Thursday, 28 October 2021
National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021; Second Reading
That this bill be now read a second time.
The National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021 amends the National Health Act 1953 to implement reforms negotiated with the medicines industry to improve and guarantee access to medicines for Australian patients.
1. Industry agreements
The amendments reflect new five-year agreements with Medicines Australia, the representative body for the innovative medicines sector in Australia, and the Generic and Biosimilar Medicines Association, which represents generic and biosimilar medicines suppliers in Australia. These agreements build upon the longstanding partnership this government has fostered with Australia's medicines industry with the goal of supporting Australian patients.
Australians have world-class access to medicines. In the 2020-21 financial year, over 300 million prescriptions for around 16 million Australians were supplied through the Pharmaceutical Benefits Scheme (the PBS). Without the PBS, many of these treatments would be beyond the reach of ordinary Australians. An Australian who, for example, is diagnosed with multiple myeloma, a type of bone marrow cancer, would face costs of around $160,000 per year to access the medicine needed to treat that condition. However, through the PBS, that Australian would only need to pay $6.60 per prescription to access treatment if they hold a concession card, or $41.30 otherwise—a mere fraction of the actual cost of the medicine.
Every year, and in fact nearly every month, new medicines are added to the PBS and access to existing medicines is expanded to new patient groups in line with emerging evidence about the safety and effectiveness of those medicines for treating health conditions. Treatment options for patients are ever expanding and the PBS has continued to expand with them. Since 2013 the government has approved close to 2,800 new or amended medicines listings on the PBS at an overall cost of around $13.9 billion.
The Australian government recognises that this is fundamentally important to Australians—that Australians continue to gain access to the best available medicines. And to that end, in 2020, the government committed to the PBS New Medicines Funding Guarantee. This guarantee safeguards the government's policy to list all medicines on the PBS as recommended by the Pharmaceutical Benefits Advisory Committee, or PBAC. It will deliver new funding each year for the listing of new medicines on the PBS, to be replenished each year to meet the expected cost of new and expanded PBS listings.
In entering new agreements with the medicines industry, the government recognises that delivery of this world-class access in a way that is sustainable over the long term requires partnership with the Australian businesses and industries that supply, distribute and dispense the millions of medicines that Australians need and use every day.
Through these new agreements, the government and the medicines industry have co-developed a comprehensive package of reforms to the PBS:
1. to ensure that Australians continue to gain access to new, breakthrough, medicines as early as possible;
2. to deliver robust and uninterrupted supply of the medicines that Australians need and use every day; and
3. to keep the PBS on a long-term sustainable footing.
The industry agreements do this:
1. by securing commitment from the medicines industry to new savings for Australian taxpayers through improved statutory price reductions which will be reinvested in the PBS—helping to make headroom on the PBS for listing new medicines; and
2. by securing commitment from the medicines industry to holding a greater level of stock in Australia of a number of commonly prescribed and older medicines that, in recent years, have become susceptible to global medicines shortages.
These reforms will generate savings of around $1.9 billion over the terms of the agreements. These reforms also target Commonwealth investment towards securing supply of commonly prescribed medicines that have lower margins and are often in short supply globally.
Increasingly, global shortages are interrupting supply of medicines that are the mainstay of treatment for some of the most prevalent health conditions in the Australian community. Recently, global shortages have interrupted the supply of medicines for high blood pressure and diabetes, and medicines for mental health conditions such as depression, bipolar disorder and schizophrenia.
These reforms agreed with the medicines industry will ensure that manufacturers are better placed to compete for supply of these medicines in the global medicine market and hold greater reserve supplies to buffer the Australian market when interruptions occur. These reforms are critical to ensuring the continuity of access that is so important to the proper treatment and management of common medical conditions.
The agreements with the medicines industry strike a balance between affordable access for Australians, a PBS that is sustainable over the long term, and providing the Australian medicines industry the right conditions for it to thrive, launch new and innovative medical treatments in Australia, and provide reliable supply. The agreements support the medicines industry in a number of ways. They do this:
1. by recognising the importance to businesses that they have certainty about government pricing policy settings;
2. by committing to reinvest savings from the agreements in the PBS; and
3. by supporting industry investment in supply chain redundancies with stable and once-off higher subsidised prices for medicines most at risk of global medicines shortages.
These enhancements to the PBS agreed between the government and the medicines industry are to be delivered through amendments to the National Health Act 1953 made by the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill.
The legislative elements of these landmark agreements are in addition to the significant policy and process reforms committed to in the strategic agreements with Medicines Australia and the GBMA, which include:
This is designed to make sure that that which occurred in 2011, when the previous government stopped the listing of new medicines recommended by the PBAC, never occurs again.
2. Improved statutory price reductions
The savings under the new agreement are to be delivered through improved statutory price reductions that will apply to brands upon the fifth, 10th and 15th anniversary of a drug listing on the PBS, and when the first new brand of a medicine lists on the PBS.
New statutory price reductions
The new anniversary price reductions in the bill will apply:
1. a five per cent price reduction to brands of a drug on the fifth anniversary of the drug being listed on the PBS;
2. a five per cent price reduction to brands of a drug on the 10th anniversary of the drug being listed on the PBS; and
3. a 26.1 per cent price reduction to brands of a drug on the 15th anniversary of the drug being listed on the PBS. This will increase to 30 per cent on 1 April 2027 for drugs that meet their 15th anniversary in the year to that day.
4. Catch up price reductions for medicines that have already been listed for 15 years and have not had these new price reductions apply.
Under current legislation, a company seeking to list the first new brand of a drug on the PBS that is bioequivalent or biosimilar to an existing PBS listed brand of the drug must agree to list at an ex-manufacturer price that is 25 per cent lower than the ex-manufacturer price of the existing brand. These arrangements will continue but will not apply if the existing brand has taken a new 15-year anniversary or catch-up price reduction.
The new statutory price reductions will be capped at 60 per cent off the original listed price of the medicine.
Ministerial d iscretion
Under current legislation, the minister can determine that anniversary and first new brand price reductions should be a lesser amount or not apply at all. These are important powers to ensure that the minister can intervene if a legislated price reduction were to have an unintended adverse consequence—such as the withdrawal of an important medicine from the Australian market. These powers, which are currently legislated to cease after 1 June 2022, will now continue.
3. A medicines supply security guarantee for Australia
In 2019 and 2020, brands of over 500 PBS items were affected by medium to critical impact shortages, with medicines supplied by manufacturers for $4 or less per pack being the most susceptible.
The amendments in the bill will give effect to commitments from the medicines industry made in the agreement to invest in holding greater stocks of medicines most at risk of global shortages and invest in greater supply chain resilience. In return, the PBS subsidised prices of those brands will be maintained at a sufficient level to support industry investment in greater stockholdings and ensure that manufacturers are better placed to secure supply in the competitive global medicine market.
The amendments will require manufacturers, from 1 July 2023, to keep in stock in Australia at least four months of their usual demand for any brand that is protected from further price reductions, and six months of usual demand for any brand where the ex-manufacturer portion of PBS subsidy is increased. This will cover over 600 PBS items when it commences including nearly all PBS brands that have an ex-manufacturer price of $4 or less, which are most susceptible to medicines shortages—in other words, guaranteeing medicines for those most at risk and most in need.
The government and the medicines industry have agreed that the PBS should, in future, only subsidise brands supplied by manufacturers that maintain the required stockholdings and employ business models that support long-term reliable supply. To that end, the amendments in the bill will provide the minister with express powers to make up PBS listing decisions to ensure that this occurs.
The amendments will provide the minister with powers to remove any brand, or refuse to list any brand, supplied by a manufacturer if that manufacturer is not maintaining the required stocks of their PBS listed brands in Australia. And for PBS listed brands that have an approved ex-manufacturer price that is less than $4 and are protected from further price reduction, the amendments will provide the minister with power to remove any brand, or to refuse to list any brand, supplied by a manufacturer if the additional Commonwealth investment for those brands that is intended to support supply, is instead used by the manufacturer to provide discounts to supply chain customers. In making such a decision, the amendments also provide for the minister to take into account the extent to which supply could be compromised in these circumstances and any other relevant matter which would include any potential impact of a decision to remove a brand from the PBS.
Price reduction floor
The investments by the medicines industry in additional stockholdings and improved supply-chain risk management will be supported by the introduction of a new price reduction floor.
The amendments in the bill therefore will prevent PBS listed brands that have an approved ex-manufacturer price less than $4 from taking any further price reductions.
The amendments in the bill will also prevent further price reductions to brands that have an approved ex-manufacturer price that is more than $4 when it is likely that further price disclosure reductions will be detrimental to reliable supply and where it is clear through market behaviour that significant discounting is no longer occurring.
Increases to the subsidised prices of low - cost PBS medicines
In recognition of the already low margins of brands that have an ex-manufacturer price less than $3.50, the increased frequency of shortages for medicines in this category, and the additional costs to manufacturers in holding greater stocks of these brands, the subsidised prices for these brands will be increased.
The amendments in the bill provide for one-off increases to PBS subsidy for brands that have an approved ex-manufacturer price that is less than $3.50. Brands with an approved ex-manufacturer price that is less than $2 will be adjusted to $2.50. Brands with an approved ex-manufacturer price that is more than $2 will be adjusted by 50c to a maximum of $3.50.
In conclusion, the amendments in the bill will deliver a number of enhancements and improvements to the operation of the PBS for the benefit of patients, taxpayers and the medicines industry. Delivery of a program such as the PBS relies on close partnerships with the medicines businesses that support it. The amendments in the bill reflect the outcome of extensive negotiations and could not have been possible without the strong, collaborative partnership between the Australian government and the medicines industry.
I particularly want to thank the negotiation teams from Medicines Australia, the Generic and Biosimilar Medicines Association and my department who have demonstrated incredible commitment to achieving this fantastic outcome that will benefit all parties and put the PBS on the best possible footing to meet future challenges.
In particular I would like to thank Liz De Somer and Anna Lavelle from Medicines Australia; and Jane Halton, Marnie Peterson and Dennis Bastas from the Generic and Biosimilar Medicines Association for their hard work, creativity and ingenuity that they have contributed to the new strategic agreements and the innovative reforms in this bill. From the Department of Health, I want to thank Penny Shakespeare, Adriana Platona, Nikolai Tsyganov and Daniel Chaston for their extraordinary and unstinting work around the clock. And, from my own office, I want to thank Sam Develin and Belinda McEniery for their extraordinary work. They, along with the departmental leaders and all of their teams, literally sometimes have worked around the clock, through the night, in preparing the documents, in helping to solve the problems.
The net result of all of this is lower prices for Australians, better stocks and guaranteed medicines for Australians, and more medicines through reinvestment of these savings in bringing on, earlier and faster, newer medicines for Australians. That is literally the definition of a win-win-win.
Ultimately, the Australian government's commitment to the PBS is rock solid. It is one of the proud articles of faith of this side of the House. It is a commitment we have had, and, whether it's new listings for cardiac, cancer, for genetic conditions and so many others, each time we list a new medicine we know that that is one of the reasons we are in government.
In that context, the reforms provided for by the amendments in this bill reflect this commitment, and will ensure that the PBS will continue to meet the needs of Australians well into the future. Sometimes the term 'landmark' is overused. On this occasion, this truly is landmark legislation to guarantee the supply of and access to medicines for Australians into the future.
I commend the bill to the House.