Nicola Roxon (Gellibrand, Australian Labor Party, Minister for Health and Ageing) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 amends the National Health Act 1953, which I will refer to as the act, to provide authority for the cost recovery of services provided by the Commonwealth in relation to the exercise of powers for listing medicines, vaccines and other products, or services, on the Pharmaceutical Benefits Scheme (PBS) and designation of vaccines for the National Immunisation Program (NIP).

The aim of the PBS is to ensure that Australians have affordable access to high-quality medicines in the community. An initiative of a Labor government 60 years ago, the PBS is now accepted by both sides of politics as a success story. Access to high-quality medicines is maintained by subsidising the cost of PBS medicines and limiting the amount that people pay for prescriptions at the point of sale. Medicines that are listed on the PBS are assessed by experts to be clinically safe and cost-effective. The PBS serves Australians well and is justifiably regarded as one of the best systems of its kind in the world.

Similarly, the government is dedicated to ensuring that all Australians can continue to receive fully funded vaccines under the NIP. The NIP is a joint program of Commonwealth and state/territory governments which provides fully funded vaccines for major preventable diseases. NIP funding is provided through grants from the Commonwealth to the states and territories. The states and territories provide vaccines free of charge to health providers for them to administer to the community.

The cost of providing subsidised medicines and fully funded vaccines to the Australian community is a significant financial outlay to the Commonwealth and taxpayers. In 2006-07 the Commonwealth paid $6.4 billion to approved pharmacists, hospitals and medical practitioners for the subsidised supply of medicines under the PBS. A further $280 million was provided by the Commonwealth to the states and territories for the fully funded supply of vaccines under the National Immunisation Program within their respective jurisdictions.

The government was in opposition when the previous government sought to introduce cost recovery of services associated with listing on the PBS and NIP and, in fact, banked the savings despite never introducing the legislation. We shared some of the reservations of some stakeholders about the model proposed by the previous government. It was arguable that the independence of the Pharmaceutical Benefits Advisory Committee (PBAC) could be threatened if it was reliant upon the pharmaceutical industry for its funding.

However, in the model reflected in the bill I introduce today, the independence of the PBAC is guaranteed. The government will continue to directly fund all the activities of the PBAC and its subcommittees. The PBAC will have no role in setting fees and it will not receive any revenue from industry. All revenue collected from cost recovery will be paid directly into consolidated revenue.

I would like emphasise that the expertise, integrity and sense of propriety that PBAC members bring to their task will not change as a result of cost recovery. The PBAC will continue to provide expert advice on medicines, independent of government and industry. Cost recovery will not affect the structure or the operation of the PBAC, nor will it compromise the independence of the committee’s decisions. There are other notable examples of agencies, such as the Therapeutics Goods Administration, the TGA—which regulate in the public interest and where that regulation necessarily results in commercial gain—where cost recovery has been implemented successfully and without a loss of independence.

In implementing a cost recovery fee for Commonwealth services, it is important to note that the Australians accessing the PBS and NIP will not be required to pay any extra for PBS listed medicines or vaccines as a result of this measure.

Cost recovery is not a new policy. Cost recovery arrangements have been applied with success to many departments and agencies at state and federal level, including for example, the TGA, the Civil Aviation Safety Authority, and the Australian Prudential Regulatory Authority.

The pharmaceutical industry is familiar with cost recovery—the industry has been paying for the pre-market evaluation of products by the TGA since 1991.

Achieving a product listing on the PBS provides a high level of commercial certainty to a company in relation to that product’s sales.

In this context, it is not unreasonable to recoup taxpayer incurred costs associated with new listings, or changes to existing listings of medicines on the PBS or vaccines designated for the NIP.

Australian pharmaceutical manufacturers and distributors with medicines or vaccines listed on the PBS and designated for the NIP receive considerable financial benefits via the PBS from the supply of their products to the Australian community. For example, in 2006-07 the top 20 pharmaceutical companies, by total cost of payments, each received, on average, $223 million from the Commonwealth via the PBS subsidy.

The Productivity Commission has commented that, by ensuring that those who use regulated services bear the costs, cost recovery can promote economic efficiency and equity by instilling cost consciousness among agencies and users. In this case, it is expected that cost recovery will provide benefits to both government and industry—for example, potentially increasing the compliance of submissions with the PBAC guidelines and reducing time and costs associated with resubmissions.

As I mentioned earlier, the PBAC is an independent expert body, established under the act. Its members are selected from consumers, health economists, practising community pharmacists, general practitioners, clinical pharmacologists and other specialists. This remains unchanged. The functions of the PBAC include making recommendations to the minister on products which they consider should be made available under the PBS or NIP. This also remains unchanged. In deciding whether to recommend products for listing, the PBAC is required under the act to give consideration to the cost-effectiveness of the treatment, including by comparing alternative options. This is also unchanged.

In fact, the whole process remains unchanged. The PBAC makes recommendations for listing and changes to those listings three times a year. In conjunction with the Pharmaceutical Benefits Pricing Authority, the Department of Health and Ageing undertakes price negotiations for brands listed on the PBS and for designated vaccines. The schedule of PBS benefits is updated and published 12 times a year to reflect new and changed listings.

The evaluation, pricing and listing of products, and changes to those listings, involves activities undertaken by various parties, including the PBAC, its subcommittees, the pricing authority, departmental officers, and contractors and subcontractors to the department.

Currently, the cost of these activities is borne fully by taxpayers. This bill changes only this part of the PBAC’s current function and structure.

The government supports the principle of cost recovery in appropriate circumstances to alleviate the burden on taxpayers and, consistent with responsible economic management, is proceeding with the previously announced intentions of the last government. The bill is to commence on 1 July 2008, and the cost recovery will begin following commencement of regulations prescribing the necessary fees and arrangements.

These proposed amendments to the act will provide the necessary legal authority for the charging of fees, which will be prescribed in regulations under the act. The bill is not a taxing bill and the fees may not amount to taxation.

Cost recovery will include the costs of submissions to the PBAC and all processes that arise from those submissions in relation to new or changes to existing listings of medicines on the PBS or designated as vaccines for the NIP.

Although any person may lodge a submission, in practice, the fees will generally be payable by pharmaceutical companies. The bill does, however, provide for regulations to be made for exemptions and waiver of fees so that, when it is in the public interest, no fees will be payable.

The trigger for fees will be the lodgement of a submission, which, in the case of pharmaceutical companies, is purely a commercial decision. Pharmaceutical companies are free to market their products in Australia independently of the PBS or NIP subsidies. However, financial returns from the PBS and NIP, especially in relation to high sales ‘prescription only’ items, are significantly increased by PBS listing.

The desired scope of the regulation-making power for cost recovery is broad in order to allow for the flexible, efficient and transparent administration of the cost recovery arrangements. The regulations will be subject to parliamentary scrutiny.

Without limiting the scope of the regulation-making power, the regulations may include, but are not limited to:

• the administration processes surrounding the making of submissions,
• prescribing of fees,
• the timing and manner of payment of fees,
• penalties and refusals to provide services for late and nonpayment,
• exemptions from fees and the waiver, remission and refund of fees, and
• the review of administrative decisions made in relation to cost recovery.

During consultations with stakeholders by the previous government in 2006 and 2007 there was a general agreement on a fees-only model with two payment points: the first for the receipt and evaluation of a submission, and the second for pricing and listing activities following a positive PBAC recommendation. A simple fee structure is proposed, in line with the existing submission categories with which the industry is already familiar. Each passage through the PBAC will be treated as a single event—a drug that is resubmitted on several occasions, following a refusal by PBAC to make a positive recommendation, will be liable for an evaluation fee on each occasion. This reflects the fact that a complete evaluation is required each time a submission is made, and is a disincentive for poor quality submissions. A further payment point will apply for an applicant seeking an independent review of a negative PBAC decision.

The regulations may allow for exemptions from fees, as I have noted. For example, it is expected that Therapeutic Goods Administration (TGA) designated orphan drugs and drugs approved for temporary supply will be automatically exempted.

The regulations may also provide for the refusal to provide services until a fee is paid. If fees go unpaid, a simple ‘tools down’ approach is envisaged, involving no further consideration until payment is received. Furthermore, this bill clarifies that the minister may refuse to exercise certain powers (under section 9B or a provision under part VII of the act) if prescribed fees are not paid. The regulations may also allow for the recovery of unpaid fees as a debt due to the Commonwealth.

The government is very committed to ensuring that there is a due process to ensure that fees and charges are levied in a fair and equitable way. For that reason we will be ensuring that there is a system in place to allow drug companies and others who may make submissions to the PBAC to have their medicine evaluated, or to the Department of Health and Ageing to have their medicine listed, will have a right to ask for a review of the charges that have been imposed.

In the first instance, and if the matter cannot be resolved through discussion, the department will ask a departmental officer who has not been a part of the original decision to review the case and make a fresh decision. And if this still does not satisfy the company, they will have a right to take their case to the Administrative Appeals Tribunal.

This will be an important feature of cost recovery and will provide assurance that fees and charges are being applied consistently, fairly and equitably. There will be no additional fee charged for this process.

In making preparations for implementation, my department is liaising with the Department of Finance and Deregulation and following the Australian government cost recovery guidelines. The department has consulted with key stakeholders, including peak industry, consumer and healthcare provider bodies. In addition, a cost recovery impact statement will be finalised to report on consultations and document compliance with the government’s cost recovery policy.

In accordance with the cost recovery guidelines, the department will introduce ongoing monitoring mechanisms to ensure fees remain based on efficient costs, and will continue to liaise closely with key stakeholders.

Revenue from PBS cost recovery will depend on the number and type of submissions brought to the PBAC for consideration. As a general rule, the more complex and time consuming the evaluation and price negotiation, the higher the fees. Once fully operational, annual revenue from fees is expected to be about $9 million in 2008-09, rising to around $14 million a year in following years.

It is expected that fees will be indexed annually and a full review undertaken within five years, in accordance with cost recovery guidelines.

The recovery of costs incurred by the department for the assessment of submissions made to the PBAC and subsequent evaluation, pricing and listing processes is an extension of an already established cost recovery model operating for the TGA. In that case applicants pay a fee for the work undertaken by the TGA in assessing their drug for use within Australia. Applicants are familiar with this process and have accepted its introduction.

Cost recovery within the PBAC process will be a simple system recovering costs from parties that are in a position to gain significant financial benefit from the listing of their drugs or changes to listings, within the PBS subsidy framework and from the designation of their vaccines for funding under the National Immunisation Program.

It is all about ensuring that the PBS continues to be able to provide reliable, timely and affordable access to a wide range of medicines for all Australians.

I commend the bill to the House.

Debate (on motion by Mrs Gash) adjourned.