Chris Hayes (Werriwa, Australian Labor Party) Share this | Hansard source

Health care and health spending face multiple competing objectives and a vast array of expectations, both realistic and unrealistic. The facts are relatively straightforward. We have an ageing population—a population that has an increasing number of people suffering from chronic conditions, and advances in medical technology, particularly in pharmaceutical treatments, are becoming increasingly expensive. This is the dichotomy that we face, and it is what the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 is addressing. If we add to that the expectation of the public, particularly the sick, that modern technology can come up with cures for all sorts of diseases, quite frankly, we have the recipe for a difficult public policy problem, certainly when looking at the economic aspects of balancing that dichotomy.

We have the option of increasing health costs to either government or the consumer—the patient. The worst possible option is to increase the health costs to both government and the consumer. In fairness to the government, it has introduced this bill as part of a package of four interconnected measures announced as reforms to the Pharmaceutical Benefits Scheme. The stated aim of the PBS reform package is to ‘give Australians continued access to new and expensive medicines while ensuring the PBS remains economically sustainable into the future’. They are noble sentiments and, much like the other motherhood statements that we hear from this government, you would like to believe that the government delivers this.

The bill before us amends the National Health Act and deals with the price changes to the PBS. It includes: the creation of formularies for classification of medicines, which is primarily aimed at dividing innovative and generic medicines; the removal of ongoing price links between the formularies; the introduction of pricing mechanisms to reduce price to government through stated price reductions for medicines coding to formulary classification and requirements as to price disclosure for all new brands; principles for the calculation of the weighted average price; and the requirement for suppliers of new brands of medicines listed on the PBS to guarantee supply for a minimum period and imposing penalties for failure to meet this commitment.

The main change in the bill is the creation of formularies for all medications. From 1 August 2007, PBS medicines will be listed on two separate formularies. Formulary 1 will comprise some 450 single-brand medicines. These are generally new, innovative or niche medicines. However, it will not contain single-brand medicines which are interchangeable at the patient level with multiple-brand medicines. Formulary 2 will comprise approximately 230 multiple-brand medicines and any single-brand medicines which are interchangeable with multiple-brand medicines at the patient level. These are generally the generics, the off-patent drugs and different versions of older drugs.

A transitional pricing arrangement will apply to F2 drugs, with two sub-formularies being created. There will be no ongoing price link across medicines listed on the F1 and those in the F2 category. Reference pricing will continue to apply between medicines that are linked within reference pricing groups on formulary 1. The reference price will continue to apply within the therapeutic group premium—TGP—groups and across different brands of the same medicine listed on formulary 2.

As I mentioned earlier, this bill deals with components of changes to the PBS that were announced in November 2006. These changes are set to come into effect from 1 August of this year. I note that if they are not able to come into operation by that date it will cause serious and substantial cost to the industry itself. The PBS is one of the most remarkable elements of health policy within the developed world. It is a means through which the public can access medicines it needs at affordable prices, while allowing new medicines to be developed and introduced. It is a model that, quite frankly, most of the developed world would love to be able to emulate. There are costs to this. In 1948-49 the PBS cost the federal government a grand total of around $298,000. Some 40 years later, it reached the billion dollar mark. PBS costs have continued to rise. In the 2005-06 period, the government paid just over $6 billion in PBS subsidies. This is expected to reach approximately $6.5 billion by 2006-07.

The cost of the PBS has increased, but it must also be remembered that the PBS has given Australians access to medicines that many would not have had access to had it not been in place. A rise in a budget item of the magnitude of the PBS is going to be a cause for concern of, quite frankly, governments of any persuasion. But the question must be asked: does simply tightening the purse strings make for a better system or does this start to act as a progressive destruction of a system that, while not perfect, is widely considered to be a good one?

The main driver for these changes—these so-called reforms—that the government has set about introducing is the alarmist conclusion that was reached in the first Intergenerational report. The Intergenerational report predicted that the PBS would grow from 0.6 per cent of GDP in 2002 to 3.4 per cent of GDP by the year 2042, a five-fold increase. The Intergenerational report assumed that the growth rate of the PBS would continue but neglected to consider the changes that might occur or factors that might come into play that would reduce the growth in the cost of the PBS system. The government’s reaction to the conclusion drawn in the Intergenerational report has provided the basis on which it has set about reining in the cost of the PBS.

I posed the question earlier: will the simple tightening of the purse strings of the PBS arrive at what Australians really want? I am concerned, and I am sure I am not alone in this, that simply tightening the purse strings may result in the denial of access to new and innovative medicines to Australians. The experience of New Zealand is one that warrants careful consideration. The New Zealand government considered cost at the expense of patients. Medicines Australia reports that, since the turn of the century, Australians have been able to access some 23 innovative new medicines on the PBS, while New Zealanders have gained access to only two. The first Intergenerational report focused a great deal on the cost of the PBS but largely neglected the benefits of early intervention. I note that the recently updated Intergenerational report has scaled back the estimates of the growth in the PBS, but once again it largely ignores the benefits—both social and economic—of proper management of chronic diseases and the benefits of prevention programs.

In examining the multiple dimensions of health care, it is important that we consider the important role of prevention. Medicines funded under the PBS play a vital role in prolonging the activity and working lives of Australians. Pharmaceutical treatments have the potential to improve productivity and workforce participation and contribute to savings in other areas of the health budget. Responsible spending on the PBS contributes to economic growth and should be seen as an investment, not just a cost. To continue to improve participation in the workforce it will need to be maintained, to enhance the health of our ageing population. Continued access to medicines through the PBS will play a significant role in that aim alone. Increasing the participation rate in our workforce will have a significant impact on the productivity of this country.

Medicines can never be the be-all and end-all of health care. Medical treatments are a support mechanism, but consideration should be given to the benefits of lifestyle factors, such as exercise and diet. Medicines form part of our total health plan, but they are in a support role. They nevertheless play a significant role in ensuring the health of our population, and in doing so they contribute to the productivity of our nation.

We can always do better. We can always manage our healthcare system better, and the way we manage our medications can no doubt improve. By treating symptoms and extending life, medicines improve people’s activity and functions in their daily lives, including their physical, social, emotional and cognitive wellbeing. The economic dimensions of health care—its role in increasing and improving workforce participation and productivity—mean that healthcare spending should also be considered an investment in the social wellbeing of our population. It should not just be considered from a one-dimensional cost perspective alone.

Earlier this year the Productivity Commission released a report that estimated that the benefits to the Australian economy of health promotion and disease prevention could increase GDP by around six per cent. Early intervention programs preventing and treating diseases all contribute to minimising the need for costly treatment after disease becomes established.

This package is structured to bring down the prices of generics and those drugs which were there in competition, and to leave headroom for new and innovative drugs. Labor supports obtaining lower and more realistic prices for generics and rewarding the development of innovative medicines. This support does not come without qualification. I do not want to see a situation emerge where the unilateral consequences are greater cost pressure being imposed on patients. I am concerned that the plans to include an annual mandatory two per cent cut to the price paid by the government for medicines on the PBS, on top of the 12.5 per cent mandatory cut which already exists, could lead to higher health costs for patients obtaining medicines. It is important that a solution does not emerge where the Australian government’s saving comes at the cost of the patient. We need always to be mindful that we do not want to repeat the exercise or the experiences of New Zealand.

In a recent survey in my electorate of Werriwa on the main things impacting on family budgets, the cost of medicines and seeing doctors came in the top three. It stood alongside, and very close to, the increase in mortgage repayments and the increase in petrol prices. So when you talk to local residents in Werriwa—in Minto, Ingleburn, Liverpool, Hoxton Park and other suburbs—you talk to real people out there, real families. And the cost of medicines is certainly something that is very much factored into the weekly budgets of many young families. It is important in every change we make to the PBS and to health care that we keep the consumers of health services—the patients—central in our considerations. This is not passing the buck; this is not just moving a line item from one to another. Cuts to medicines should not be passed on as costs to be absorbed by local families alone. Simply examining the cost side of health care in isolation is a short-term approach and should be avoided at all costs.

I understand that there are some 2,000 new medicines in the pipeline, developed mainly by private sector organisations, for mental health and for the treatment of a wide range of conditions, including cancers and cardiovascular disease, just to name a few. A survey commissioned by Medicines Australia reported that 92 per cent of respondents agreed:

... subsidising the latest innovative medicines through the PBS so that they are available for all Australians who need them, is a good investment for the nation.

I could not agree with that quote more. The expectation that new medicines will be developed and, more importantly, made available to all Australians at an affordable cost is at the core of the community’s expectations for the management of the healthcare system. My constituents are deeply concerned about what they consider to be the Americanisation of the Australian healthcare system. They hear stories about the 47 million people with no health insurance in the United States, the other 40 million with minimal health care and those who face very real budgetary considerations about whether or not they can afford the treatment they need. They worry about the future of our healthcare system as it applies to their families. Healthcare has always rated near the top of the list of concerns of the Australian public.

The PBS, and access to high-quality medicines at an affordable price, is considered by many to be the cornerstone of Australia’s health system. It is important that we balance the competing tensions around its cost and continued effective operation. Labor’s approach to health care involves the recognition of the broader impacts of high-quality health care and the role that prevention and chronic disease management plays. Health care is not simply about healing the ill but also about always having in place a system where people receive treatment when they need it. Health care is both a cost and an investment in the future. For Labor health care goes hand in hand with our overall economic strategy and what is good for the long-term future of this country. Labor do not intend to treat the PBS in the way that this government has tended to—that is, as simply a line item of expenditure. There is no denying that the PBS needs to be managed wisely so that it continues to play an effective role while also delivering the best value for money for both the government and patients.

Whilst there are some concerns with this bill, which we hope will be fleshed out in the Senate committee process, I am supporting the bill. I am mindful of the fact that in the past when this government has set about the process of health reform it has, unfortunately, meant a diminution of access to services for some of the most vulnerable in our community.

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