in fact not get to be submitted to the PBAC? Yet this is a situation that we currently have no clarity whatsoever around. What is the public interest? Who decides? Where is the transparency in the draft regulations that are currently in place?

Professor Ravenscroft explained the situation to the committee. There are many drugs that currently exist to help palliative patients undergoing palliative care but the clinical studies for those drugs have not been done for palliative care purposes. There needs to be new data generated, at a cost. There need to be trials of the use of the drug, at a cost. If and when enough data is generated then these drugs go to the TGA for extension, at a cost. They go to the PBAC potentially, at a cost. Who is going to do this when we are talking about a low and disparate population group? We are talking about roughly 50,000 people. They have numerous problems—numerous needs for numerous different drugs. So we are talking about very, very small population groups that are not going to attract the attention or the funding that is needed from the drug companies.

There was also evidence given that community and industry organisations are free to bring submissions for listing with the PBAC to the PBAC. From the evidence given it appears that this has never happened. The palliative care medical profession at one stage investigated doing this because of the need for drugs in the palliative care industry and the fact that it is such a low-volume industry, but they could not get the funding needed to undertake the work that had to be done.

So the PBAC assessment process means that, in fact, most medicines are submitted to the PBAC for their major indicator. It is the first thing sought by the companies. There are many examples where drugs that have been used in palliative care are used off licence by palliative care physicians because the drug, whilst registered for the PBAC, still has not been through the regulatory mechanism for use by people having palliative care.

Two examples given during our evidence are worth bringing to the Senate’s attention because, in my view, they put a personal face, a real human aspect, to the sorts of issues we are currently talking about. The drug gabapentin is a reasonably new anti-epilepsy drug that is used for resistant epilepsy in the broader Australian community. It has proved to be a good drug for pain control in some areas. Currently, the palliative care group are asking whether, as an orphan drug, this drug would be able to work its way through the system. Will it be allowed to go through the system in a free way? We do not know. That is the point—we do not know. They cannot tell. No-one knows whether this would go through the system or not.

A second drug is octreotide, which has been approved for growth hormone treatment and for the treatment of a specific type of tumour. It is not available to the palliative care market, except in this off-label way. It is used much in the palliative care market for treating terminal gut obstruction where the patient has a tumour that is blocking their intestines and therefore causing the person to vomit copiously and to be in severe pain most of the time. The only place someone can get that drug right now is in a hospital, and a regular dosage of it outside the public system would cost well over $300 a week.

We are talking about one group of people here. Gut obstruction in the palliative care area affects about 10 per cent of those 50,000 people we were talking about before. This is not a group that any drug company is going to be seeking to make a submission about to the PBAC. In fact, we were given evidence that whilst the palliative care industry had asked the company to submit on this basis they were not prepared to do that, even now in the current system, because of the cost to the company. We need a lot more certainty than we currently have about what will be considered an orphan drug or a low-population drug and therefore will be able to be put through at someone’s discretion. We are not entirely sure whose discretion it will be. It will be discretionary, but at whose discretion we do not know.

The other thing that witnesses were concerned about was the stage of the process at which they would know whether there would be costs involved with submitting to the PBAC. Why would a drug company go through the effort of putting up submissions, for instance, around what they considered to be an orphan drug or a low-population drug to subsequently discover that it was not to be assessed in that way? At what stage, at what point in the cost cycle, would companies know whether they had to fork out for their submission or not?

I suggest that the government might like to consider some of the other ways that companies in other countries go about putting medication into the system. There is, for instance, a process under the FDA where companies are given priority for listing low-population or orphan drugs depending on the work that they have done in the larger and wider community. A company might look at listing a low-population or orphan drug to potentially earn brownie points towards the listing of another drug which is going to be more profitable and therefore a way for them to write off or subsidise the costs of putting the orphan drug or the low-population drug into the system.

The coalition, as Senator Colbeck has pointed out, will not be supporting this legislation. We certainly accept that the PBS has ever-increasing costs and that these must be recouped, must be controlled and must be monitored. These costs will continue to rise. However, it is irresponsible to say: ‘Let’s worry about controlling the costs irrespective of the processes. We do not care what this is going to do or how it is going to do it. Let’s just get it in. Trust us. It will all be all right in the end because we say so.’ We would say to the government, a government so keen on process: ‘Sorry, get the process right and then this legislation will be very worthy of consideration—but when the process is right.’ Without careful analysis of the regulations, especially by those bodies that will have to live and be assessed under these regulations, it would be hypocritical of the government, I would suggest, to think that rushing this through makes some sort of positive difference to the PBS system. Clearly, a delay in here to do this properly would have cost very little in monetary terms. It would have given a lot of comfort to the industry and it would have been a very sensible way to progress this issue.

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

This is a threshold issue in terms of change in legislation and it is important just to remind people about the scheme of which we are talking. There is no disagreement in this place or indeed, I think, in the community about the value of the Pharmaceutical Benefits Scheme. The committee had on evidence the honour and the respect with which the Pharmaceutical Benefits Scheme is treated by the industry, by the people who are using the system, by the pharmaceutical industry itself, by the health system and also by a number of people who are consumers. We heard valuable evidence in our inquiry about just how convinced people were that the system needed to work well, how it needed to be well resourced and how there also needed to be a sense of engagement with the system. This shows us that for about the 60 years in which the Pharmaceutical Benefits Scheme has been in place it has served Australia well.

Consistently in this place over many years I have heard arguments from both sides of the chamber, in particular from the then government, about the rising costs of the Pharmaceutical Benefits Scheme, how we had to be careful and how we had to be sure that this scheme was well resourced by government. There was always some concern that the ever-increasing expenses relayed to the dynamic industry of pharmaceuticals would have some impact on the ability of the Pharmaceutical Benefits Scheme to supplement the cost for consumers.

That is a given. There is no doubt that the rising cost of the scheme over the years has been of deep concern to the government and, I believe, to governments. There has got to be some ongoing acknowledgement that the scheme itself continues to need to be reviewed closely and that there needs to be ongoing commitment from all parties involved to ensure that there is effective funding for this scheme. We know that last year over $6 billion was spent on the Pharmaceutical Benefits Scheme alone in this country and that anticipated costs into the future will grow. In a number of contributions to this debate we have heard about the marvellous scientific advances that have occurred and the growth in the capacity of medication to adapt and also to respond to the illnesses that people are working through in their lives.

Senator Boyce has just given us examples of drugs that have come onto the market in the recent past. Our committee received evidence, both in writing and at the inquiry, from a number of the large pharmaceutical companies that are members of Medicines Australia, the umbrella organisation, about the horrific—and I use this term deliberately—cost of research and development for medications. They also told us about the fact that for the few major successes in the field, of which people speak with great pride—and we in this place have heard about major successes where drugs have been researched and come on the market and provide immense benefit to people—many years of research and trials can be put into the development of drugs that do not result in a good product coming forward. But that is part of the industry.

In terms of understanding this industry, we believe that it is an industry based on research and on decisions that are made, almost on a daily basis, about effective profit margins. We are not talking about some form of charity in the pharmaceutical area. We are talking about effective and highly successful business decisions. Within that business environment, there is no doubt that the range of costs that must be contributed to ensure that a final result is received is built in. The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008, which we are considering here today, looks at inserting one level of cost into the bank of costs that must be seen by the industry as they make their daily business decisions about what they are going to do in the market. And it is not an overwhelming cost. Indeed, there will be a cost; that is what the legislation is about. No-one has run away from that. It is not a new concept. It has actually been in discussion in this country since 2005.

The previous government had on record a proposal in previous budgets to bring forward a very similar costing proposal. There were a range of discussions at the time, as the department explained to us at the inquiry, about the interaction with the industry, with consumers and with the various people who have interests in the Pharmaceutical Benefits Scheme and the National Immunisation Program. And there are a range of people who share the interest in the industry. The discussion has been going on for a couple of years and we have indications of where it occurred and what the basis of the discussions was.

It is fair to say that in 2005 the industry did not like the introduction of a costing program, and they do not like it now, because it inserts a realm of costs. But the argument that the government is putting forward is that this is part of the contribution that players in this market must make to ensure that the program continues to be strong, well resourced and effective and provides what Australians have come to believe is their right—that they will have access to the best possible medications and that they will have certainty that they are safe, that they are well tested and that their government, whatever the government of the day is, will provide effective financial support so that the cost will be supported.

We know that at the present time a large percentage of the drugs and medications available on the Pharmaceutical Benefits Scheme are directly supported by the government. We also know that patient contributions make up about $1.15 billion of what is provided. If I had the figures I would work out what that would be if there were no PBS. I am sure people will do that. We have heard in this place on a number of occasions just how much individuals are prepared to pay for medications that will provide a cure or support or alleviation of symptoms and also contribute towards having as strong and as healthy a life as they possibly can. The Pharmaceutical Benefits Scheme, which we support in Australia, gives certainty to consumers that programs are there for them. Indeed, across the world the Australian Pharmaceutical Benefits Scheme is the envy of many countries. Stories about the way it operates have actually been written up in industry papers.

One of the core things, I think, that came out of our inquiry was the strong desire that regulations be available with the legislation so that the actual detail of the costing regime would be available for everybody. I agree completely. The best possible process when we are looking at primary legislation that is supported by a range of secondary legislation and regulations is that we would have in front of us all of that information when we are making our decisions. The reality is that for the very short time of six years during which I have been in this position and working on this committee I have never seen regulations provided to any community affairs legislation or reference committee along with the primary legislation that it was considering. We have of course asked for it.

I share the opposition’s view in their strong statement in the committee report and in today’s debate about it being essential that we always have regulations or guidelines in front of us when we are looking at legislation. I support their position entirely. That unfortunately has not been their position for the last six years. I welcome their coming on board so that in future debates of this kind we will be able to say this with certainty to the departments supporting our debate and the various bodies working to develop the legislation, and to come forward with all the information we have. We will be able to say that if we as a considering committee are truly going to see the full detail of the impact of any new legislation, it would be very, very welcome to have all the regulations. When asking the department during Senate estimates and in many other committees whether or not we could see regulations at that stage of the consideration—I do not recall the number of committees but I do recall asking this in committees on which you sat, Acting Deputy President Hutchins—we were consistently told that, from the department’s point of view, it would be quite likely that the regulations would be formulated with the legislation and most particularly after the legislation is agreed so that all the details can then be put in place for implementation. With great politeness, various departmental officers have told me that they would take note of our concern and that they would see what they could do and would get back to us.

I am so pleased that we now have the regulations for consideration. It would have been better if we had had them longer; nonetheless, we are talking about people who are very skilled in this process. I hear concern from various industry groups and people from the opposition about how they would like to have more time to look at the regulations in detail and to consider them. I understand that the people who are saying this have significant resources and have the ability, the knowledge, the interest and the commitment to this system to be able to have a look at these regulations and immediately respond. With them having years of experience in working in the area, if there is something there that concerns them at this stage—and I know, having talked with the departmental officers over many years, that regulations evolve—the department will work with industry, with the government, with opposition and with anyone interested in the process to make sure that the process is as effective and as responsive as possible.

The Senate Community Affairs Committee totally agree that to have full knowledge of how this legislation will work, down to the detail of how the process will operate, it is an advantage to have the regulations, and in future it would be good to have them at the time of the committee inquiry process. But we have them now, and I have looked at the regulations and had discussion with departmental officers about the issues that were raised in general during the committee, including how various delegations would operate; how orphan drugs—which is a term that I do enjoy saying; they are the kinds of medications not linked to major pharmaceutical companies that have quite small areas of use—will be considered; how people will be able to waive fees.

The committee heard evidence from the department and from a range of experts in the field, and it was quite clear that everybody at the committee inquiry understood that this is not a one size fits all; that there would be the ability to respond to the different kinds of medication brought forward, that there would be flexibility and that there clearly would be the ability of the delegate—the trained, professional, aware delegate—to provide waivers when a case put forward listed all the things that we have heard about in debate in the last day or so. Those are all things that are a part of this business: the special need, the particular area, the overwhelming cost.

Everybody will be aware of the rules, and in fact the rules themselves have not changed. What we have is a pricing regime put into the process at this level of getting approval for pharmaceutical assistance, the PBAC process. So whilst it is an impost, it is not something of which people are ignorant. People are all too well aware of what this means. They understand where they fit into it, and now that we have had the regulations provided we will be able to see the detail of exactly how it will work, which is something that we have not seen in many other pieces of legislation.

One of the really positive elements of the committee—and it continues to astound me and make me very proud to see—is the way that our legislation engages a range of people in the discussion and how deeply they care for the process. From hearing evidence from people like Carers Australia and the palliative care association and from reading statements from people who work in Aboriginal and Islander health you become aware that they are all very involved in the process. And what they asked when they came before the committee was: would their particular need be taken into consideration during this new pricing regime? The government can say, with absolute authority: yes. People’s individual circumstances will be taken into account when they apply for any process through the PBS, exactly as is done now. A whole range of issues will be taken into account.

Whether people will get the answer that they want all the time, I cannot say; that is part of the decision-making process. But to presume that this is some uncaring, separate process which will be put in over the top and not take into account any of the issues about how this process operates now is just not accurate. That tends towards a scare campaign to get people worried about how it will work and to take the real object of the process off the agenda. The object is to ensure that our system remains well resourced and strong into the future. We hope that we will be able, through this process, to get an agreement on an element of contribution from the major pharmaceutical companies when they apply to go onto the assistance scheme. When they have gone through the process of getting their drugs approved for safety and for being able to be efficiently used and they are looking for government sponsorship so as to mitigate costs for consumers, there will be a cost involved. The details of that are in the regulations. It will operate as people put forward their applications.

The committee was made most aware of the concerns raised by the pharmaceutical area about where their future would be and also of the concerns raised by various specialist groups. In our recommendation, which is in the report, we say that the regulations should incorporate specific measures, whether through exemptions, waivers or in some other form, to ensure that there is no disincentive for companies to lodge applications to list low-volume medicines or to change or extend the indications of listed medicines. That was a clear recommendation in the majority committee report. That has been taken on board by the drafters of the regulations.

I know now that there has been an extended time for people to consider the regulations. We now need to move effectively forward so that there will be understanding and security. We have heard the word ‘security’ a number of times in the debate. It will be security for all participants in the process about exactly what their responsibilities are, what their charges will be and what their responsibilities will be in the future of medicines in this country. I was deeply concerned by the response from some of the pharmaceutical companies. They tended to say that if this charge came in they would have to seriously consider their availability and their ability to provide this service into the future. That is of concern; we have to look at business need. But we also have to look at community need, and in this debate we are looking at ensuring that safe medications are available, that we have the best possible medical research and that Australian consumers can be secure that their PBAC system is well resourced, strong and engaging for all participants.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

The Pharmaceutical Benefits Scheme is a world-leading scheme that we can all be proud of. The scheme helps protect Australian families from the soaring prices of prescription drugs that we see in other parts of the world. The affordability of the scheme for the family needs some more attention, and I should note that Family First expressed concerns about changes to the safety net threshold levels under the previous government which increased costs for families.

With regard to this bill, the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008, Family First does support the concept of cost recovery outlined in the bill. That is a principle that Family First supports, but the detail is also important. We have heard throughout this second reading debate from both sides of the chamber about the regulations having only come out since the Community Affairs Committee report on the bill was finalised. Family First has concerns with some of those regulations. The issue here is that even the committee report found that there was concern about making sure there were no unintended consequences. What this gets down to is: will there be some drugs in the future that will not be available for vulnerable Australians because making applications to get those drugs on the PBS could be cost prohibitive to the company applying? That would be of concern especially in Australia where we have a sense of a fair go. I understand about the orphan drugs, but I am worried about things falling in the gap and whether there will be unintended consequences through these regulations. Now that we have the regulations I wonder whether we should actually have a good look at them and see whether there is some way of bridging that gap or hole.

It is very hard for us when we get information last Friday night and then are in here debating a bill that actually unfolds the regulations that follow it. It would be very good for this Senate and for Australia to look at those two items together. That way we can get off on the right step rather than doing a half step with a few holes probably into the future. I am going to leave this problem for the government to solve. As it stands, Family First is looking for—I hate to say it—the topic that the Rudd government likes, which is another inquiry. I would hate to be the first person to stand here today and say, ‘Family First is suggesting an inquiry.’ But these regulations came out last Friday, and even the committee report was seeking government assurances:

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

All that is gobbledegook to a lot of people. What that basically says is that there could be some Australians missing out on getting drugs through the PBS because of this cost recovery principle—and, while we agree with the principle, we need to make sure that somewhere in the regulations we have some way of making sure that does not happen. I will not go through suggestions; I will let the government come up with suggestions. However, I think we need a short, sharp inquiry into the regulations that came out on Friday, as we have already had the bill looked at and a report that came out on Friday—just to make sure that when we pass this bill we understand the regulations that we are passing along with it. We have heard in debate here today that when the regulations go forward we can change them through disallowance. That is a very, very messy way of doing it. This is a significant change and I think we need to make sure we are actually on solid ground moving forward. So I appeal to the government that they support—even propose themselves—a short, sharp inquiry into these regulations because without that inquiry Family First cannot support this bill as it stands.

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

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

I seek leave of the Senate to make a very short statement.

Leave granted.

In my summing up speech I referred to the cost recovery as a percentage of overall revenue—the $14 million cost to the industry as opposed to overall revenue of $18 billion. Unfortunately, the calculator was broken and I said 0.008 per cent. The figure was actually 0.078 per cent or 0.08 per cent rounded up to two decimal places. It is not a lot of money in the scheme of things, but the calculation was incorrect and I wanted to correct the record.