Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

Before question time, I was reflecting on how the views of the Minister for Health and Ageing, Nicola Roxon, had changed from before the election, when she was the opposition spokesperson on health, to now, when she is the minister. Before the election, she was opposed to and could not see any justification for a system of cost recovery for PBS listings, in fact raising the prospect of the risk that cost recovery would pose to the independence of the PBAC. Cost recovery, as I was saying before question time, has been implemented successfully in the TGA process, which has been able to maintain its independence, but of course the TGA and the PBAC have very different roles. The TGA decides whether a drug or a medical device can be marketed in Australia, whereas the PBAC advises the minister on which drugs should be approved for a public subsidy.

The Productivity Commission has made the point that cost recovery arrangements should only be introduced to improve efficiency and should not be implemented where they are inconsistent with policy objectives. Whilst cost recovery may improve efficiency, if it leads to higher drug prices and delays PBS listings it would be inconsistent with the objectives of the PBS, which are to provide timely and affordable access to pharmaceuticals.

The industry has pointed out quite vigorously a number of concerns. The first of those is that this is a global first. It is indeed unprecedented around the world that cost recovery principles, in terms of the listing process of pharmaceuticals, be implemented in this fashion. The measures do not adhere to the principles of cost recovery from the industry’s point of view, in that there is no service to the seller. Recovery is being made for a purchaser’s function and could, from the industry’s point of view, take the cost of listing to over $1 million. That presents a risk to patients across Australia in getting access to new medicines which might not be listed in Australia as a result of what the government is proposing through the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 [No. 2]. It could well impact on small patient population groups. The real risk is that some companies may decide that it is not worth listing some drugs for those groups.

Finally, there is a real concern that this measure will deter innovation and investment in the Australian pharmaceutical industry because it is in fact a tax. It should be acknowledged as such, and there is no proper comparison to the TGA process, where payment is made for registration. The government is reintroducing this measure at a time when the industry is already dealing with a substantial four-year reform process, which was initiated in 2007. It comes at a time when the budget is already imposing a further $175 million in price cuts on the industry, and, of course, it comes at a time of a significant global economic downturn.

The minister’s views on this have changed, as I have noted. Rather than agreeing with the proposition that she put before the election that this measure would threaten the independence of the PBS, she is now actively pursuing it on behalf of the Rudd government. I do note that the Chairman of the PBAC suggested that there were no concerns about cost recovery impacting on the recommendations or independence of the PBAC.

The PBS does give Australia one of the best pharmaceutical delivery systems in the world. It gives Australians access to the best available medicines that are safe and of the highest quality. We fully support the charter of the PBS to provide timely and affordable access to subsidised medications for the Australian community. We are very concerned about the impact of the measures in this legislation. We understand that the government have given indications to the Greens that they will agree to an amendment that the Greens will move later. We will also support that amendment by the Greens to have a review of the impact of these cost recovery measures. If that amendment is passed by the Senate, as it seems that it will be, the opposition will be supporting this legislation. However, we continue to have very grave concerns about the impacts that it is likely to have into the future.

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

We made our position clear on this bill the first time we considered it. I am not going to go through all the comments that I made last time but I do want to reiterate a number of our points and put the reasoning behind the Greens position on this National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 [No. 2]. In principle we support the cost recovery mechanism. The pharmaceutical industry makes a great deal of money from the PBS. We believe that, in general, cost recovery makes sense given the large amount of money the industry makes out of the PBS and the large cost of the scheme to the taxpayer. The Greens strongly support the PBS. We think that it is appropriate that the industry pays for cost recovery.

When we originally looked at this bill, we were concerned about the independence of the PABC. As a result of the two inquiries we had, our questions to government and our looking at the legislation in detail, we were somewhat assured that it did not undermine the independence of the PABC. We had particular concern about non-orphan drugs—those specialised drugs that are used for purposes for which they are not listed. Those drugs include some used in specialist and rare cancer treatment and some that are used in Aboriginal communities. A number of drugs have proved to be very beneficial for palliative care. These drugs are often used in low volumes but it is quite an expensive process to list them. So we were concerned to ensure that those drugs were protected in any cost recovery scheme.

The other issue we were concerned about at the time was the fact that the regulations, if I can remind the chamber, were made public the day that the Senate Standing Committee on Community Affairs was due to report on this legislation. We were extremely disappointed about that. We did not think it was good process given that this particular piece of legislation was going to significantly impact not only the industry but also stakeholders. There was a particular level of concern around those non-orphan drugs, particularly from people involved in palliative care. In fact, we had a number of submissions to the Senate inquiry about that specific issue. Following that, the government referred the regulations to committee. So the community affairs committee has had two inquiries into this bill: one to the bill itself and the second into the regulations. Once we had had a look at the legislation, it helped to allay a lot of the concerns of the Greens, but there were terms in the legislation that were confusing and not adequately defined. When we go into committee, I will seek government assurance around some of those definitions.

There has been a lot of concern in the industry and amongst those that rely on non-orphan drugs as to the impact of this legislation. Although a lot of the issues have been dealt with, we think it is appropriate that there be a review around its impact. We believe it would increase transparency and accountability to look at the application of the cost recovery processes, so we will be moving an amendment to the legislation. I understand that it has support from the government and that the opposition, as we just heard, will be supporting it. In fact, the amendment incorporates amendments put by the opposition in terms of annual reporting. I will go through those amendments in more detail in the committee stage. Whilst the government has made further attempts to improve the regulations, this is a substantive change. We are not sure whether this legislation and the cost recovery process is going to have the impact that people are worried about in terms of making it impossible for non-orphan drugs to go through the process, even with fees waived or reduced.

Senator Fielding has circulated some amendments around the minister retaining discretion to waive fees. I signal right now that the Greens have very strong concerns about those particular amendments. Again, I will go into more detail in committee, but we are very concerned that those amendments go way beyond what is already in the regulations and that they could introduce an element that undermines the independence of the PABC. The legislation has been at pains not to do that. We are very concerned that these amendments may do just what we have all been trying to avoid.

The Greens will be supporting this legislation provided the amendment is accepted. We believe the amendment provides the safeguards to ensure that this legislation is not adversely impacting those groups that everybody in this chamber, from my recollection from the previous debate, was at pains to protect. Those are the small groups who use the non-orphan drugs, those drugs that are low volume and that are too expensive to put through the process if there is not a fee waiver process. We will obviously make our decision once we see what the government does with the amendments that the Greens are proposing.

John Faulkner (NSW, Australian Labor Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 [No. 2] amends the National Health Act 1953 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 and the designation of vaccines for the National Immunisation Program. The aim of the PBS is to ensure that Australians have affordable access to high-quality medicines in the community. An initiative of a Labor government 60 years ago, the PBS is now accepted by both sides of politics as a success story. Access to high-quality medicines is maintained by subsidising the cost of the PBS medicines and limiting the amount that people pay for prescriptions at the point of sale. Medicines that are listed on the PBS are assessed by experts to be clinically safe and cost effective. The PBS serves Australians well and is justifiably regarded as one of the best systems of its kind in the world.

Similarly, the government is dedicated to ensuring that all Australians can continue to receive fully funded vaccines under the NIP. The NIP is a joint program of Commonwealth and state/territory governments which provides fully funded vaccines for major preventable diseases. The states and territories provide vaccines free of charge to health providers for them to administer to the community.

The cost of providing subsidised medicines and fully funded vaccines to the Australian community is a significant financial outlay to the Commonwealth and taxpayers. 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.

In implementing a cost recovery fee for Commonwealth services, it is important to note that patient co-payments will not be affected. They are administered separately to the PBS and subject to annual review and indexation adjustment. In 2009 these co-payments are $5.30 for concession card holders and up to $32.90 for general patients.

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 (TGA), the Civil Aviation Safety Authority and the Australian Prudential Regulatory Authority. The pharmaceutical industry is familiar with cost recovery—the industry has been paying for the pre-market evaluation of products by the TGA since 1991.

The trigger for fees will be the lodgement of a submission, which in the case of pharmaceutical companies is a purely commercial decision. Pharmaceutical companies are free to market their products in Australia independently of the PBS or NIP subsidies. However, financial returns from the PBS and NIP, especially in relation to high sales ‘prescription only’ items, are significantly increased by PBS listing.

The government first announced its intention to introduce cost recovery of the PBS listing process in the 2008-09 Budget and it is scheduled to start from 1 July 2008. It has, however, been delayed previously in this place and been subject to intense parliamentary scrutiny, including two inquiries in 2008 by the Senate Standing Committee on Community Affairs. The interest taken by stakeholders in the inquiries demonstrates how the PBS is valued by the Australian community. The government appreciates and values the contributions made during those inquiries, particularly concerns about access to medicines targeted for small patient populations groups such as medicines for palliative care and paediatric patients and medicines specifically listed to assist people from the Aboriginal and Torres Strait Islander communities.

The government will ensure that cost recovery is not a barrier to the continued listing of orphan and niche products within the PBS and that they will not be adversely affected by the introduction of fees. Applications relating to drugs designated orphan drugs under the Therapeutic Goods Regulations 1990 will be exempt from fees. The subordinate regulations will allow for the applicant to request a waiver of the fees when lodging their submission, where the application involves the public interest test and where payment of the required fee would make the application financially unviable.

After consideration of the committee’s findings and evidence presented to the committee, the government is re-presenting the bill. The delay in passing the bill has led to a loss of expected revenue to the government—at least $9.4 million in 2008-09. The government is pleased that the opposition now supports the thrust of the bill and has negotiated in good faith on amendments suggested by both the opposition and the Australian Greens. The government accepts the suggested amendments that will provide for an independent review of the operation of the cost recovery regime after it has been up and running for two years and for the report of that review to be tabled in Parliament. In addition the minister will be required to table an annual report on the processes leading up to the Pharmaceutical Benefits Advisory Committee’s (PBAC’s) consideration of applications.

The government guarantees the continued independence of the PBAC. 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. I would like to emphasise that the expertise, integrity and sense of propriety that PBAC members bring to their task will not change as a result of cost recovery.

Pharmaceutical companies receive much by way of benefits from the Australian taxpayer once products are listed on the PBS. It is not unreasonable that they contribute toward 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. It is time for the pharmaceutical companies to contribute something back to the system.

The bill provides for a commencement date of 1 July 2008. The government has no intention of introducing the cost recovery regime to allow for the retrospective collection of fees. It will be the regulations made under the power provided in the bill which will specify the actual date from which cost recovery fees will commence. No fees can be imposed until the regulations are made by the Governor-General. The regulations will be subject to parliamentary scrutiny and disallowance.

The Department of Health and Ageing has continued to consult with key stakeholders, including peak industry, consumer and healthcare provider bodies. The department has met with industry and agreed to establish a consultative mechanism with industry on cost recovery. In addition, a cost recovery impact statement will be finalised, reporting on compliance and consultations within the government’s cost recovery policy. In accordance with the cost recovery guidelines, the department will introduce ongoing monitoring mechanisms to ensure fees remain based on efficient costs and it will continue to liaise closely with key stakeholders.

Revenue from 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 total about $14 million a year. In addition to the legislative reviews agreed to, a full review will be undertaken within five years, in accordance with the cost recovery guidelines.

The government has asked the Department of Health and Ageing to liaise with industry before finalising an implementation date. The minister will announce that date as soon as practicable to allow industry time to prepare. That said, the government does not anticipate that the implementation of these arrangements will be unduly delayed, and on passage of this bill the Department of Health and Ageing will work quickly to submit the proposed regulations to the federal Executive Council for the Governor-General’s consideration.

Cost recovery will be a simple system, recovering costs from parties that are in a position to gain financial benefit from the listing of their drugs or changes to listings within the PBS subsidy framework and from the designation of their vaccines for funding under the NIP. It 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 thank those who have contributed to the debate.

Question agreed to.

Bill read a second time.