Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Hansard source

I rise to speak on the National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008. Australia has arguably one of the best systems of pharmaceutical delivery in the world. After several innovations over the life of the coalition’s time in government, we can say that Australians have access to the very best available medicines and that they are safe and of the highest quality. We also have one of the lowest cost medicine systems in the Western world. The coalition has a proud history of working with industry to ensure we bring the best and most advanced medicines to market in a timely fashion and at a low cost to Australians. This amendment will allow the government to charge fees for services provided by the Pharmaceutical Benefits Advisory Committee, PBAC, and related services performed by the Department of Health and Ageing. What is proposed is that fees will be charged to drug companies which make an application to the PBAC. Pharmaceutical companies already pay fees to the Therapeutic Goods Administration to test the efficacy and safety of new drugs that they wish to bring to market. This amendment will extend the cost recovery structure so that pharmaceutical companies will now also contribute to the costs incurred by the PBAC in its role in advising the minister as to which drugs should be listed on the Pharmaceutical Benefits Scheme.

Full cost recovery of the PBS was considered by the coalition in government last year and in 2005. However, for a very good reason, it was never introduced: there were definitely problems with its implementation. Consultants called in by the Department of Health and Ageing identified potential problems with the fees based proposal and suggested other methods be considered. It was felt that fees alone would create an environment where the sponsors of generic medicines could potentially receive a free ride. Concerns were expressed that an unfair financial burden would be passed on to pharmaceutical companies seeking to list a medicine for the first time or to change a listing. This had the potential to stifle new products and innovation.

I note that, during debate on changes to the PBS, introduced by the coalition in May 2007—in which the PBAC cost recovery was not included, I might add—the now Minister for Health and Ageing expressed strong opposition to the proposed scheme of PBAC cost recovery. On 31 May 2007, the minister—at that time the shadow minister—said:

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 ...

That was the member for Gellibrand on 31 May 2007. The member for Gellibrand, who is now the Minister for Health and Ageing, is now doing a complete backflip and is seeking to use this as a revenue raiser in the budget. How policies change to suit the agenda! Here we have a government desperate to pull back on its budget spending spree.

The member for Gellibrand was concerned about the independence of the PBAC a year ago but obviously not today. The member for Gellibrand expressed some apprehension that, if pharmaceutical companies were to pay for their own consideration on the PBAC, the process of achieving PBS listing could not be said to be an arms-length process. The member for Gellibrand has changed her tune today. This was the very concern expressed by the then AMA president Mukesh Haikerwal. He acknowledged that the TGA, which is also involved in regulating new pharmaceuticals, does employ cost recovery strategies. However, the TGA looks only at safety and efficacy data for any given drug. It does not look at subsidising the drugs through the PBS. It is a very important difference. There are concerns that having a user-pays system will have the effect of making a public body financially dependent on the industry it is supposed to be regulating.

In October, Professor Christopher Nordin AO, who is a visiting professor at the University of Adelaide and a consultant physician at the Royal Adelaide Hospital, told ABC radio:

The influence of industry on the PBAC is bound to grow as it pays an increasing proportion of the running costs.

We have to ask the Minister for Health and Ageing how she has managed to put these concerns to rest. It has certainly not been by raising her concerns with the industry, including Medicines Australia, the peak body representing pharmaceutical benefits companies. In fact, it was a complete surprise to Medicines Australia when the cost recovery measures appeared in the budget on 13 May. True to form for this new government, the first time the industry learned of a government decision—in this case to introduce cost recovery—was six weeks before its proposed start date of 1 July 2008. Medicines Australia are particularly concerned about the financial impact on their member companies. The cost to make a submission to the PBAC will be just shy of $150,000. These costs will come in on 1 July this year. These significant costs are being sprung on the industry with a mere six weeks notice and without any consultation and any adequate warning. Without having set aside funds for these fees, they will either come out of general revenue, where possible, or we will simply see the delay of presentation of many pharmaceuticals to the PBAC until such time as the fees can be allocated. This will particularly affect drugs for smaller patient populations.

The financial year for pharmaceutical companies runs from January to December mainly, meaning these new costs will begin midway through a financial year. They have not been able to budget for such massive cost increases. It is easy to see the pharmaceutical industry as a cash cow. However, these companies are already facing major price cuts from 1 August as a result of PBS reforms passed through the House last year by the previous government. The pharmaceutical industry in Australia has already seen three manufacturing plant closures announced in the past year alone at a cost of some 500 Australian jobs. The industry in Australia has fierce global competition. What it needs are signals from the government that encourage, not discourage, investment in Australia by their global head offices.

This lack of consultation and the lack of advice, or the ignoring of advice, is becoming a bit of a theme with the government. It seems that the Prime Minister has taken policy advice from Star Command instead of seeking input from the key bodies, departments or anyone else that has some expertise and can contribute in a meaningful way. Far too many questions and concerns remain unanswered. There has been insufficient consultation on how cost recovery will be implemented and insufficient time given for the industry either to prepare for this introduction or to be able to pay for it, and concerns about the independence of the PBAC have not been sufficiently allayed. We will be referring this bill to a Senate committee to ensure industry and other consultation takes place because no consultation has taken place and so far—and I would be very happy to stand corrected—the minister has not provided answers. Maybe the parliamentary secretary can provide answers. The minister was on the record as saying one thing last year but now that she has become the minister she is saying something entirely different. I think the minister owes an explanation to the House, to the Australian people and to those people who are very concerned about the impact of having pharmaceutical companies pay for their own regulator.

See this speech in context