Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Ageing, Disabilities and Carers) Share this | Hansard source

The National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 has of course been the subject of a fair bit of attention in recent days, although Labor certainly would have welcomed greater scrutiny of such a significant change to the legislation which manages the PBS. Given the fundamental importance of the Pharmaceutical Benefits Scheme to the health of Australians, Labor would have appreciated more time for the parliament to undertake a longer and more substantial analysis of such complex and fundamental changes and to allow for improvements to be debated. For legislation that was flagged last November, it is extremely disappointing that the government was not able to make draft legislation available to the parliament or to key stakeholders until early May and only introduced this bill on 24 May. Then, without so much as a courtesy call to the shadow minister, the Minister for Health and Ageing threw some amendments to the bill into the mix a week later. Finally—with all respect to my colleagues on the Senate Standing Committee on Community Affairs, who did very well within the constraints served up to them—we saw what can only be described as an extremely truncated Senate inquiry process. The Howard government, I am afraid, makes a mockery of this parliament when it refers a bill to a committee on a Thursday, holds a hearing for half a day on the Friday and expects a report scrutinising the bill to be tabled the following Monday—but that is exactly what we saw with this bill.

While Labor acknowledges that there have been many months worth of planning and discussion about these changes and that industry has been well consulted, there has been too little time available with the legislation before us to really examine the impact of these changes. And, while industry has been generally supportive of the package, consumer groups, academics and other advocates have expressed concerns, too few of which have been adequately examined in recent weeks. The sort of time frame imposed on the Senate committee severely curtailed its capacity to perform the tasks charged to it. As the community affairs committee itself recorded in its report in respect of this bill:

... this very short inquiry has provided insufficient time to analyse the specifics of some concerns raised in evidence, especially in relation to longer term possible impact of these reforms.

Of course, this approach to legislation and long-term reform is exactly what we have come to expect from this government and from this minister. Yet again we are in the position of having to ram through another significant piece of legislation with what many of us feel is totally inadequate analysis or scrutiny.

As my colleague the shadow minister for health emphasised in the other place, Labor knows that the PBS has been the envy of other countries around the world for its ability to control the cost to consumers yet also be a workable and predictable system for the industry. There is no doubt that the changes proposed in this bill are some of the most significant changes since Labor created the PBS. We want to be confident that this is the right step—something that this process has not allowed any participant to feel.

My colleague the shadow minister for health outlined a number of Labor’s concerns in her second reading speech. Firstly, the government asserts that this bill will deliver massive savings—some $3 billion over 10 years. Labor has been trying for months, without success, to uncover exactly where these savings will be drawn from. The government is hiding behind the general idea of ‘savings’ without explaining that the savings are to government, not consumers, and, in the worst-case scenario, may be at the expense of the consumer. These issues were not clarified to Labor’s satisfaction in the Senate committee process, which actually heard evidence from the Generic Medicines Industry Association, or GMiA, which completely contradicted the government’s claim.

The stated aim of the PBS reforms, of which this bill is part, is to ‘give Australians continued access to new and expensive medicines while ensuring that the PBS remains economically sustainable into the future’. This is an aim which, of course, Labor endorses. The shadow minister for health outlined Labor’s concerns in her second reading contribution when she stated that we wanted ‘to be assured and convinced that there were adequate protections for consumers within this package so that family budgets do not bear the brunt of the price reductions to government through increased costs at the pharmacy counter’. When the Senate Standing Committee on Community Affairs asked the department what savings from these changes might be expected to accrue into the hands of the customers of pharmacies, it was told that, while the department was aware of the Pharmacy Guild’s estimates, the department itself had not done any independent modelling. Labor remains concerned that the impacts on consumers have not been satisfactorily explored. The committee itself recognised its own concerns in this regard. In its report on the inquiry into the bill, it stated:

The Committee considers that as the changes implemented by the Bill will have major implications for the sustainability of the PBS and will impact on consumers and taxpayers, the Government should monitor the reforms as they are being progressively implemented and make as much information publicly available as possible.

The committee recommended that, 12 months after the implementation of the reforms, the minister report to the Senate on the impact of those changes, particularly the cost of medicines to consumers. Labor supports this recommendation and will move amendments to this effect.

The second area of concern is the impact of these legislative changes on the generics industry. As was noted in the committee’s hearings, generics have not had the market share in Australia that they have had in other countries, and the changes in this legislation do not provide any price signal to consumers to encourage greater use of generics. The common theme and criticism of this reform is that it does not do enough to facilitate the development of—and, indeed, may lead to the erosion of—the Australian generic medicines sector. Labor has always seen a strong generic sector as essential to increasing price competition in the Australian medicines sector, to reduce the cost to government and to ensure the future sustainability of the PBS. Labor would have welcomed a greater opportunity to explore some of these suggestions put forward by representatives of the generics industry at the Senate inquiry—for example, the use of financial incentives for consumers to use generic medicines—but, as I have already commented, the time frame in which we have been operating has severely curtailed any investigations of this nature. The government did announce in the budget a $20 million public awareness campaign to promote the use of generic medicines. Labor supports this campaign and will be monitoring its rollout to ensure that it is effectively targeted.

In addition to the issues already raised by Labor, a number of additional issues were explored in the Senate inquiry—firstly, concerning the transparency of processes being implemented by the department. As I noted earlier, the industry has been well consulted with regard to this package and is generally supportive of the reforms. However, it seems that not all have been equally consulted in the negotiations. Concerns have been expressed by the generics industry, consumer groups, academics and other advocates that they have been locked out of some discussions, with particular concern regarding the composition of the Access to Medicines Working Group. While the department argued that this working group essentially formalises the long-term, frequent and informal relations between the Department of Health and Ageing and Medicines Australia, and sometimes also the PBAC, concerns remain among other stakeholders that this group would inform decision making and that those stakeholders excluded from the group would also be excluded from the decision-making process. While representatives of the department argued that there would be a process of consulting and engaging with other stakeholders if anything were to come out of this group that would affect others, concerns around the transparency of the body remain. The Senate committee recognised these concerns in its third recommendation, which was that the department make publicly available information on the outcomes of the process being employed to effect the changes contained in the bill.

The treatment of combination products was another area of considerable discussion in the committee process. Combination products are products made up of more than one chemical, where pricing is usually based on the sum of the cost of the individual components, in accordance with PBS guidelines. The bill proposed a separate list for single brand fixed dose combination products and states that the price of these products would be linked to the price of the component parts. This would mean that the price of the combination products would fall in accordance with the mandatory price reductions for the component parts of the products. As I said, this is a complex piece of legislation and a half-day inquiry is not enough to be able to get your head around these sorts of issues.

Medicines Australia suggested to the Senate committee that the reform package could be improved by amendment to the way in which combination products were treated, recommending that single brand combination products should be classified into the F1 formulary, where they would effectively be protected from the mandatory price reductions to the F2 formulary. The department in turn argued that ‘the treatment of single brand combination products under these proposed reforms is highly consistent with the way in which combination products are currently priced’ and would ensure that the combination products would not be ‘priced in a different way to the component parts’. The committee considered this evidence and in its conclusions acknowledged the need to ensure that, ‘when a combination drug has been demonstrated to be no more effective than its component drugs, the level of the subsidy for the combination drug should be no more than that justified on the basis of its components’.

The committee subsequently recommended that the bill be amended to allow the minister, in determining the price of a combination drug when a statutory price reduction applies to its component drugs, to take into account the advice of the PBAC on whether the combination drug has advantages over its component drugs or other alternative therapies. In providing such advice the PBAC should consider evidence of significant improvements in compliance, clinical benefit or reduced toxicity associated with the combination drug compared to alternative therapies.

The government has moved amendments to the bill to reflect this recommendation. The amendments essentially represent a compromise between the proposed approach in the bill and Medicine Australia’s argument that combination products which provide an intrinsic value over and above their component parts should be treated differently in the formularies framework. Labor supports the government amendments, which will require PBAC to determine and advise the minister whether a combination product itself has an intrinsic value over its component parts which compels that the combination product should have a price advantage.

New section 101(4A6) provides guidance to the committee as to the factors it should consider when determining whether a therapy involving a combination item provides greater intrinsic value than its component parts. These factors include a significant improvement in patient compliance with the therapy or a significant improvement in efficacy or reduction in toxicity.

The department has noted that there are currently around 50 combination products on the PBS and that it is their inclination to send this entire list to the PBAC for assessment prior to the implementation of the 1 August 2008 price reductions. Labor believes that this is a sensible approach which will provide certainty to the pharmaceutical industry and flexibility to government.

A further area of concern noted in the Senate inquiry process but not explored sufficiently was around the concept of interchangeability. The bill adds a new provision in section 101(3BA) requiring the PBAC to consider whether or not a drug is ‘interchangeable on an individual patient basis’ and inform the minister. Dr Thomas Faunce, who appeared before the committee, argued that this new concept should be defined in the legislation. Departmental representatives argued before the committee that interchangeability:

... means that these drugs are pharmaceutically related, have the same mechanism of action and provide similar therapeutic outcomes at equivalent doses at the individual patient level.

While departmental officers were able to provide this definition verbally before the committee, it was a more complex exercise locating exactly where this definition was located. The department has argued that there is no need for a definition in the legislation as this is:

... one of the things that the PBAC looks at ... it is really formalising a role that the PBAC already has that has not really been mentioned.

However, the lack of transparency around the concept remains a concern to Labor, particularly as critics of this change maintain that this new concept of interchangeability will raise the burden of proof required to list a drug in the new F2 formulary, creating an opening for dug companies to argue that their drugs are not interchangeable and hence that they should remain in the F1 formulary. Labor remains concerned that this area remains unresolved—and we will keep an eye on how the legislation plays out in this area.

Labor’s approach to health is a compassionate one—we must care for those around us who are ill and need our support. But our approach is also one that goes hand in hand with our economic strategy. Clever health spending cannot and should not been seen merely as a cost but also as an investment in the nation’s future. Drugs play an important role in chronic disease management—they always have and they increasingly will.

Medicines funded under the PBS play a vital role in prolonging the active working lives of Australians. Used responsibly, medicines have the potential to improve both workforce productivity and participation, in addition to saving money in other parts of the health system. Responsible spending on the PBS contributes to improved economic growth and should be seen as an investment, not simply a cost.

To continue to improve participation in the workforce, we will need to maintain and enhance the health of our ageing Australian population. Continued access to medicines through the PBS will play a significant role in improving productivity. Medicines can positively contribute to workplace productivity and economic growth. By treating symptoms and extending life, medicines improve peoples’ activities and functions in daily life, including their physical, social, emotional and cognitive wellbeing. These all contribute to a person’s ability to participate in the community and in the economy—a value we must not forget. Labor will support this bill and the amendments that I have highlighted, but, as I say, we will continue to keep a close eye on how the legislation plays out.