Mark Butler (Hindmarsh, Australian Labor Party, Deputy Manager of Opposition Business in the House of Representatives) Share this | Hansard source

I'm pleased to speak on behalf of the Labor Party in relation to the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021. The bill flows from the conclusion of the latest round of strategic agreements between the Commonwealth on the one hand and, essentially, the pharmaceutical industry represented by Medicines Australia, which represents the innovator part of the industry, and the Generic and Biosimilar Medicines Association—GBMA—which, as the name of the association indicates, represents the generics and biosimilars part of the industry.

This is a process that has been underway now for some time. It started in the latter part of the first decade of this century, largely in response to the projections contained in the first Intergenerational report, which was published by then Treasurer Peter Costello in 2002. It projected that PBS costs would climb quite dramatically over the 40-year period that each of the IGRs contemplate. As I recall, of the increase in Commonwealth health costs across the spectrum of responsibilities the Commonwealth has in health, 70 per cent of the increase in Commonwealth obligations would come from increases in the PBS. At the time there was all manner of breathless pieces of commentary about the PBS being unsustainable and having to be reined in, lest the whole of the Commonwealth health budget fall down because of the burden on it.

The process that has now been undertaken through governments of both political persuasions, including the Rudd and Gillard governments, to come to an agreement that balances the viability of this critically important sector, to bring medicines that are often developed overseas—this is a global industry—to Australian patients and to ensure that Australian patients have a ready, dependable and affordable supply of the best medicines in the world is, on the one hand, a key objective. On the other hand, fiscal sustainability has been essentially a tension or a balance sought to be achieved through a series of strategic agreements. This is the latest one, which follows a lengthy negotiation between the Commonwealth, led by Minister Hunt, and the industry, represented by those two associations.

The bill implements two critical measures contained in the agreement; I'll come to what those measures are. The agreement contains a number of other very important measures that are not reflected in this bill, because they will largely be measures implemented through the executive government and the industry. I will talk very briefly about one or two of those measures, because they give important context to the important but largely technical matters included in this bill. Of very substantial importance is the government agreeing to the first independent review of our health technology assessment processes. It's quite clear that, with the enormous advances in medical technology we are living through, we are living through a turbocharged period of discovery not just in health but in a whole range of sectors of society and the economy, characterised by the harnessing of big data not only in health and medical research and technology development but also in genomics and the development of this extraordinary generation of precision medicines, new diagnostic technologies and so on and so forth. This is quite expensive but incredibly exciting, because it's giving us avenues to treat and, in some cases, cure conditions that not too many years ago were thought untreatable—or, if they were treatable, were thought to be largely incurable. This is a wonderful period we're living through.

I heard the member for North Sydney and, on our side, the member for Macarthur table the latest report from the House of Representatives inquiry into access to medicines. They talked about the horizon that awaits us, where, as the member for Macarthur indicated, very orthodox traditional technologies for cancer treatment, like chemotherapy, may well—and we hope so—soon become a thing of the past, replaced by precision medicine that targets the cancer in a very precise way, without doing the extraordinary damage to surrounding tissue and cells that we know chemotherapy does. This is incredibly exciting.

But so many of these new treatments don't fit neatly into the silos which are reflected in our assessment, approval and reimbursement systems. Those systems are largely set up around the idea that something is a therapeutic good, usually a medicine, or a service, a diagnostic technology or a medical device, each of which largely have their own assessment, approval and reimbursement systems. The trouble is that treatments now tend to blur those distinctions such that you might end up with something called theranostics, which is a combination of diagnostics and therapy, not fitting neatly into those traditional Commonwealth systems but giving patients, for example, with neuroendocrine cancer the most extraordinary opportunities for treatment.

This health technology assessment review has rightly been welcomed by patient groups in particular but also by the broader industry as well and certainly by the opposition. It commences next year. It's to be concluded in 2023. The inquiry report was delivered by the member for North Sydney and the member for Macarthur, and the inquiry was conducted by both of them with a great deal of energy and a real spirit of cooperation and bipartisanship across the aisle that has garnered very impressive reviews from industry and patient groups. These two things together, along with a review of the national medicines policy, I think set out a really exciting pathway to the future.

It will be incumbent on whatever government ends up holding power after the election largely to steer those processes through. That really is the important guts—if I can use that technical term!—of these strategic agreements. They are an opportunity to bring our assessment, approval and reimbursement systems into line with what's happening in the real word. It's an incredibly exciting period of discovery that we're living through.

Having said that, though, and having mapped out, hopefully, what some of the more exciting, sexy parts of the agreement are, there are, as usual, the more technical, bureaucratic measures contained in this agreement which are very worthy and supported by the opposition. As I've said a number of times in public fora and in this place, we are a party of government. We take the view that agreements concluded in good faith between the Commonwealth government and industry, as in this case, must be respected by an incoming government, if we're lucky enough to be an incoming government next year. Our approach to the conclusion of this agreement, which we've indicated publicly we support, extends to our support for this bill, subject to a second reading amendment which I foreshadow that I will be moving at the end of my remarks.

This bill covers two important measures contained in the strategic agreements. The first is to amend the price reduction system that has been a feature of the strategic agreements going back to the first decade of the century, the decade before last, to ensure that some anomalies are fixed in favour of taxpayers and the budget, particularly through catch-up statutory price reductions, which I will talk about. Secondly, the agreements in this bills also put in place measures to deal with the insecurity of supply of a range of medicines that had already started to become an issue in Australia but which has been greatly exacerbated by the supply chain shock that we've seen through COVID. I might deal with that measure first of all.

At the moment, there are around 263 medicines that are listed by the TGA that are experiencing shortages in Australia, with a further 54 medicines that have anticipated shortages. So well over 300 listed therapeutic goods—listed medicines—in Australia do not have secure supply. As local members on both sides of the House, I'm sure we have all been receiving substantial feedback from patients, constituents and pharmacies about the difficulty they have been having—some of that was already happening before COVID—accessing supplies of very standard, important medicines: medicines for cardiovascular disease, diabetes, epilepsy, high cholesterol, pain management—particularly for severe pain, as well as a range of medicines for mental health conditions, including depression, bipolar disorder and schizophrenia. These are obviously very important issues for the delivery of good health care to the Australian community.

This agreement contains a number of measures to, essentially, put in place an obligation on industry to guarantee security of supply of a range of medicines, particularly those that are at risk of supply shortage—a security of supply of four to six months stockholding. This is a measure that we support and that we think is a proportionate, measured response to the shortages we've seen, particularly over the last two years, but, as I said, some of which predated COVID. It's a measure we welcome.

Regarding return for the obligations that the industry has taken on through the signing of this agreement—the medicines supply guarantee they make—I make the point, firstly, that this is largely a supply guarantee that will fall on the genericised medicines, because they are the medicines that are usually subject to insecurity of supply. In return for that guarantee, the government has agreed to a modest price support for those medicines. This itself, frankly, should help ensure a greater willingness on the part of global industry to ensure that the Australian market is properly supplied. So that is the first technical measure contemplated by this bill, a measure that we support.

The bill also implements a number of important measures designed to deliver price reductions for medicines. As I said, a system was put in place some years ago that has really delivered very substantial budget savings for Australian taxpayers. These new measures include catch-up price provisions that deliver price reductions for medicines that have thus far avoided price reductions commensurate with what we would expect in the functioning of a competitive market. It is through these catch-up price reductions that the bill delivers around $1.9 billion in savings to the PBS, which will be reinvested in the PBS through new listings.

The full schedule of statutory price reductions is very large and complex—far too large and complex for me to detail in this speech—but it is worth the House noting some of the more prominent of those details. These reductions will ensure that on the 5th and 10th year anniversary of a drug being listed on the PBS the drug will see a five per cent price reduction on each of the two anniversaries. This price reduction increases to over 26 per cent on the 15th year anniversary of a listing. In 2027, towards the end of the agreement, this 26 per cent reduction for the 15th year anniversary will increase to a 30 per cent price reduction—a very substantial saving to taxpayers, which will be reinvested in new listings on the PBS. The bill maintains a first new brand price reduction of 25 per cent, which applies when the first new brand—which will usually be a generic—that is bio-equivalent or bio-similar to and has the same method of administration as an existing brand of drug is listed on the PBS. Again, that is a substantial savings. The five-, 10- and 15-year anniversary statutory price reductions only apply if a drug has no competitors listed on the PBS and, as a result, has not been subject to a first new brand price reduction.

Some drugs have been listed on the PBS for over 15 years and have not yet been subject to price disclosure reductions that are designed to ensure the PBS can adjust and see those decreasing costs over time. These drugs will now be subject to catch-up price reductions equal to the cumulative statutory reductions that would have applied over the period of their listing. That means that, for a drug listed for 15 years that thus far has not seen any price disclosure reductions, we will see a price reduction of almost 37 per cent from 1 April 2023. It should be noted though that the 25 per cent first new brand price reduction will not apply if the 15-year anniversary price reduction has been applied. Again, we welcome the agreement between industry and the government on these catch-up price reductions. We think they're a proportionate, measured response to the circumstances surrounding some of those drugs that have not yet been subject to the price disclosure reductions over 15 years, again seeking to balance that need around access to new medicines for Australian patients with the sustainability of the PBS elements of the budget.

There have been some issues raised by areas of industry and some patient groups which I want to put on the record and that I know the minister is aware of and is responding to. There are some nonmembers of Medicines Australia who have expressed concern to a number of fora, to the opposition and, I know, to the minister about slow-release drugs for a range of disorders, including opioid dependence, that will be subject to statutory price reductions under this bill, even though the slow-release versions of these drugs are quite novel and have not been supported by the PBS for the statutory period of 15 years.

The intent of this bill, which we support and understand the government has, is to give effect to a broad objective in ensuring the sustainability of the PBS while safeguarding medicine supply for the Australian population. That includes making sure that statutory price reductions do not have an unintended consequence that results in the withdrawal of supply of important medicines from the Australian market. We have a strong view, and I imagine the government shares it, that statutory price reductions should not be allowed to undermine medicine supply.

As a result of that shared objective as I understand it, we note the important role that ministerial discretion has in determining how price reductions are applied in order to ensure that supply of medicines is maintained along with, connectedly, the financial viability of medicine suppliers. We know that the government shares that view, and to that effect we understand that the government has committed to bringing forward an update of the ministerial discretion guidance material and to engage companies that are potentially affected in that process of an update. In particular, I am referring to the companies that I know have been in communication with the minister, as they have been with me and my office. I welcome that commitment from the minister and expect that will be delivered in good faith.

As I said, this is an important agreement that has been struck between the government and the pharmaceutical industry. It follows a series of agreements that have been struck now for some years. It's clear that the predictions contained in the 2002 IGR around increases in the PBS budget have not come to pass. We're only halfway through the 40 years that then Treasurer Costello was looking at at the time.

But it is a very different picture to the one that was painted in the 2002 IGR, and that in part is due to the discipline that's been introduced into market pricing through a series of these strategic agreements. I think it also reflects the fact that those projections from Treasury about PBS costs were, to describe them generously, probably quite heroic. I commend this bill to the House and indicate the opposition will support it subject to a second reading amendment, which I now move as follows:

T hat all words after " That " be omitted with a view to subs tituting the following words:

" whilst not declining to give the bill a second reading, the House urges the Government to do more to ensure Australia's p harmaceutical industry can provide new jobs, medicines and investment into Australia. "

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