Mal Washer (Moore, Liberal Party) Share this | Hansard source

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 proposes a number of amendments to the National Health Act 1953. The bill enacts a series of measures to provide Australians with continued access to new and expensive medicines whilst ensuring the Pharmaceutical Benefits Scheme, the PBS, remains economically sustainable into the future.

For nearly 60 years the PBS has provided affordable access to a wide range of medicines for all Australians. The scheme has proven itself to be one of the best drug subsidy systems in the world and around 80 per cent of prescriptions dispensed in Australia are subsidised under the PBS. With new and more effective medicines helping us lead longer and healthier lives, the PBS is growing each year. The cost of the PBS is currently around $6 billion per year, and changes need to be implemented to ensure its sustainability. In recent times the Australian government has been paying too much for multiple-brand, off-patent drugs. In order to correct this and protect the price being paid for patented drugs, medicines on the PBS will be separated into two groups, each subject to different pricing arrangements. There will be no price links between the groups, allowing the government to reduce the price paid for medicines operating in a competitive market whilst protecting single-brand and patented medicines from unsustainable price reductions.

From 1 August 2007 PBS medicines will be placed either in formulary 1 and formulary 2 or outside these formularies for certain combination medications. Medicines in the formulary 1, or F1, group include both on-patent and off-patent medicines that cannot be substituted by other brands or medicines. They are single-brand medicines and are not subject to price competition in the market. The amendment bill also allows for co-marketed brands to be included in this group. A pharmaceutical company may release their new patent drug under more than one brand for different consumer groups. However, once the new drug’s patent has expired, other companies may introduce new brands of the drug into the market. When this occurs the brand will then be placed in formulary 2, or F2.

Approximately 450 single-brand medicines, with PBS expenditure of $3.2 billion, will be listed in F1. There will be no mandatory price reductions for these medicines and any existing price linkages will be retained within this group. Medicines that are listed under many brands, and those that are interchangeable at the patient level with a multiple-brand medicine, will be placed in formulary 2. Approximately 230 medicines, with PBS expenditure of around $2.8 billion, will be listed in F2. Statutory price reductions will apply to medicines listed in this group. There is already a 12½ per cent price reduction when a new brand of medicine is listed on the PBS. This mandatory price reduction will continue, along with further reductions.

From 1 August 2008 there will be a price drop of two per cent a year for three years for medicines where price competition between brands is low. These are referred to as F2A medicines. There will be a one-off price drop of 25 per cent for medicines where price competition between brands is high. These are F2T grouped medicines. Separating F2 medicines between those with low competition and those with high competition has been done on the basis of information provided to the department by stakeholder groups involved in the selling and purchasing of medicines. Amoxycillin is an example of a high-competition drug which would be included in F2T. Around 100 drugs, currently costing the PBS around $2 billion a year, would fall into this category.

As mentioned earlier, medicines that are interchangeable at the patient level are included in the F2 pricing structure group. These medicines provide a similar health outcome and may be safely substituted with one another for most patients in most cases. These interchangeable medicines are known as ‘therapeutic groups’. The Pharmaceutical Benefits Advisory Committee, the PBAC, will be required to provide advice to the minister about the formation of any new therapeutic group. This is essential as some drugs may provide similar outcomes as other drugs but are superior in certain circumstances. In this case they should remain in F1 where their price will be protected. Failure to do this could see companies withdrawing their drug from the PBS due to lack of profitability.

Not all medicines will be listed within F1 or F2 pricing groups. Medicines which are a combination of two or more drugs, at least one of which is on the PBS, will be listed outside these formularies. Generally the pricing of these combination medications will be based on the weighted price of their component medicines. However, the PBAC can advise whether a specific combination medication has advantages over alternative therapies. For example, the specific combination may result in improved compliance, improved efficacy or reduced toxicity. In these cases it may be appropriate for the combination product to receive a higher price than simply the price of its components.

Another major change to be implemented with this bill is price disclosure. Price disclosure will be phased in for medicines that operate in a competitive price environment—that is, those drugs in the F2 pricing group. Companies will be required to disclose the prices at which they actually supply their medicines to wholesalers or pharmacies. This will introduce price transparency, allowing taxpayers, through the government, to pay a fair price in a competitive market environment.

Drugs which are still under patent and are therefore listed in pricing group F1 must retain their pricing confidentiality. It must be remembered that Australia represents one per cent of the global pharmaceutical market. Patents last 20 years from filing and it takes a drug typically around eight to 10 years to reach the market. This gives the pharmaceutical company 10 or so years of exclusivity on the market to recoup costs of development. If we were to publish the cost of these drugs, then the other 99 per cent of the market—that is, Europe, the United States, China, et cetera—would know. The drug may be marketed differently in different countries and would therefore be at a different pricing. It is unlikely that other countries would be happy to pay more for a drug than Australia pays. As a result, pharmaceutical companies would simply stop selling drugs which are under patent to Australia. This has occurred in New Zealand, where they have adopted price disclosure on patented drugs. For Australia to have access to new innovative drugs and to retain pharmaceutical companies and their associated research arms, we must keep patented drug prices confidential.

The bill also includes a guarantee of supply for any new brand listing in the F2 group and for currently listed medicines for which price reductions are offered. From 1 August 2007, companies must guarantee a supply period of 24 months or until a new lower priced brand is listed. Failure to comply with this guarantee will result in penalties, including delisting that brand or other brands from the PBS, or refusing to list new brands of that company. This guarantee will help address some concerns of cheap overseas produced drugs being dumped on the local market. There is also other trade legislation already in place which further deals with the issue of illegal dumping.

Another change being implemented which is worth commenting on is streamlining the way that doctors can access ‘authority’ approvals for prescribing certain medicines. From 1 July 2007, doctors will be able to authorise the prescriptions they write for around 200 of the 450 PBS items that currently require a pre-approval phone call to Medicare. This will apply to medicines for the treatment of long-term chronic conditions, such as diabetes and osteoporosis, where the patient and the doctor are both very familiar with the condition and medication.

The reform package announced in November last year also established the Access to Medicines Working Group, which had its first meeting in April. This group, which involves the Department of Heath and Ageing and Medicines Australia, will provide advice and recommendations relating to the timely and appropriate access to effective new medicines.

This bill and associated reforms introduce necessary changes that ensure that the PBS is sustainable into the future without changing the fundamentals of how it works. There will be no reduction in the range or number of medicines, and patients will continue to pay only the standard copayment contribution. Key industry stakeholders, particularly Medicines Australia, the Pharmacy Guild and the Australian Medical Association, all support these reforms. And, most importantly, the largest stakeholder of all, the Australian public, will benefit the most from these reforms. I commend the bill to the House.

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