Peter Dutton (Dickson, Liberal Party, Shadow Minister for Health and Ageing) Share this | Hansard source

I rise to speak on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012. In September 2010, the then health minister, Nicola Roxon, signed an MOU between the Commonwealth and the peak pharmaceutical industry body to 'promote the long-term sustainability of the Pharmaceutical Benefits Scheme'. The MOU sought to ensure that the PBS expenditure remained sustainable and that the PBS remained responsive to change and to the availability of new and innovative medicines. Clause 4 of the MOU states:

The Commonwealth undertakes not to implement new policy to generate price-related savings from the PBS during the period of agreement …

The government offered policy certainty to the sector in return for additional savings of $1.9 billion over five years. It is reported that Medicines Australia wrote to Minister Roxon stating that it believed that the Australian government would abide by its explicit recognition of the need for such stability.

Only months later, on 25 February 2011, Minister Roxon announced the decision to defer listing a number of medicines which had been recommended for listing by the government's own independent expert committee, the Pharmaceutical Benefits Advisory Committee. This was an unprecedented decision, for a government to go against the advice of the PBAC and make the listing of medicines a political decision. This resulted in a situation where the politics of the day could, and in some cases would, directly impact on whether a patient would or would not have access to a life-saving medicine at an affordable price.

The government claimed that the deferrals were due to its fiscal circumstances. However, by most accounts the government only deferred drugs to the value of about $30 million. This is insignificant in the scheme of things, particularly compared to what the Labor government has wasted on programs such as school halls, pink batts, GP superclinics and the like. The decision to defer PBAC-recommended and potentially life-saving medicines from being listed on the PBS rightly received widespread condemnation by stakeholders. The pharmaceutical sector was particularly aggrieved as it was, in the words of Medicines Australia, a breach of the intent and spirit, if not strictly the letter, of the MOU.

But, more than a breach of an MOU, the decision to defer the medications represented one of the most concerning changes to the conventions of how governments administer the PBS. The Pharmaceuticals Benefits Scheme was the first element of Australia's universal healthcare scheme and has received bipartisan support for many years. Even today, as the PBS website tells us, the PBS is intended to provide 'timely, reliable and affordable access to necessary medicines for Australians'. The PBAC undertakes a thorough analysis of the cost-effectiveness of all new medicines and makes recommendations regarding those medicines that it finds are value for money and should be made available to patients. Traditionally, all medicines that the PBAC concluded were cost-effective and recommended were listed on the PBS by the government. Those under $10 million have been listed by the Minister for Health without the need for cabinet approval.

The PBAC method has been extremely effective, and our PBS is, or certainly has been, the envy of the world. In recent times, unlike the case in many countries, our processes have kept budget increases to less than inflation. Medicines Australia analysis found that the PBS grew by just 2.8 per cent in the year to March 2011, in comparison to the consumer price index for the same time of 3.3 per cent. This would indicate that the growth rate of the PBS is sustainable, largely thanks to the PBS reform by the previous coalition government, and in particular by the then health minister, Tony Abbott. Therefore, there was no reason to defer listing of medications that had been recommended for listing by the expert advisory panel, the PBAC, other than the government's own fiscal and policy mismanagement—and, I suspect, a Treasurer and Minister for Finance and Deregulation who were scared and wanted to send a message of uncertainty to the industry to try and defer listings and to make the process uncertain, again adding to perceptions around this government's sovereign risk. That is a view that is held by many within the sector, and it should be quashed. Naturally, consumer groups protested. So did the industry groups, which, as I mentioned previously, worked in good faith with the government to achieve an affordable and sustainable PBS system.

As a consequence of the government's actions, it had to go back to stakeholders to negotiate a new set of principles for a deferrals policy, which it announced on 30 September 2011. In what was essentially a major backflip, six of the medicines which the government had deferred from listing were finally listed on the PBS. The government continued to insist on its right to bring all PBAC recommendations to cabinet for final approval but, strangely, agreed not to defer PBAC recommended medicines for listing in the next 12 months. It did not say what might happen after that time.

In order to negotiate these outcomes for patients, the stakeholder group agreed to a number of other measures. A significant commitment of this new agreement was that all parties would support technical amendments to the National Health Act 1953 and the National Health (Pharmaceutical Benefits) Regulations 1960 to correct anomalies. It is in relation to this final commitment that the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012 is before us.

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2012 makes technical amendments to the National Health Act 1953 to improve the operation of the pricing and price disclosure for medicines supplied under the PBS, to commence 1 October 2012. The bill also makes some modifications to the way medicines are listed for supply for doctors' emergency bags. This government claims the bill will be cost neutral for the PBS.

Under the current legislation, the price of a medicine can be expressed in different ways for different functions. For example, at the time of listing on the PBS, prices are currently referred to as an 'approved price to pharmacists', which includes the manufacturer price and a wholesale margin. The Commonwealth price, which is the price paid by the PBS to the pharmacist, includes a further mark-up and dispensing fees. Price disclosure calculations require the removal of the wholesale margin because they are based on an approved ex manufacturer price. The purpose of these amendments is to remove the concept of the approved price to pharmacists as the core PBS price in the act and replace it with an approved ex manufacturer price, which is the very basic price of a medicine.

At present, as the minister advised, statutory price reductions for medicines coming off patent are applied to the approved price to pharmacists, but price disclosure calculations take place at the manufacturer price. The bill will require price setting and price reductions occurring on the PBS to be based on the one base ex manufacturer price for each pharmaceutical item. It will require that only one approved ex manufacturer price be agreed or determined for a pharmaceutical item, that being the price for the lowest listed pack quantity. If a brand has a pack quantity different from the pricing quantity, the price will be calculated as a proportional ex manufacturer price.

Provisions for premium brand pricing will continue where a price set for a pharmaceutical item is higher than the price that would apply under the approved ex manufacturer price or proportional price. This will enable pricing functions to operate uniformly at ex manufacturer level across the PBS, including where the same item is listed under different PBS programs and mechanisms of supply.

The bill before us provides transitional provisions and includes a method for converting current PBS prices to an ex manufacturer amount. The transition to the new prices is designed to be cost neutral overall. It is claimed that the amendments are designed not to achieve price reductions but rather to achieve a consistent base level price for each item of medicine. However, the minister has advised that there will be around 40 pharmaceutical items for which the conversion calculations will result in different prices, and some negotiations will be required on a case-by-case basis. Where negotiations are not successful, a default price will be applied which is the lowest of the converted ex manufacturer prices for the item.

While the pricing elements of the bill were subject to consultation, the coalition has been advised that key stakeholders were not consulted on provisions relating to prescriber bag supplies. Concerns have not been raised regarding this component of the bill, but surely those professions affected should have been consulted or at least advised.

The minister has indicated that the bill will not change the medicines listed on the PBS or access to them and—I have beaten the bells in the other chamber—on that basis I indicate that the coalition does not oppose this bill.

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