Monday, 18 October 2010
National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010
Debate resumed from 29 September, on motion by Ms Roxon:
That this bill be now read a second time.
The federal government and Medicines Australia signed a memorandum of understanding in May 2010 and details were released in the budget this year. The memorandum intends to deliver savings to the government of around $1.9 billion over the next five years. The merits of the PBS are well-known to both sides of this chamber. It has been providing access to clinically proven, cost-effective medicines for over half a century. The PBS process for listing drugs is well known and it enjoys bipartisan support. We know that prior to listing pharmaceuticals need to go through the most rigorous of evaluations both for safety and efficacy but also for cost effectiveness to ensure that the taxpayer’s dollar is well spent in ensuring that Australia has one of the finest health systems in the world.
The changes that are being debated today in this bill and part of the MoU look at statutory price reductions, price disclosure and co-payment data, the last of which has not been always easily available. Many of these are largely technical amendments and relate to matters such as PBS pricing and how we actually calculate price reductions as a result of statutory price reductions, policies that we first saw implemented by the Howard government in their last term in 2006. We also know that there are amendments that will streamline the way that drugs are listed for supply under section 100 amendments.
A key challenge for successive governments is to ensure that there is enough investment in new pharmaceuticals while at the same time making sure that as drugs flow through their patented period and into off-patent periods generic drugs fall in price satisfactorily so that we are in turn able to use taxpayers’ dollars effectively. One great challenge for Australia has been that, by having a PBS that offers very equitable access to pharmaceuticals nationwide within 24 hours and at affordable price, particularly for those who are concessionaires, in many cases we have had an upwardly sticky system where generic prices fail to fall after the patent period is completed.
There are no better examples than comparisons with neighbouring countries New Zealand and the UK. I note the work of Philip Clark but also others writing over the last five years looking particularly at the statin class of drugs, one of the most commonly taken pharmaceuticals in the country. We know that, while Australia continues to pay upwards of $30 a month for a 40 milligram dose of a very common statin drug, Simvastatin, in New Zealand and the UK these have fallen to around $3 or even $1.50. Even in the US we saw the Walmart intervention where some of the most common categories of generic drugs were available for in the vicinity of $1 to $2 per month—yet we continue to pay upwards of 10 to 20 times that amount here in Australia for exactly the same pharmaceutical, exactly the same preparation and product. That is a cause for concern, because the PBS is expanding, despite the impressive policy reforms introduced under the Howard government which have reduced that growth. We have seen that after reductions too often those reductions again escape. We lose control of that increase in price growth and it is becoming less and less clear exactly how that money is being invested.
New Zealand’s approach from straight across the Tasman Sea has been to take much stronger action to see generic prices fall. Their approach was in fact to put out to tender the supply of generic drugs and let the generic providers engage in a market based competition to provide national supply. Their prices fell up to 93 per cent, which is an extraordinary result. I move now to the Netherlands, where generic drugs such as statins cost around one-twentieth of those in Australia. These drugs are so common that more often than not senior Australians are taking them on a regular basis, and the costs to our health system are enormous.
On top of this the government, as part of this legislation we are debating today, have actually conceded the ground in the reform of pharmaceuticals and the PBS. They have said that for the next four years there will be no more cost negotiations or further reforms. This is a cause for significant concern because this part of the health system is one that I think needs more scrutiny than to walk away for four years and say that there will be no more efforts to tune this system and make it work even better for Australians.
The pharmaceutical agreements that were introduced in 2007 by the former government introduced the issue of regulatory price cuts where, effectively, when the first new generic product arrives on the market there is a mandated cut right across the sector. That 12.5 per cent policy yielded significant financial dividends and I understand that under this legislation that will increase to 16. We know from research that even with these mandated drops in prices doctors can continue to make choices about whether they wish to prescribe a generic drug when it hits the market. Many countries have set guidelines. One is the UK, where when a cheaper, usually generic, product comes onto the market there have to be significant and clear clinical reasons why clinicians do not go right ahead and prescribe the cheaper product.
In Australia this is so often not the case. For pharmaceutical companies that can produce a slightly more improved statin, for instance, the whole front end becomes an effort to convince GPs that they need to go for the extra one or two per cent clinical efficacy even if it costs the national health system and the PBS significantly more than that. The lesson there is that in the UK they have gained considerable ability to shift people onto generic pharmaceuticals, while in Australia we so often tend to evergreen the process, keeping Australian equivalent patients on the patented product, which is significantly more expensive.
The recent PBS agreement gives business certainty to Australian pharmaceutical companies, and that would be agreed on both sides of the House. We want business certainty for the innovators so that they are more confident to invest in the expensive multiclinical trials that are so important to bringing new drugs through the pipeline. But they also need the certainty to know that when they do business in Australia there is a PBS that can afford the best pharmaceuticals that money and Western science can provide. The great concern is that, while upwards of one-third of the PBS bill is spent on generic pharmaceuticals—in the rest of the world that can be as little as 10 per cent—we are foregoing the opportunity to bring these drugs on quickly. And I believe that a great detraction from the current PBS system is the time it takes to bring these pharmaceuticals on.
So it is great to see that in the MOU there is an undertaking from government that, within six months of the recommendation from the PBAC, cabinet will consider and make a decision on whether to list the drug. And it would be hoped that it would be a lot faster than six months. That is a lifetime for someone waiting for a brand new medication. So, in some ways we would like to see an even faster streamlining of the system. So often when you legislate for a minimum the minimum becomes the maximum and everything drags out to five months and 29 days. We want to see these drugs coming on straight away. What we cannot afford is a government that does not have the courage to look at the best possible system for pricing of generic pharmaceuticals, freeing up the resources and moving that around to the front end to help the innovators.
All the members of Medicines Australia are confident in that MOU, but there is one thing I know: as soon as we can get generics priced somewhere near where they are priced in the rest of the developed world, it will be an even better place for Australian patients who are waiting desperately for those new medications. That is the challenge that we face at the moment. On any normative international comparison Australia does perform poorly on the pricing of generic pharmaceuticals. The great paradox is that it is our wonderful PBS that does it. The fact that we pay generously for concessional and non-concessional co-payments for pharmaceuticals actually removes the incentive to be any cheaper. Why would you price a pharmaceutical any cheaper than the $20-odd or $29 you will receive from the government, if you were guaranteed that amount? The PBS and its very generosity actually makes it difficult to move and to garner those really great savings that are possible in the generic sector.
Let us make no mistake, the front-ending and the bringing of great new drugs through the pipeline is a very risky and expensive process. We need a government system that makes it as certain as possible for these companies that if they can bring through a life-saving drug or a significant advancement on what is currently available it will be supported and encouraged. By the same token what we cannot afford to do is what this government has done, which is effectively to walk away from any future reforms for at least four years. It is a very confident decision as to whether you will even be around as a government in four year’s time. What we have done in this MOU is forfeit the right to have that conversation. That is an awfully large price to pay, particularly since, as can happen, very expensive pharmaceuticals can come down the pipeline in a relatively short period of time such as 18 months to two years. I think it was a little short sighted of the government to do that.
Let us remember what happened in 2007. The coalition was faced with similar challenges around the PBS. Their suite of measures have already demonstrated outcomes. This was the separation of single-brand and multiple-brand medicines into the F1 and F2 formularies; the statutory price reductions for model-brand medicines, which I have referred to before; the 12.5 per cent price reduction when that first bioequivalent drug for a single-brand medicine is introduced or when a medicine moves from F1 to F2; and the price disclosure arrangements which this legislation will be extending to 1,600 different lines, which I acknowledge will create for the government a significant challenge through all of the legal difficulties in being able to actually identify what is going on with those pricings and with that disclosure. It is a significant challenge, but it is an important one to progress if we are to understand whether pharmaceuticals are being priced at the market or at the most competitive price possible. We have the incentive payment in 2007 for community pharmacies to process claims using PBS Online and of course the community service obligation for pharmaceutical wholesalers who meet specific service obligations.
Let us look at those PBS reform impacts. They have been reported on. That report showed that over the forecasted 10-year period from 2008 to 2009 patients would potentially pay less—between $592 million and $803 million less. That is a significant saving for patients, through their co-payments, because a large number of pharmaceuticals actually become cheaper than the co-payment. That is extremely relevant, particularly for the 30 to 35 per cent of Australians who are not concessionaires and pay what we deem to be the higher co-payment. That could really mount up, prior to the pharmaceutical safety net, for families who have to pay that full amount. They are the prime beneficiaries of these kinds of reform. The total savings to government from the reforms are even higher, because they are saving on having to pay a full co-payment for every one of the prescriptions—between $3.6 and $5.8 million.
I draw the House’s attention to research done by Philip Clarke from the University of Sydney, who did reports on what savings could have been achieved. This was published with his colleague Ed FitzGerald in the Medical Journal of Australia and estimated that Australia could have saved $1 billion in the past four years if the UK prices had been achieved in Australia and that, more importantly, were we to implement the English pricing systems in Australia, savings could be in excess of $3 billion over the next 10 years. I can see the shadow finance minister licking his lips as he thinks about what could be done in the health system with $3 billion invested in the new drugs coming through the pipeline and being brought on early. That is a genuine incentive for our pharmaceutical manufacturers and for our innovators to be coming up with the new breakthroughs: the Gardasils; the treatments that save thousands of lives and reduce morbidity. They are the areas that we should be investing in rather than paying unnecessarily high prices for generic pharmaceuticals which are being produced around the world in large factories for sometimes less than a fraction of a cent per dose.
The PBS reforms that were initiated by the coalition were significantly successful. We note that this MOU has the support of Medicines Australia and a number of others who made submissions. They are encouraging both sides of the chamber to consider this legislation, and I make the following observations about the ground that has been forfeited in basically declining to look at this area again for any form of reform for the next four years. It is terribly important, therefore, that the parliament carefully scrutinises all of the measures in this bill—the measures for under-co-payment data and statutory price reductions; which are being increased to 16 per cent, and, most importantly and probably most challenging of all, price disclosure.
The great challenge for government is that there simply is not enough information about the price at which wholesalers provide pharmaceuticals to pharmacists. We know that there are significant discounts. If those discounts lead to better service or better provision of pharmaceuticals or a better range of products to patients, one would not complain about that. But, fundamentally, that discounting represents government and taxpayer resources that need to be used well. That is why I believe that this side of the chamber would want to see a full and frank evaluation of the impacts of this legislation and where it is going. We are also mindful that it is currently under inquiry at the moment. I think it would be very, very short-sighted to move forward and vote on this bill prior to seeing the results of that Senate inquiry into this very bill.
This bill will be expanding those elements that I referred to before. It will be extending some of the things that were achieved in 2007. But I would certainly not want to see this bill completely debated and passed through this chamber without seeing the full results of the Senate inquiry being conducted at the moment. We have a date on which we expect that inquiry to come down. I would hope that we would put off this debate until that inquiry has been heard and read. (Time expired)
I speak in support of the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010. I listened to the member for Bowman talk about the great support that the previous Howard coalition government had for the PBS. The last time a coalition government was elected—in 1996—the coalition government immediately hit pensioners with an 18.5 per cent price hike for drugs listed in the PBS. That is exactly what they did. If those people opposite had been on this side and had been sitting here right here and now, we would have seen a $1.2 billion cut to the Pharmaceutical Benefits Scheme. That cut would have meant that pensioners and concession card holders would be slugged with, on average, an extra $28 per person per year in the cost of their prescription drugs.
So let us not come into this place and talk about the great support for the PBS from the coalition, because they have got form with respect to their years on the Treasury benches. Their proposal at the last election was simply to make the personal circumstances of pensioners and people on low incomes more difficult in dealing with sickness, ill health and disability by making it more costly for them to get access to the drugs they needed to alleviate the conditions and illnesses they suffered from. It is a bit of sanctimonious rhetoric coming from those opposite in their support for the PBS. All other Australian families, if the coalition were sitting here, would be slugged with an increased cost of about $4 per person per year for prescription drugs. This would rise to about $6 extra per person by 2013-14. So, the coalition has never been particularly supportive of the PBS. For the member for Bowman to talk about the benefits of reducing costs to Australian taxpayers, pensioners and concession card holders—to hear coalition members talking about that with their rhetoric which does not match their record—really sticks in my craw.
The purpose of this legislation is to make sure that we have a viable PBS system. This is important. It is part of the overall package of health and hospital reform that we are undertaking because we have a great challenge in this country. We have the third-longest life expectancy in the world. Our future generations, if they want to enjoy access to a world-class health system, need to get access to drugs, not just to doctors and allied health professionals. We want to make sure they have universal access to a decent healthcare and hospital system. It is important that we invest in primary health care. I commend the federal Labor government for their assistance in that regard with the money available to doctors. I am also pleased to see the new round of funding for regional health infrastructure from the Health and Hospitals Fund. In particular, the legislation that is before the House today deals with issues that maintain the viability, sustainability and security of the PBS.
Currently the PBS costs about $9 billion in the 2010-11 year and it is estimated that it will cost us $13 billion by 2018. So the taxpayer is the winner from the MOU which has been agreed to with Medicines Australia, which represents over 50 companies. About 86 per cent of total annual PBS expenditure goes to companies which produce drugs through Medicines Australia. We are talking about nearly 60 per cent of sales of off-patent medicines as well. So I thank Medicines Australia for their willingness to ensure price certainty and the reductions that will benefit not just the taxpayers of Australia but also the pensioners and concession card holders who really need access to the kinds of drugs that will make their lives better.
The bill sets out a new PBS pricing arrangement that aims at reducing the growth and the cost to the taxpayers. We want to make sure that taxpayers get access to funds which we can use to build roads, to improve schools and to improve our health system generally. The minister said in her second reading speech on 29 September 2010 that the purpose of this bill is:
… to achieve a more efficient and sustainable Pharmaceutical Benefits Scheme (PBS), better value for money for Australian taxpayers, and policy stability for the pharmaceutical sector.
I agree entirely with her assessment in that regard.
Over time we have seen the PBS price for multiple-brand medicines affect taxpayers in an adverse way. We think it is important that where we have multiple-brand medicines they reflect the price at which medicines are sold by suppliers into pharmacies. We think that information could be disclosed, we think that the PBS price will reduce the average price across all brands and we think that is fair and equitable to taxpayers. Price disclosure is critical. You cannot have a situation where the market is in that way secret, because it results in prices being higher than they otherwise would be. Consumers should not and will not have to pay extra money for the changes that are in this legislation. Indeed, we believe that some non-concessional consumers will also end up having to pay less.
We have talked about the savings. We are talking about hundreds of millions of dollars being saved directly by consumers from lower prices as the result of the changes in this legislation. This legislation is important in the sense that it does not affect a patient’s access to necessary medicines and neither will it affect a doctor’s ability to prescribe PBS medicines which are clinically appropriate to the condition that the patient suffers. The amendments also make it clear that price disclosure will allow the market forces to apply and play a part in pricing of PBS medicines. It always mystifies me that those opposite claim that they are the supporters of the market when the reality is that it is Labor governments which have supported small business operators and the market forces generally. Those opposite too-often side with big tobacco, big companies and big multinational endeavours, whereas we on this side of the chamber are the authors of trade practices legislation to help small business. We are the ones who are concerned about market share and market power. We are the ones concerned about making sure the market works better for taxpayers.
The bill sets out, as the minister has pointed out, that we think there will be an average price reduction of at least 23 per cent, to be achieved across all brands in the cycle. What that means is there will be a very large saving in the PBS and we think this will be market driven. The minister has pointed out, in a report to parliament on the 2007 PBS changes that the member for Bowman talked about, that consumers will benefit. She says that somewhere around $700 million will be saved over 10 years. That is roads, schools and health care. That is community infrastructure which can be used in communities across regional and rural Australia and in my electorate of Blair in South-East Queensland. We think that this legislation is a better deal for taxpayers and we think it is a better deal for consumers We think it is a better deal for pensioners and a better deal for non concessional card holders. We think it will mean that the market will play a role in reducing the cost of medicines for people. We also think that the pharmaceutical industry will play a role, as will the Pharmacy Guild of Australia, in achieving better outcomes for taxpayers and consumers.
It is my honour to represent the electorate of Blair. In the shopping centre where my electorate office is located in Brassall, the biggest suburb in my electorate, is a pharmacy. Every day as I walk past the pharmacy I see people going in and getting the medicines and tablets that they need each day. Every time I see that I think about the fact that those people need and deserve access to health care in a way that benefits them and their community. We should all thank the previous governments that had the wit, wisdom and foresight to bring in the Pharmaceutical Benefits Scheme, which means that medicines, tablets and assistance can be given to low-income earners, including in my electorate to the people of Brassall, who are able to purchase their medicines because of the PBS.
The previous speakers in this debate on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 have spoken about the foundation stones of the Pharmaceutical Benefits Scheme and the coalition’s history of reform to make this scheme sustainable. In commenting on the coalition’s 2007 reforms, a report released by the Department of Health and Ageing states:
… the data suggests that the PBS is buying more generics at a cheaper price while maintaining access to new innovative medicines. More generic prescriptions at overall lower cost to Government is an indication that the community will gain better value from PBS expenditure over time, particularly as medicines become subject to competition.
In many ways, the PBS reforms initiated by the coalition government have achieved more than was anticipated. The reforms were not undertaken lightly but were subject to extensive consultation and negotiation prior to the introduction of the legislation. Unfortunately, this government has failed badly to demonstrate any capacity to consult or, indeed, to engage in evidence based reform. Many of this government’s so-called reform processes are driven by ideology or by fiscal incompetence. There is scant regard for outcomes, which has been all too evident with the Building the Education Revolution, the insulation scheme, cuts to the cataract rebate and chemotherapy changes to name just a few. In light of these issues, it is especially important that the parliament carefully scrutinises all measures presented by this government.
The bill before us seeks to accelerate and increase statutory price reductions. Specifically, it provides an additional two per cent reduction for drugs listed on F2A. In addition, there will be a five per cent reduction to all drugs listed on F2T. The price reduction applying when a bioequivalent drug is listed or when a drug moves from F1 to F2 will increase from 12½ per cent to 16 per cent. The bill expands and accelerates the price disclosure arrangements for all medicines listed in the F2 formulary. The addition of a new brand will no longer be required to trigger a price reduction.
An important aspect of the MOU which is enacted by this legislation is a minimum average 23 per cent price reduction to applicable F2 medicines in the cycle to 1 April 2012. The MOU does specify that drugs will continue to be excluded from adjustments where the difference between the weighted average disclosed price and the proved ex-manufacturer price is less than 10 per cent. For medicines subject to price reductions, the guaranteed adjustment proportion is calculated and, in effect, used to gross up each price reduction so that the average of 23 per cent is reached.
Given that the Minister for Health and Ageing has a chequered history of implementing savings measures, it may not be improbable that the minister demanded X amount of savings over the forward estimates and negotiations then worked backwards to arrive at the 23 per cent. This would have allowed the minister to lock in savings over the forward estimates to try and rebuild her image with the then so-called ‘Gang of four’. Unfortunately, though, it may not be conducive to good public policy and gives greater justification for closer parliamentary scrutiny. According to evidence at Senate estimates, price disclosure will impact 1,600 brands, up from 160 at present. The process of price disclosure is administratively complex. It is claimed by some stakeholders that such a large increase in the number of brands covered and the additional 23 per cent weighted average price cut will give rise to higher administrative costs.
Whilst it may be appropriate to pursue measures to better match the price paid by government to the market price, it is important that the government consults on such a large change. It appears that this has not been the case. Generic medicine companies are highly exposed to the price reductions and disclosure provisions. Whilst there are some conflicting accounts of their level of involvement in negotiations on these changes, it appears that generic companies were not directly involved in devising the final MOU. The viability of the generic medicine sector is of particular importance in ensuring a competitive market when medicines come off patent and reducing the cost of medicines to the government and individuals. The sector also employs 5,000 Australians in a variety of roles, including manufacturing, research and development. The subsidised pharmaceutical sector is different from other fully competitive markets. When drugs come off patent there can be reluctance from medical practitioners and patients to move to other brands. The generic sector is important to price competition, but brand substitution is imperfect and it can be difficult for Australian generic companies to attain and maintain market share.
In circumstances where it is clinically appropriate, pharmacists can offer patients a generic alternative. The coalition introduced a financial incentive for pharmacists to dispense a substitutable, premium-free medicine. While this agreement continues that incentive, it explicitly states that the Commonwealth will not make any variations without the consent of Medicines Australia and also will not introduce any measure which favours the prescribing or dispensing of generic brands without the consent of Medicines Australia. It remains to be seen whether the information campaign proposed by the government will be sufficient to offset other factors affecting market share and viability of generics as a result of these changes.
The MOU also provides for no new therapeutic groups to be formed for the duration of the agreement. The government introduced a new therapeutic group in the 2009-10 budget and three new groups in MYEFO. Clinicians raised concerns, particularly in relation to the bisphosphonate group. It was argued that the government had failed to consider the concerns of many clinicians that the drugs were not interchangeable at a patient level. At present, exemptions can be granted by Medicare to premiums paid by patients in certain circumstances. However, if the drugs are not interchangeable and exemptions need to be granted in most instances, timely access to treatment may be jeopardised. Accordingly, a Senate committee inquiry was launched into the therapeutic goods to allow for a proper investigation and, in the interest of process, the Senate disallowed the relevant groups until the Senate committee had reported. Contrary to what has been suggested the Senate did not move the disallowance because of opposition to the policy of therapeutic groups; rather, it was to allow clinical concerns to be heard and to examine the process and reasoning of the government’s MYEFO measure.
The 2009 budget measure for two statin drugs was not disallowed and there are a number of therapeutic groups that have existed for many years. The concerns supporting the disallowance were purely in relation to the process followed and clinical arguments presented. The MOU does specify that the three therapeutic groups announced in MYEFO are not excluded for the purposes of this agreement. It is appropriate that consideration be given to the groups following the outcome of the Senate inquiry, which is consistent with the coalition’s position from the outset.
The bill also makes changes to section 100 of the act to provide for the government’s compromised chemotherapy arrangements. The government first proposed changes to the funding of chemotherapy drugs in a 2008-09 budget measure. The government claimed that the savings of $105.4 million would be delivered over four years. The changes proposed to reduce wastage of chemotherapy drugs by providing funding according to the precise quantity of active ingredient used rather than by the vial. The changes were due to commence on 1 July 2009, but the Minister for Health and Ageing announced in April last year that the changes would be delayed until 1 September 2009. It is only now, towards the end of 2010, that the minister has finally worked through the detail with stakeholders. The changes would have made it unviable for many pharmacies to supply such drugs, especially in rural and remote communities. The wastage from unused portion in the vials would have been wholly borne by pharmacies. The minister did not understand and did not bother to consult on the practical implications of the proposal. It created unnecessary stress for patients, pharmacists and health professionals. Incredibly, it took two years for the minister to resolve. The chemotherapy bungle again highlights the minister’s, and indeed this government’s, incompetence and dangerous policy approach.
The changes proposed under this bill are also reported to affect wholesalers who ensure timely supply of pharmaceuticals to community pharmacies and in turn patients. Under the previous reforms, funding was provided through the community service obligation to ensure no adverse interruption to the supply chain. Under these new changes, it appears that there has been a failure to consult or at least a blatant disregard for the concerns raised. With a change such as this it is imperative that the government is able to provide assurances that the supply chain will not be disrupted. To date there has been no such substantiated assurance.
The MOU also provides for changes to administrative processes to streamline the listing of new treatments. These changes are welcomed and, on behalf of patients and clinicians, I genuinely hope the government manages to fulfil this promise. This is particularly the case with the time taken for cabinet consideration. With the listing of new drugs we have seen this government using the process to delay important treatments recommended by the PBAC. This was exemplified with drugs such as Avastin, approved by the PBAC in July 2008 but not listed by the minister until July 2009. Unfortunately, the language of the MOU on this aspect is far from convincing. It states:
… the Commonwealth will use its best endeavours to implement a maximum time frame of six months for consideration and decision …
Too often this government’s so-called best endeavours are nowhere near good enough.
The coalition will stand up for parliamentary scrutiny, especially on measures as significant as this. The bill before us today proposes significant changes to a vital component of our health system. Following extensive consultation, the PBS has undergone significant reform over the last few years. The coalition government’s reforms are expected to generate savings far greater than originally anticipated according to the government’s own calculations. The government has sought to wring more savings out of the scheme through measures that were not consulted on and may have had serious implications for patient access to treatment. Again it appears that this minister has undertaken a complex change without consulting fully with all stakeholders affected.
It is important that the parliament be given an opportunity to scrutinise the changes in detail and that all stakeholders can have input. The bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and the coalition will reserve its position and consider the outcome of that inquiry. It is entirely appropriate that debate on this bill occurs with the benefit of the inquiry’s findings. The coalition proposes that the bill be deferred until after the reporting date of the inquiry—that is, 16 November. This will allow for a more informed consideration and there will remain a number of sitting days for the bill to be debated before the parliament rises this year. Accordingly, I move the following amendment:
That all the words after “That” be omitted with a view to substituting the following words: “the House declines to give the bill a second reading until the Senate Standing Committee on Community Affairs has reported to the Senate on its inquiry into the bill”.
The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 is another example of the government making great strides in the reshaping and delivery of a new and remodelled comprehensive and affordable health system for Australia. This bill goes to the cost-effective and affordable delivery of our beloved PBS well into the future. The future of the scheme has been under a cloud of rising costs, as has been our overall health system. There is no inflation like health expenditure inflation and the PBS alone was forecast to increase by some 40 to 50 per cent over the next several years. This is an increase that could not be sustained across the board and it would suggest a health system that, while dearly loved by Australians of all walks of life, if left untended could become unaffordable in the not too distant future. The compromise of our health system, Medicare and the Pharmaceutical Benefits Scheme will not be accepted by Labor, the creators of Medicare.
The focus of the bill before us is the weighing down of the cost of the pharmaceuticals purchased under the PBS. Through the work of the minister with the industry group, Medicines Australia, this government delivers in this bill pricing reforms and administrative changes that improve the PBS listing processes. It cuts the red tape and will achieve highly significant savings over the years ahead. This bill enshrines the agreement between industry and government while delivering the significant additional price benefits for the Australian public. The price benefits will be through the PBS, but individual members of the public may also find that they can access certain courses of medicines more cheaply.
This bill goes to the government’s delivery of more with less—more benefit for our health dollar and less wastage of expensive medicines. The bill sees greater downward pressure on the cost of a greater number of drugs. This will be achieved through the PBS’s price averaging mechanism, expanding from its current application to 162 medicine brands to some 1,600 brands—a 1,000 per cent increase—with substantial consequent savings. It must be noted that these reforms will in no way diminish a patient’s access to necessary medicines and nor will they in any way diminish or interfere with a medical practitioner’s ability to prescribe PBS medicines that are clinically appropriate.
This is simply another example of this government’s drive to reform the health system and to meet the need of a growing and increasingly ageing population of Australia for a health system that will deliver affordable health care through the decades ahead. There is no greater example of this drive, of Labor’s capacity to plan and deliver systemic and affordable reform for the benefit of all Australians, than the national health and hospitals reform plan. It commenced in the term of the previous parliament, and the reform agenda and the drive for superior outcomes and better efficiencies with our limited health dollar continues.
We have seen the agreement between the government and states and territories as well. We have replaced eight separate health systems with a single National Health and Hospitals Network, combining all public hospitals, GP services and related services. We have dedicated one-third of GST revenue previously paid to the states and territories for the Commonwealth to take majority financial control and to control the entire network and invest this revenue in health and hospitals. We have elevated small, local hospital networks to be in charge of their own service delivery. All of this is achievable through the greatest shake-up of our health finances this nation has probably ever seen. It is deliverable by the Commonwealth through ending the blame game and the tireless abdication of funding responsibility and cost-shifting that has been a feature of the health system for far too long. It is achievable through the goodwill of the states and territories, who have agreed to end the games and enable the Commonwealth to take 60 per cent of funding responsibility for public hospitals and to take over full responsibility for GP and related services provided outside of hospitals.
The government is most intent on making substantial improvements in the funding of health services and in health service delivery. But there are always a few spoilers. While we are reshaping the remedial health landscape through the PBS pricing mechanism and hospital reform program, there are of course areas where the government has had its reform and improvement of the health system stymied by the opposition. One might have thought that this parliament, due to the outcome of this last general election and the agreements that appeared to be made prior to the forming of this government, would be a little more constructive that the last. One might have thought that a little more weight would be put on debate and decision making to judge legislation on its merits. Regrettably, the reflex of opposition for opposition’s sake, irrespective of rational thought, appears to remain the position of many in this House.
Two areas of opposition for opposition’s sake will immediately come to the minds of members present. What is the point of reshaping the hospital system to reduce patient suffering if one does not even bother to try to prevent the suffering in the first place? I am talking about the preventative health agency. The Minister for Health and Ageing has now long been in pursuit of Australia’s first ever preventative health agency—an agency dedicated to preventing the public’s need for emergency departments and surgery theatres, an agency dedicated to relieving the pressure that has long been on our public hospitals and an agency dedicated to maintaining the health and thereby the wellbeing of all Australians. Such an agency is common sense. But that makes it, as we have seen, directly at odds with the opposition. While it is common sense to anyone you might speak with, the opposition simply does not get it. It is like water off a duck’s back.
Similarly, the current Leader of the Opposition while Minister for Health and Ageing repeatedly refused to have the Commonwealth participate in dental care. As Minister for Health and Ageing, he preferred to watch hundreds of thousands of principally elderly Australians suffer with troublesome dentures and decaying teeth, suffering deteriorating dietary habits due to the lack of healthy teeth with which to eat properly. Clearly treatable dental problems grow and expand into nutritional problems, causing the most frail in our community to become even more susceptible to viruses and other illnesses. As it was in the previous government in which Mr Abbott was a minister, now it is under Mr Abbott’s opposition—opposition to preventative health, opposition to dental care, opposition to the reduction of preventable decay and the onset of entirely preventable, unnecessary and avoidable disease.
The government stands by the commitments it made to the Australian people prior to the last election. In the bill before us we have just one element of the government’s ongoing commitment to delivering superior, affordable health care for all Australians—an important element in the Pharmaceutical Benefits Scheme. I am very pleased to be able to support the measures of this bill and the ongoing benefits that will accrue to the Australian public by its passing. I commend this bill to the House.
If there has ever been legislation that should be supported in this House, it is the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010. This legislation will deliver cheaper medicines to Australians and at the same time save $1.9 billion over five years. This legislation should be voted on and passed by this House tonight. It is my understanding that the opposition is seeking to defer a decision on this legislation and refer it to a Senate committee, and if that is the case I would say that the opposition is abrogating its responsibility to support the government in this very sensible cost-saving measure and deliver cheaper medicines to the Australian people. I will first go through the legislation and then come back and touch on my disappointment and anger with the opposition in the action it is proposing to take: to have the House abrogate its responsibility to make decisions on important legislation such as this and defer the bill to a Senate committee for consideration. I do not believe that the Australian people would like to see that. I think that, if we did that, we would be failing in our responsibility to the people whose votes put us into this parliament.
The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 will amend the National Health Act 1953 to achieve a more efficient and sustainable Pharmaceutical Benefits Scheme through moderating growth in expenditure and delivering better value for money to taxpayers and greater certainty to the pharmaceutical industry. An enormous amount of consultation has taken place on this legislation. I see that the shadow health minister, Mr Dutton, has returned to the chamber, and I say to him what I have already stated here in the House: the opposition will be abrogating its responsibility if it does not support the passing of this legislation through the parliament tonight. It is currently estimated that the PBS will cost $13 billion in 2018 compared to about $9 billion in 2010-11, and that is a significant increase. PBS expenditure needs to be managed. If it is not, the scheme will not be sustainable or affordable, and that will mean that Australians will not have access to the many essential medicines they need.
This legislation is about delivering medicines to the Australian people at an affordable price and ensuring the future of the PBS, a scheme that has delivered to Australians for a very long time. The bill gives effect to further PBS price reforms that were announced in the 2010-11 budget and the subject of a memorandum of understanding with Medicines Australia, which is the peak body in the pharmaceutical sector. As I have already stated, this will result in $1.9 billion in savings over five years. The bill focuses on medicines that are the subject of competition in the market. That means that PBS prices will closely match the prices at which the medicines are actually sold, and I think that is a very important point. Medicines will be affordable, they will be provided at a competitive price and Australians will benefit from lower prices and timely access to innovative treatments. For the PBS to continue to be the successful scheme that it has been, it needs to be able to include new and cutting-edge medicines—innovative treatments—but if it does not remain an affordable scheme this will not happen. Every member of this parliament would have constituents coming to see them on a regular basis and raising medicines that they would like to see listed on the PBS. There is a process that medication must go through before it can be listed on the PBS. As members we all wish to deliver the best medicines and see that our constituents can access the best medicines and the latest treatments, but unless we maintain an affordable PBS this will not happen.
Price disclosure will be accelerated and expanded through the implementation of this legislation. It requires pharmaceutical companies to advise the Commonwealth of prices at which PBS medicines are sold to pharmacies. That is very important, because people buying that medication will then know the exact mark-up on the price of the medication, and the government will be able to better monitor the process.
This legislation will benefit the whole Australian community. From October this year price disclosure will be mandatory for all multiple brand medicines, increasing the coverage from 162 brands to about 1,600 brands, which is a significant increase. That will lead to an average price reduction of about 23 per cent, which will be required across all medicines in this cycle. The duration of the price disclosure cycle will be reduced from two years to 18 months. This will be of significant benefit to Australians and it will also make medication and the PBS much more affordable.
As I mentioned earlier, this has been discussed at length. There has been adequate time for community consultation. I see this legislation as being a win-win. It is a win to government because it decreases the cost of the PBS, it is a win to the Australian people because they will be paying less for their prescription medicines and it is a win to the generic medicine companies, who will be able to continue in the marketplace and who will be able to deliver medications at a cheaper price when they come off patent.
Given the fact that there are so many benefits associated with this legislation, I do not understand why it needs to be referred to a Senate committee. I do not understand why we in this House are abrogating our responsibility and saying that there should be no decision at this stage, that a Senate committee should be able to decide whether or not legislation that delivers cost savings to the Australian people and cost savings to the Australian government of $1.9 billion over five years should be passed by this parliament. I commend this legislation to the parliament and I urge each and every member to support it because the benefits that it will deliver to the Australian people are extremely important.
The merits of the Pharmaceutical Benefits Scheme have been well canvassed in this parliament. Since the Pharmaceutical Benefits Scheme was introduced in 1949, 61 years ago, it has provided subsidised access to clinically proven, cost-effective medicine. The PBS and the process for listing drugs enjoys in-principle bipartisan support. It is one of the pillars of our health system.
Prior to listing, drugs need to meet rigorous criteria to ensure that patients get access to important new treatments and taxpayers get value for money. We have the Pharmaceutical Benefits Advisory Committee and we have the Pharmaceutical Benefits Pricing Authority. A key challenge for successive governments has been to ensure that there is an incentive for research, development and listing of new medicines whilst ensuring that the health budget is sustainable into the future.
Australia currently spends about 9.1 per cent of GDP on health. That is about average for the OECD. It is significantly up on where it was 10 years ago but we are average in terms of our spending in the OECD. With that, we see that many of our measures for health put us in the top third of countries in the OECD. Particularly in areas like life expectancy at birth and life expectancy at 65, Australia is ranked third in the OECD. Only people in Japan and, for women, France and, for men, Iceland have longer life expectancies than Australians.
In 2008-09 there were 181 million prescriptions dispensed under the PBS. This is anticipated to grow to 232 million by 2013-14 alone.
Yes, I did fill one this afternoon. Real spending per capita on pharmaceuticals is also expected to continue to increase over time, as is health spending as a proportion of GDP. For the financial year ended 2009, Commonwealth government expenditure on pharmaceutical benefits amounted to some $7.7 billion. The annual growth rate of PBS expenditure is currently around 10 per cent.
PBS expenditure is driven by many factors. Relative spending on pharmaceuticals per person is highest for those in the 75 to 84 age group. A rapidly ageing population will be a key driver of prescriptions dispensed and the overall cost of pharmaceuticals. It is important that the government is able to secure value for money for pharmaceuticals—and the coalition provided genuine reform to do so. In 2006, after extensive consultation and negotiation, the previous coalition government announced a series of reforms to support the sustainability of the PBS. Mr Deputy Speaker, you will remember it was anticipated in the first Intergenerational report in 2002 that the PBS’s share of GDP would increase by five times over 40 years—and that was one of the imperatives in addressing the reform of the PBS. The key reforms which were initiated by the coalition included the separation of single-brand and multiple-brand medicines into F1 and F2 formularies; statutory price reductions for multiple-brand medicines; a 12½ per cent price reduction when the first bio-equivalent drug for a single-brand medicine was introduced and when a medicine moved from F1 to F2; price disclosure arrangements triggered with the listing of a new brand of medicine; a $1.50 incentive to community pharmacies to dispense a substitutable premium-free medicine; an incentive payment for community pharmacies to process claims using PBS Online; and additional funding through the community service obligation for pharmaceutical wholesalers who met specific service obligations.
These reforms were successful in ensuring the sustainability of the Pharmaceutical Benefits Scheme but they were not undertaken lightly. They were subject to extensive consultation and negotiation prior to the introduction of any legislation. The legislation before the House, which is the result of a memorandum of understanding between Medicines Australia and the government, has not allowed all parties to have input into the MOU. That is why it is important for the parliament to be able to consider all views before voting on this legislation. The legislation has been referred to the Senate Community Affairs Legislation Committee, and that committee will report on 16 or 17 November. The opposition believes that, before we give this bill a second reading, we should be able to have the benefit of the views of all parties and all stakeholders. That is why the member for Dickson has moved an amendment which will have the effect of not giving the bill a second reading until the Senate Community Affairs Legislation Committee has reported.
The opposition have demonstrated in a number of ways that we believe in the sustainability of the Pharmaceutical Benefits Scheme. It is important to make sure that the scheme is sustainable but, in such a multibillion-dollar expenditure, it is absolutely critical that the parliament has the benefit of all the information and that we are able to consider that information. That is why the opposition has moved this amendment and supports it.
In summing up, I would like to thank all members who have participated in this debate. The purpose of the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 is to deliver a more efficient and sustainable PBS, better value for money for Australian taxpayers and policy stability for the pharmaceuticals sector. We in Australia can be very proud that we have a world-class PBS that provides timely access to medicines for all Australians. The reforms in this bill will guarantee that the PBS continues to provide this essential service to Australians while at the same time ensuring that every precious health dollar is spent effectively.
The proposed changes to pricing policies recognise that competitive pricing already exists in the market for many PBS subsidised medicines, but the changes acknowledge that Australian taxpayers should be benefiting from this market competition and the lower prices that result from it. The reforms will result in no extra costs for patients. In fact, patients will benefit from price reductions where the price of a medicine falls below the general co-payment amount. The direct saving to consumers from these new measures is independently estimated to save general patients on average close to $3 per prescription.
During this debate some members have raised the issue of consultation with industry on these reforms. The government negotiated collaboratively and closely with the pharmaceuticals industry to develop these reforms. Both Medicines Australia, which represents about 50 companies, and the Generic Medicines Industry Association, which represents five companies, were involved in discussions with the government and were asked to provide proposals to enhance the sustainability of the PBS. Discussions with Medicines Australia proved to be very fruitful, and the matters agreed between Medicines Australia and the government were ultimately given expression in the memorandum of understanding.
On multiple occasions, GMiA was able to discuss options for reforms to the PBS with the government, including with me, as the minister, in my office and with senior officials of the Department of Health and Ageing. GMiA had a good hearing and the government valued the exchange of views. However, I do need to note here that GMiA’s key proposal to the government in these discussions was that patients should be made to pay some $5 more for off-patent medicines made by originator companies compared to the same drugs made by generic companies. This proposal would have resulted in concessional patients paying nearly twice as much as they currently do for some off-patent medicines. The government could not support this proposal. Notwithstanding these differences of view, the government continues to work closely with the industry on how these reforms will be implemented, through a working group which includes GMiA, pharmaceutical wholesalers and Medicines Australia.
I also note that it has been suggested that a vote on this bill be deferred until the Senate Community Affairs Legislation Committee has reported to the Senate on its inquiry into the bill. In fact, I understand that the member for Dickson has now moved such a motion. Of course, this is not the normal procedure which has been followed in the past in the parliament. We are operating in a new parliament and, if that is the will of the House, then so be it. What is being proposed is that the House not pass this legislation while a Senate inquiry is underway. Following the procedures of the past would mean that debates on legislation in the House would be delayed, and usually a Senate inquiry would commence only when legislation moved to the Senate. In recent times, those inquiries have been commencing earlier to enable the quick handling of important matters such as this one. The government would not press for this to be voted on in the Senate before the Senate committee reported on this matter.
We believe that it is an appropriate mechanism for the opposition to reserve its right to state whatever position it likes in the Senate. However, I note that the Liberal opposition have previously indicated that they would support this measure. I do want to record my concerns here that this appears to be an indication that the Liberal Party will oppose this measure with its very significant savings for taxpayers, money which can be used for other important health initiatives, also failing to honour the agreement negotiated and reached with Medicines Australia. We think that the opposition will have plenty of time when the Senate committee reports to the Senate. We will have the capacity to consider those findings when the bill is debated in the Senate. Any amendments passed by the Senate will come back to the House for consideration.
This is the usual way of doing business. I understand that the Liberal opposition do not want to continue with that being the usual way of doing business. We will make an assessment. As I say, the legislation would not be voted on in the Senate prior to the Senate committee reporting but it would absolutely be our preference that this be noted in the House, that the procedures continue and that an opportunity be provided for the bill to be handled in a prompt way at an appropriate time in the Senate.
I thank Medicines Australia for their very cooperative approach through very difficult negotiations. This was not easy for industry or for the government, but I believe that Medicines Australia has been far-sighted in wanting to protect the interests of its members, particularly in providing innovator drugs and ensuring that the PBS is sustainable in the future. The reforms in this bill support a more sustainable PBS, while providing certainty to industry in relation to medicines pricing policy. This was a key factor for Medicines Australia. These changes will ensure that all Australians can continue to benefit from PBS subsidised medicines now and in the future.
Finally in the debate, some members asked whether these reforms would affect jobs, particularly in generic medicines companies. I would like to emphasise that the key mechanism in the bill, price disclosure, captures the price discounting that already occurs in the market. This discounting is a result of decisions by companies, not by government. The government and taxpayers will simply be paying the average discounted price for pharmaceuticals. The reforms will affect both innovator and generic companies as the majority of medicines that are affected by price competition are supplied by Medicines Australia member companies. It can be argued that this sector will be more affected by these arrangements than those companies represented by GMiA.
The policy stability encapsulated in the memorandum of understanding provides a secure environment for future investment. For example, Eli Lilly has announced that it will contribute up to US$50 million to help expand and develop the biotechnology industry in Queensland. Eli Lilly believes the pricing certainty provided by this policy will help to foster investments like this one in Queensland’s biotech sector. In addition, there are 19 medicines estimated to come off patent in the next 12 years which cost the PBS $2.3 billion in 2008-09. Some high-volume drugs will come off patent as early as 2012. Overall, these 19 medicines represent almost 30 per cent of total PBS expenditure and these patent expirees will provide the off-patent sector with significantly increased opportunities to expand their business and jobs.
I commend the bill to the House. It is our preference that the bill be able to proceed to the Senate where it will await the outcome of the Senate inquiry. Obviously, it is a matter for the opposition if they would like to take a different approach. Ultimately, if that is the will of the House, we will be seeking the opposition’s support to ensure that the matter can be progressed quickly in the Senate following the tabling of the Senate committee report. I put on record here our concern that the Liberal Party appear to have changed their position, putting at risk nearly $2 billion worth of savings over the next forward estimates period.
The original question was that this bill be now read a second time. To this the honourable member for Dickson has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question. There being more than one voice calling for a division, in accordance with standing order 133(b) the division is deferred until after 7.30 pm.