Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Link to this | Hansard source

I rise to speak on the National Health Amendment (Pharmaceutical Benefits) Bill 2015. This bill seeks to amend the National Health Act 1953 to implement measures in the PBS Access and Sustainability Package. My colleagues in the other place have talked about the failure of this government to consult Labor over substantial amendments to this legislation. In the time the legislation has moved from that place to this one, the level of consultation has not improved at all. So I am glad that the economics committee did have the opportunity, albeit a very short one, to have a look at the bill in more detail. This is an important piece of legislation because it includes changes to the Pharmaceutical Benefits Scheme and it includes measures that give effect to agreements with the generic medicines industry of Australia and Medicines Australia and, of course, the Sixth Community Pharmacy Agreement, the new five-year agreement with the Pharmacy Guild of Australia.

Labor is rightly concerned about potential unintended consequences because of the lack of consultation and the lack of scrutiny. This is becoming typical of this government; it is their way of operating. They make changes to legislation that have the potential to harm some of our most vulnerable Australians, but they shut down conversation until the very last minute and then try and ram it through an hour before midnight. In the case of this bill, Labor was only made aware of the detail the night before it was tabled in a briefing from the department. The government knew that the existing pharmacy agreement was to expire on 30 June but have yet again shown their inability to have good-faith negotiations with those they need to. This incompetent and chaotic government has had 12 months to negotiate a new pharmacy agreement. The Fifth Community Pharmacy Agreement clearly sets this out. It says: ''Negotiations for a new community pharmacy agreement will commence 12 months prior to the expiry of the agreement and will conclude by 31 March 2015.' But we know that negotiations did not start until just four months ago and only concluded earlier this month, just one day before the bill was rushed into parliament. And now we have just seven days to give this important legislation, a commitment to spend $18.9 billion, the attention it deserves in the Senate before it is passed. As you would expect from an opposition which is reasonable and responsible, Labor believes it is worth taking the time to have a good look at the detail of this bill in the Senate as we did in the other place.

I now go to the elements of the bill—the PBS package initially. Unlike previous pharmacy agreements this bill seeks to bundle up a series of other measures not directly linked to the remuneration of pharmacists. This is called the PBS Access and Sustainability Package. The government says that this package of measures is designed to deliver 'a more sustainable pharmaceutical benefits scheme with better value for taxpayers, cheaper medicines for consumers and approved access to innovative medicines'. Labor is always concerned when the government talks about sustainability because, as night follows day, it almost always results in massive cuts such as their cuts of almost $800 million to the flexible funds or new taxes such as the current GP tax, which is in fact worse than the original proposal for a GP tax. We know that the government is cutting $800 million from the flexible funds that support vital programs such as drug and alcohol rehabilitation services, mental health services and peak organisations like Mental Health Australia and the Consumer Health Forum. It is also cutting more than $2 billion in Medicare rebates over the forward estimates, something we know from health professionals will see bulk-billing rates decline and many more vulnerable patients facing not insignificant out-of-pocket costs.

According to the government, this access and sustainability package contains more than 20 measures and is designed to achieve $3.7 billion in net savings over five years. It includes $6.6 billion in savings 'across the entire pharmaceutical supply chain', partially offset by $2.8 billion of these savings going back into pharmacies as part of the Sixth Community Pharmacy Agreement. Of the remaining $3.7 billion, the government is promising, though not budgeting for at this stage, that some of this money will be invested in new drug listings. In other words, cuts to the prices paid to drug companies are being used to both prop up the budget and fund the additional money going into the Sixth Community Pharmacy Agreement. The industry newsletter Pharma in Focus declared that 'research pharma companies are by far the hardest hit in contributing to the $6.6 billion in total savings'.

The key components of this package are new PBS pricing policies to reduce the price paid by the Commonwealth for innovative medicines—that is, F1 or formulary 1 medicines—and generic F2 medicines; a supposed increase in pharmacy competition by allowing pharmacies to discount the co-payment; the removal of some over-the-counter medicines from the PBS, which I note may see some patients paying more in out-of-pocket costs; a change in the structure of pharmacy remuneration to remove the link to PBS prices, something that also may increase out-of-pocket costs for some patients; and a provision for pharmacy to expand its role into the community. The government expects the majority of savings achieved by these measures to come from PBS pricing changes.

Firstly, I go to the F1 five per cent reduction issue. Around $1 billion of the cuts from this package come from the inclusion, for the first time, of a statutory price reduction for patented or F1 medicines. The price paid for all patented medicines that have been listed on the PBS for at least five years will be cut by five per cent on 1 April 2016. This is expected to affect 400 medicines. Newer medicines that reach their five-year anniversary on the PBS following that date will take a five per cent price cut on the following April.

The government argues that delaying the price reduction for five years after listing is intended to give manufacturers time to recoup their investment cost. Prior to this agreement, Medicines Australia argued that drug companies had been forced to take significant cuts in recent years, most notably as a result of expanded and accelerated price disclosure, and reductions could put at risk Australia's access to innovative new medicines. The industry argues that it is in the F1 phase that it recoups its research investment. It says it would affect the listing price of new drugs, because part of the price struck was directly related to the price of comparable drugs. It also warned that the proposals made it more likely that some medicines would be delisted and could impact on research and development worth over $1 billion.

However, the 2013 report by the Grattan Institute found the opposite—that Australia is paying more than many Western countries for pharmaceuticals in general and more than New Zealand for patented as well as generic drugs. I also note that there is some uncertainty about the status of the agreement with Medicines Australia, largely due to the incompetence of this government and its obvious inability to work with industry collaboratively or negotiate in good faith.

Secondly, I go to the question of F2 price disclosure. Generic and off-patent medicines, also referred to as F2 drugs, are, as a result of Labor's reforms, subject to accelerated price disclosure, which requires the suppliers of these medicines to advise the Department of Health of the prices at which they are selling their brands. The government then uses this information to move the price paid by the government closer to the price at which the drugs are supplied in the market.

Under these changes, expected to save $2 billion, from 1 October next year the market price of medicines listed on F2 for three years or more will no longer take into account the originator brand of the drug. This should see lower prices for both government and consumers, as originator or premium brand names tend to maintain higher prices than generic competitors, which draws the average price up. As well as an expected 50 per cent reduction in the price of generic medicines, prices should also fall for general patients, though not for concessional patients, who make up around 80 per cent of PBS prescriptions, as all PBS prescriptions are priced above the concessional co-payment of $6.10.

The third issue is price disclosure. Another change, expected to save $610 million over five years, is the closing of a loophole relating to combination drugs that allows them to avoid price cuts from price disclosure in certain circumstances. The bill has provisions to close this loophole so that price disclosure reductions for component drugs of combination drugs on F2 will flow on to the combination drugs, starting on 1 April 2016.

Perhaps the most significant and the least understood change in the package is what is referred to as a technical amendment relating to 'PBS listing for bioequivalent and biosimilar medicines', which is expected to save the Commonwealth another $880 million. This continues to be an area of significant contention. It involves the insertion of a new subsection into the act allowing bioequivalent or biosimilar medicines to be taken as having the same drug effect as a listed brand.

Another technical amendment allows the minister to determine that a brand is equivalent to another brand for the purposes of substitution by a pharmacist and requires the minister to have regard to any advice on equivalence given by the PBAC. Exactly how this will operate is still unclear, with even the industry at this stage unsure as to the full details of the move. However, on the surface it does appear to be designed to promote across-the-board substitution. This appears to contradict the TGA's biosimilar guideline. While this is currently under review, the existing July 2013 guideline specifically says that a biosimilar's product information should include a statement ruling out substitution. Labor will always support moves to make the PBS sustainable and medicines cheaper for patients, but this issue has not been explained well by the government. In fact, the government has handled this issue very, very poorly indeed.

All of the measures that I have detailed to this point are, in effect, the lead-in to the real reason for the legislation: the Sixth Community Pharmacy Agreement. This legislation encapsulates how the government has, in the words of one commentator, basically raided the drug companies to pay for the additional funding promised as part of the sixth agreement. However, it is deeply disappointing and of great concern to Labor that, while the government boasts of how it has ripped $6.6 billion out of health as a result of these cuts across the pharmaceutical chain, just $2.8 billion is going back into the health system by way of increased payments to pharmacists. The government has made vague promises about some of that money being made available for new drugs, but there is no mention of that in the legislation.

I now move to the pharmacy location rules. A key component of the National Health Amendment (Pharmaceutical Benefits) Bill is the extension of the pharmacy location rules for another five years. These rules generally restrict a new pharmacy from opening within a certain distance of an existing pharmacy—usually 1.5 kilometres in metro areas or 10 kilometres in more remote locations. These rules prevent pharmacies from being placed either within or in a position directly accessible from a supermarket. I do understand the arguments about competition and prices, but Labor believe that community pharmacy plays an important role in our society that goes beyond dollars and cents and, therefore, the location rules deserve our support. As such, Labor do support amending the existing legislation, which sets a 30 June 2015 expiry date for the location rules, to 30 June 2020, but we do so in the context that these rules will be reviewed independently over the course of the next two years. This, of course, is the main reason this bill is now being forced on the parliament with such haste. Were this bill not to pass this month, the location rules notionally would expire on 30 June and, in theory, anyone could apply for the right to open a new pharmacy in any location.

Easily the most contentious part of this legislation is the proposal to allow pharmacists to be allowed to discount the PBS co-payment by up to one dollar for every dispensed medicine from 1 January next year. From the moment this proposal first became public, it prompted a furious backlash from pharmacists, who have argued that it will harm chronically ill patients as it will take them longer to reach the PBS safety net and they will thus be paying for medications for a longer period. This is because the safety net is not, as many have assumed, set at a certain number of prescriptions but set at a dollar amount. In the case of a concession card holder, for example, that is $366. Therefore, with cheaper drugs it means it will take longer to reach the safety net. It is this delay which explains how the government expects to save more than $360 million over five years through this measure.

A couple of points can be made here. First of all, the discount is entirely voluntary. Unlike the cuts applied to drug companies, chemists can choose whether or not to offer this discount to their customers. As the safety net is unchanged, ultimately no-one can be worse off. No patients can pay a cent more for their prescriptions under this proposal, and many, indeed, may pay a bit less. The average concession card holder fills 40 scripts a year, and 80 per cent do not reach the safety net. If their prescriptions were all filled by a chemist offering the discount, that is a saving of $40 a year, which, for many pensioners, is quite a significant amount. I note that the Pharmacy Guild has indicated that it supports the package, 'with the exception of the discounted co-payment, which is a matter for government'. But the fact is that this co-payment is embedded in the package and cannot be dealt with in isolation.

One thing that concerns me about these changes is that people living in rural and regional areas may end up paying more because pharmacists are less likely to discount co-payments where the costs of doing business are higher and competition is lower. No-one will doubt that the costs of living for everyone are higher in rural, remote and regional Australia, but the government are happy to drive costs up even further because, despite the rhetoric, they, frankly, just do not care. I also am concerned about the impacts for Aboriginal and Torres Strait Islander people living in remote areas.

Finally, I wish to go to the question of pharmacy payments. The previous five-year agreement was costed at $15.4 billion; this one, we are told, will cost $18.9 billion over the next five years. That is an increase of $3.5 billion, or 22 per cent, at a time when every other part of the health sector is being cut to the bone and forced to accept a freeze in indexation. This is an increase, but it is an increase in real terms, running at close to double what would have been the case had the amount been linked to inflation; and this does not include an estimated $4.8 billion paid direct to chemists for scripts at below the PBS charge. In total, the government therefore estimates the potential revenue for this sector from the PBS to be $23.7 billion over the next five years. As the Australian Medical Association has pointed out, at the same time as pharmacists are receiving a significant increase in funding and a dispensing fee that for the first time will be indexed to inflation, GPs are being asked to accept no indexation and no increase to their funding for four years, while other sectors such as specialists and radiographers could see their income frozen for five years or more.

This is a proposal that just does not make sense. The government recognises that chemists cannot be viable without a significant increase in funding, while other parts of the medical profession can get by with no change in income for four or five years. The answer, of course, is that they cannot, and it is patients who will pay the cost, either through even higher gap payments or by being denied bulk-billing. This is, of course, just the GP tax by another name. Instead of an up-front charge of $7, it is now a back-door charge of over $8—according to the Medical Journal of Australia—by freezing doctors' incomes and forcing them to pass on the cost to their patients.

Labor welcomes the decision to recognise the work done by chemists and reward them with a living wage, but it is the height of hypocrisy for the government to recognise this in one sector of the health profession while denying such recognition for everyone else. (Time expired)

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

I rise to speak today to the National Health Amendment (Pharmaceutical Benefits) Bill 2015. It is a very problematic piece of legislation for the Senate to deal with. It is problematic because we have a whole range of measures that are packaged as part of this omnibus bill. Many of these measures have huge implications for the health budget and patients. You have to wonder about whether this is a strategic or deliberate tactical decision to force the Senate to pass this package of legislation as a whole rather than allow us to unpack it and deal with each piece of legislation on its merit.

The Sixth Community Pharmacy Agreement is one of the most important measures in this agreement. It is a major component of the legislation. It is worth almost $20 billion and, I suspect, that is part of the reason we are here today, on the eve of the Senate breaking for the winter period, in a rush to pass all this legislation. We did not get the Sixth Community Pharmacy Agreement signed off in time. The result is that we are in a panic to pass the bill by 30 June. The reason for that is, if the Sixth Community Pharmacy Agreement does not get passed the location rules that exist in the fifth agreement lapse and, as a result, we end up with a huge disruption to community pharmacy. The Senate should be concerned that we have had very little time for scrutiny of the bill or any scrutiny of the community pharmacy agreement. We are being asked to rush through a major piece of legislation because we did not conclude the negotiations around the community pharmacy agreement in a timely way.

Importantly for me, as somebody who has expressed concern over the criticisms levelled at the previous agreement, the Senate has been asked to take the government's word that the failings in the last community pharmacy agreement have been rectified. The audit into the Fifth Community Pharmacy Agreement was one of the most damning indictments ever handed down by the audit office and it was a shock to me to read of it. The auditor found that there was very limited basis for assessing the extent to which the fifth CPA met its key objectives. It failed at that very basic level. There was no straightforward means for the parliament or other stakeholders to know the expected or actual cost of the key components. It did not document that some of the $2.2 billion—of $13.8 billion that the Commonwealth was supposed to deliver for pharmacy remuneration—was sourced from co-payments, which were not a cost to government. There were a whole range of things.

The initiatives in the fifth agreement promised $1 billion in savings. They only delivered $400 million. There were a lot of questions about how money was transferred. There were $277 million from professional programs put into a grant to the guild. The audit office could not explain why these programs were transferred or why they became grants. There were all sorts of problems. A number of key government negotiating objectives were only partially realised. There were major shortcomings in record keeping by the department. We had a situation where the meetings between the department and the Pharmacy Guild occurred without minutes being taken. When they prepared the initial agreement the department did not develop a risk-management or probity plan and did not consult with a probity adviser. The list goes on.

Those criticisms were made by the National Audit Office and, to my knowledge, they have not been dealt with in an open and transparent way. The last discussion we had in this chamber around the Fifth Community Pharmacy Agreement was about the findings of the audit office. The next time I stand in the chamber is to sign off on a new agreement, without any clear understanding about whether those shortcomings have been addressed. I have grave concerns about that. I have grave concerns about the way the agreement was negotiated and whether we have a framework now to ensure the Sixth Community Pharmacy Agreement, which is an essential piece of this legislation, meets its key objectives.

We are now being asked to approve the Sixth Community Pharmacy Agreement with $19 billion—because of this rush to do so before the 1 July deadline. A much more sensible thing would have been for the government to remove the pharmacy location rules from the bill, for us to have passed that measure so that we get some certainty in community pharmacy and then to start unpacking the various pieces of this legislation and have a genuine hearing into the merits of each. Instead, we have been told to pass all of this—effectively, with a gun to our heads.

If we do pass this bill, the effect will be that a $19 million agreement goes through with almost no scrutiny. It is fair to say there was a committee process. It went for two hours while the parliament was sitting, while the division bells were ringing. It is remarkable to think that we could have a bill of such importance and with such a truncated committee process. It denies us in this chamber the opportunity to interrogate the legislation in any meaningful way. My concern is that we will end up passing some good reforms—I think there are some sensible reforms in the bill—but deny the parliament the opportunity to ensure we have it right when it comes to the Sixth Community Pharmacy Agreement. I do not make any direct criticism of the guild, in this, because I do not know whether what was negotiated was in the interests of patients or not—and we are being denied the opportunity to do that.

If we look at some of the other measures in the bill, there was the $6.6 billion in savings across the entire pharmaceutical supply chain. That will be partially offset because a chunk of that, $2.8 billion, is returned to pharmacies through the Sixth Community Pharmaceutical Agreement and the remainder, $3.7 billion, is going to be invested in new PBS drugs. That is a good thing, provided it happens. That is not part of this legislation. We are very keen to ensure that that is what that $3.7 billion is allocated to do. We understand that the bill amends the Pharmaceutical Benefits Scheme by implementing agreements with the Generic Medicines Industry Association and Medicines Australia—that the government at least wants to do that—and the bill, as a result, sees a new PBS pricing policy that reduces the price paid by the Commonwealth for drugs on the F1 formula by five per cent after five years, and that measure alone is expected to affect about 400 listed drugs.

Another complex part of the legislation is the change to F2 drugs. From October 2016, the market price of medicines listed on the F2 formulary for three years or more will no longer take the originator brand of the drug into account, and that will deliver significant savings: $2 billion. Another $610 million is saved by closing loopholes relating to combination drugs that allow companies to avoid price cuts as a result of price disclosure. They are measures, by and large, that have our support. They are sensible measures. We think they are changes that will ensure that consumers will pay less for their medications and we think that is a good step forward.

On the other side of that equation there are a number of reports that suggest that five million people using the most commonly prescribed medications will see prices rise—in one report by up to 39 per cent. That is of huge concern to us. When we tested that, one of the arguments that was made was that competition will ensure that we do not see price rises when it comes to medicines, but of course, as we discussed through Senate estimates, there is very little competition, particularly in rural and regional areas where there may only be one pharmacy. It is hard to see what incentive there is for pharmacies to pass price savings on to consumers.

The rise in the cost of medications is a consequence of the introduction of the new handling fee to chemists as part of the agreement. The Greens in general will support one of the positive measures that we think is in that agreement, and that is that the pharmacies will now discount the co-payment by $1 for the provision of generic medicines. We think that is important. However, we do know that the health department wanted to implement a $3 discount policy and we know that the guild fought against it. Again, because of the secretive nature of these negotiations, we do not know how the price of $1 was reached. The total lack of transparency through these negotiations means: could we have got a better deal for consumers? And, if we could have, why didn't we do that? What was the reason that we settled on the $1 discount? It is opposed by the Pharmacy Guild and I think that says a lot about the way this negotiation was reached. I have to say that it is disappointing that the guild would oppose a very small $1 discount on concession card holders. We think that is good policy, particularly when you contrast that with the fact that there is a significant increase relative to the Fifth Community Pharmacy Agreement and we now have an agreement with the guild that is worth around $19 billion.

One of the most contentious parts of the bill is the amendment to the PBS listing for equivalent and biosimilar medicines. It is a change that is expected to save the government about $880 million. It is worth exploring what biosimilars are before we get into the economic argument. With regard to biosimilars, you have a number of new medications—really effective medications for some cancers, some autoimmune conditions and so on—that are made from biological products, living cells. They are very big and complex molecules. They are very different to other existing medications which have small molecules—drugs like aspirin, paracetamol and so on. They are not drugs that are particularly complex—only a few changes in atoms—and they are easily replicated. You can replicate the manufacturing process in a way that ensures that you get exactly the same product every time, regardless of where it is made, providing that the manufacturing facility conforms to a uniform set of standards. But, when it comes to biosimilars, because they are such big and complex molecules and they are very highly sensitive to the environment in which they are manufactured, it is almost impossible to create a molecule that is identical to the molecule that you are trying to copy. So biosimilars are the generic version, if you like, of the original biological medication, but, unlike generics, it is very difficult to guarantee that what you are getting is exactly the same molecular structure, and what flows from that is whether you are going to get exactly the same physiological effects. Every biosimilar medication does have to undergo a range of clinical trials. They need to demonstrate safety and they have to go through the same process that the originator biological product had to go through to show that there are not any clinically meaningful differences.

That brings us onto the issue of substitution. If the chemicals are not identical, should we be able to substitute the original drug with the biosimilar drug? This is where the contention lies. Under this bill, the substitution provision allows pharmacists to substitute a prescribed medication—that is, the original biological medication—with a biosimilar or bioequivalent medication. There is some debate about this in the scientific community. It is true that we do permit substitution for generic medication, but the technical amendment in this bill ensures that it is allowed to happen at a pharmacy level for biosimilar medications. There is a lot of contention about this. One of the things that concern me is that Australia will be one of only a few countries that allows this substitution to happen at a pharmacy level. I do recognise that a number of concerns have been raised about this aspect of the policy. Our understanding is that the TGA's existing guidelines, which I think are currently under review, state that a biosimilar's product information should include a statement ruling out substitution. There are some experts on biosimilars who claim that pharmacy level substitution:

… is not only moving away from best practice but seemingly is about to set itself on a path that will see patients at unnecessary risk.

On the other side of the argument, agencies like the Therapeutic Goods Administration and the PBAC—the Pharmaceutical Benefits Advisory Committee—will not allow biosimilar substitution unless there is evidence that that can occur.

What this suggests, though, is the debate that exists within this area of biological medications and substitution is not settled. That is always a cause of concern for me. I would have appreciated the opportunity to vote on this legislation after having had some time with the various academics and experts in this field to get some assurances that what we were doing is not putting patients at risk. We were denied that opportunity. We were denied it because this bill is packaged as a whole and you have to support the whole thing. Otherwise, we will have an issue with pharmacists getting remunerated and with location rules.

On balance, though, there are, as I said, a number of measures that we support. Cheaper medication for patients at a time when out-of-pocket costs are rising is a positive step forward. We do worry about some of the measures in the bill that will increase the cost of medicines. It is almost certain for a number of common prescription medications. You have to wonder why the government allowed that to occur in its negotiations with the Pharmacy Guild. We think that was a mistake. But, again, it is very difficult to make any firm judgements on that when the only people involved in the negotiations are the guild and the department. There is very little opportunity for any transparency, scrutiny or accountability of that extremely significant and very expensive agreement.

In concluding, we will support this bill, but we do so with the reservations that I have just expressed. We are being asked to pass legislation governing some pretty cutting-edge scientific debates around whether we can substitute one drug for another and what that does in terms of risk to patients. I want to put on record that we hope that some of the concerns expressed by people in this area do not materialise and that we would have liked the opportunity to interrogate those potential risks a little further. We do not think it is good practice for senators who have limited understanding in this area—and I am fortunate that I have more than most—and who want to interrogate this further to be denied the opportunity for a decent committee process where this sort of evidence can be presented and discussed.

Also, we do not think that passing the bill simply because we did not reach an agreement with the Pharmacy Guild in time is good practice. We think that needs to be taken into consideration. We should not be rushing these bills through the parliament. I am concerned about the way the Community Pharmacy Agreement was reached and I am concerned about the issue of substitution when it comes to biosimilars. On balance, though, those other measures are important. We think they are worthwhile and we welcome them. We will support this bill because of the benefit that those measures will deliver for consumers.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

I rise to speak against passage of the National Health Amendment (Pharmaceutical Benefits) Bill 2015. I do so in full awareness that the bill is a proper curate's egg—good in parts—and contains measures designed to increase price competition and deliver PBS savings to the government. In some cases, they may even result in cheaper medicines for consumers. However, the bill also continues the operation of the pharmacy location rules for another five years—a powerful anti-competitive measure. I put on record my opposition to this piece of opportunistic rent-seeking because it benefits the Pharmacy Guild at everyone else's expense.

Both Labor and the coalition support the continuation of the rules which require a pharmacist to obtain federal government approval to open a new pharmacy or to move or expand an existing pharmacy. I hesitate to suggest a direct link, but I note that the guild is a very significant donor to both parties. Generally, a new pharmacy cannot be opened within a certain distance of an existing pharmacy—usually either 1.5 kilometres or 10 kilometres, depending on the area. These rules also ban pharmacies being placed either within or in a position directly accessible from a supermarket.

Several reviews have recommended the rules be abolished. In March, the review of competition policy led by Professor Ian Harper found the rules were anti-competitive and unnecessary, restricting consumer choice and suppliers' capacity to respond to consumer demand. Last year, the National Commission of Audit recommended the pharmacy sector be opened to competition through the deregulation of location and ownership rules. Such reform would produce more efficient service delivery and allow the development of alternative retail models such as pharmacists dispensing medicines at supermarkets.

A decade ago a Productivity Commission review found that pharmacy regulation increased costs for consumers, taxpayers and the wider community. Poor Tony Shepherd: every single good idea he had at the National Commission of Audit has been ignored by the government that commissioned his services. I suspect, however, that repeating the findings of various reviews cuts no ice with many people, because they fail to see the human cost of the pharmacy location rules. To that end, I am going to do what economic reformers and analysts rarely do: I am going to tell a story—or several stories.

In my first story, it is night. A fever takes hold and a mother starts to worry. A bathroom cupboard is raided, but it is full of medicine past its use-by date. A child is bundled into a car. A waiting room is endured. Then a GP provides a prescription. With child in arms, the mother returns to the car then scratches her head: where is a chemist that would be open at this time of night? Should she drive around in the hope of finding a chemist that is open? Driving past the lit-up supermarket, the mother wonders, 'Why is it so hard to find a chemist?'

In my second story, the enthusiasm of a young pharmacist slowly seeps away. She is at home, twiddling on her iPhone, passing the time. She had a short shift today. They are always short shifts. She is just a temp. She used to dream of running her own pharmacy. The dream took hold during her years of business and pharmacy studies. It lingered on after graduation as she did stints in pharmacies far and wide, working for the man. But now the dream of working behind her own counter, building her own reputation in her own neighbourhood and community, is gone. It was a silly dream.

In my third story, over at the Pharmacy Guild headquarters on National Circuit, David Quilty, the guild's executive director, reclines in his office chair. His late-night meeting with the health minister went well. The guild's members, the owners of pharmacies across Australia, will be pleased. The next Community Pharmacy Agreement—a five-year deal between the guild and the government—is much like the last one, and the one before that. The deal will see pharmacy owners continue to enjoy regulations to protect them and subsidies to enrich them. Mr Quilty recalls how he had to explain the regulations to the health minister: 'They ban new pharmacies within 10 kilometres of an existing pharmacy. Of course, this exclusion zone is reduced to 1½ kilometres if the new pharmacy is to be near a GP or supermarket, 500 metres if the new pharmacy is to be in a large medical centre or small shopping centre and 200 metres if the new pharmacy is to be near four GPs and a supermarket. And two pharmacies are allowed in large shopping centres with more than 100 shops; three are allowed if there are more than 200 shops. Naturally, pharmacies that are directly accessible from a supermarket are banned. And the regulations require any new pharmacy to be approved by an authority that includes incumbent pharmacy owners nominated by the guild.'

Mr Quilty chuckles as he recalls the health minister's bemused look. As the Commonwealth car drives off into the night, the health minister shakes her head in the back seat. She ponders the numbers thrown around in the meeting just gone. More than $18 billion from taxpayers to around 5,000 owners of pharmacies over five years: nice work if you can get it, and well above the hundreds of thousands of dollars that the Pharmacy Guild provides in political donations. A wry smile passes over her face as she heads back to the comfort of Parliament House, a place where deals usually involve the government getting something in return for giving something away. She is philosophical. No previous health minister has been able to cut the taxpayer funds flowing to pharmacy owners or remove the anticompetitive regulations that grant them protection—and perhaps no health minister ever will.

This is corporate welfare in its purest form, corporate welfare in response to a sustained campaign of rent seeking. That is, it involves the Pharmacy Guild spending money on political lobbying for government benefits or subsidies, thereby gaining a chunk of wealth that has already been created while imposing regulations on competitors. This, more than anything else, brings free market capitalism into disrepute, not because there is anything wrong with free market capitalism but, rather, because certain industry players are happy to kick everyone else in the teeth while engaging in the economic equivalent of pillage. The rent seeking, opportunism and overregulation in this bill ought to be condemned.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I support the National Health Amendment (Pharmaceutical Benefits) Bill 2015. And, just as Senator Leyonhjelm has his position in relation to the Pharmacy Guild, I support community pharmacies, and I do so unashamedly. In relation to the location rule that Senator Leyonhjelm will be putting up an amendment about, of course he is entitled to do so. I think debate is healthy in relation to this. I was involved in a case for a constituent who had a pharmacy. I do not think he will mind me mentioning it. It was the Midnight Pharmacy in Adelaide, on Frome Street.

Sarah Hanson-Young (SA, Australian Greens) Share this | Link to this | Hansard source

I have been to that place many times.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Senator Hanson-Young has been to that pharmacy many times, and I think many others have as well. It is the only late-night pharmacy, and if you happen to be there between 10 pm and midnight, when all the other pharmacies in the metropolitan area seem to shut down, and hardly any others are open, you will see the Midnight Pharmacy full of parents with their young kids, or maybe the kids are in the car with the other parent. They are getting some urgent medications. This is the sort of situation Senator Leyonhjelm mentioned.

In my constituent's case, the Midnight Pharmacy was in breach of the location rules and had all sorts of technical difficulties in relation to that. But fortunately ministerial intervention prevailed, because there is a safety valve in the legislation. I am grateful to the former minister, Minister Dutton, for appropriately using ministerial intervention in relation to that, because there was a compelling case for that pharmacy to be open. It provides a community service late at night. It is open from 7am to midnight—the longest hours of any pharmacy in South Australia, as I understand it. So there is a discretion. There must always be a discretion in terms of hard and fast rules, but I think, on balance, the location rules do provide a basis for pharmacies to invest and to make a contribution to the local community by providing a service. I do not support, under any circumstances, Coles and Woolworths having pharmacies in their stores or controlling pharmacies. I think that would lead to a race to the bottom. That is my fear. I would rather it be run by as many small community businesses as possible. There are some chains or franchises, such as Terry White, but my understanding is that the Terry White pharmacies are owned by individual franchise owners. So I do not think this image that Mr White owns 150 pharmacies is accurate at all.

This piece of legislation is important, as the Pharmacy Guild points out. This gives effect to the PBS Access and Sustainability Package, which was formally announced by the Minister for Health on 27 May 2015. The government has made it clear, according to the Pharmacy Guild, that the bill's passage is a prerequisite to commencing the Sixth Community Pharmacy Agreement on 1 July 2015. I agree with the guild when it says that this agreement is critically important to securing the future of Australia's 5,450 community pharmacies, the jobs of their hardworking staff and the health care of the millions of patients who rely on them for their medicines. Without the investment contained in the Sixth Community Pharmacy Agreement, community pharmacies face an unsustainable future due to the flow-on impact on the remuneration from PBS reforms.

I think it is fair to say that, on any reasonable analysis, the heavy lifting, in terms of cutbacks in health, has been borne disproportionately by the community pharmacy sector. I disclose that I happen to have two cousins who are pharmacists, and they tell me first hand of the pressures they face in their businesses. They are not gilding the lily. They tell me about the pressures that they face as community pharmacists—about the hours they have had to cut back for staff, as a result of accelerated price disclosure. I disagree fundamentally with the government for going back on its word in terms of accelerated price disclosure. The shocks were too sharp and too severe for community pharmacies in this country. Price transparency is of course unambiguously good thing, but the way it was implemented caused a lot of harm to the community pharmacy sector. We know that there have been a number of layoffs from the 60,000 employees. I have spoken to a number of pharmacists who are really, genuinely doing it tough. The goodwill of their businesses has been destroyed at the stroke of a government pen. All I ask is that there be some equity in this. If there are going to be savings and cutbacks in the health system it needs to be done in a way that is proportionate and fair and does not adversely impact on consumers and patients. That is my concern in relation to this. I unambiguously think that we need to have that debate.

I welcome Senator Leyonhjelm's amendment about the location rules. I think it is healthy to debate and discuss these issues. I have had one experience with location rules. Peter Angelos operates Midnight Pharmacy on Frome Street in the city near the corner of Wakefield Street. I am not sure if I am allowed to give a plug to a business as this is being broadcast through the national broadcaster, but I will say that he, like many other community pharmacists, provides a valuable service. This service is a good service because it is there for consumers who, after being in hospital or having taken their kids to the Women's and Children's Hospital, invariably get referred, late at night, to the Midnight Pharmacy on Frome Street.

I think we need to be very careful about changing the location rules, because, with 425 country towns only having one pharmacy operating, the consequences of losing a pharmacy in such a community could be devastating. It could also be very concerning in a particular suburb, where people have to travel even further to see a local pharmacist to get the quality advice in terms of that frontline of medical services that pharmacies give.

I think that the Sixth Community Pharmacy Agreement, whilst by no means ideal, does give some breathing space for community pharmacies. I think there needs to be transparency. Let us see how they are doing. I think they are very happy to open their books in terms of how pharmacies are doing, as other members of the medical profession should be. But if you look at the savings in the health sector, it seems that community pharmacies have borne a disproportionate burden in relation to that.

I want to raise one issue with the minister, which has been raised by the Generic Medicines Industry Association in a circular letter to senators. They have asked us to consider and remember that the proposed legislation makes a technical amendment to the National Health Act that will enable substitution to occur if appropriate. It does not mandate that that substitution will happen, and therefore the questions that I put to the minister—and I hope she is in a position to answer them—are, and I am quoting directly from the GMiA letter of June 21:

Do you trust the TGA to assess medicines for quality, safety and efficacy?

And the letter states:

Just like all medicines in Australia, biosimilars have to be approved by the TGA and meet stringent quality, safety and efficacy standards. Therefore Australians can be assured that biosimilars used in Australia have passed the test for safety. There are no special leave passes on safety for biosimilars.

The next question is:

Do you trust the PBAC for all products that are currently available and publically funded?

The commentary in the GMiA letter is:

The PBAC is an independent committee of experts who make decisions on a $10 billion annual budget. Over five years, this is a bigger budget than the Community Pharmacy Agreement. If you trust this committee to make decisions to list new medicines on the PBS, why wouldn't you trust them to follow the same principles of evidence-based decision making for biosimilars?

The GMiA says that if the answer to these questions is yes they urge us to support the passage of the legislation. So I just wanted to get some clarification in relation to that. In terms of biosimilars, I think it is reasonable to ask what the safeguards are—that you are actually getting precise substitutions so it is the same medication and it will have the same effect on the patient. I think these are important issues that need to be considered. Having said that, I look forward to the passage of this particular bill, and the debate in the committee stage.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I thank senators for their contributions to the debate on this bill, the National Health Amendment (Pharmaceutical Benefits) Bill 2015. I can assure the Senate that this government understands the importance of the bill not only to senators and to the people in the states and territories they represent who use PBS medicines but also to the pharmacies, manufacturers and distributors who supply them.

Australians rely on the PBS for affordable access to medicines wherever they may live, whether occasionally or often or for acute illness or chronic disease. It is becoming clear that it is no longer a case of whether you are rich or poor when it comes to many new medicines. The new treatments people are seeking are so complex and expensive that they are out of the reach of almost everyone without subsidy under the PBS.

The amendments in this bill support eight elements of the broader access and sustainability package of measures that will help the PBS to meet the challenge of listing of new medicines. The package is the result of extensive consultations and negotiations which, for the first time, included stakeholders from across the PBS supply chain. It reflects the input and ideas of all sectors and contains savings from all sectors. Those negotiations have resulted in the government making the sixth community pharmacy agreement with the Pharmacy Guild of Australia and signing a five-year strategic agreement with the Generic Medicines Industry Association. The agreements recognise that everyone must contribute in order to share the benefits.

In relation to biosimilar medicines—and I note the issues raised by Senator Xenophon—when it comes to deciding whether and on what basis medicines should be listed on the PBS, the government relies on the expertise and independence of the Pharmaceutical Benefits Advisory Committee. The PBAC has been very forthcoming and transparent regarding its proposed approach to biosimilars. It released information from its April 2015 meeting and a statement on the safety of biosimilar medicines last week. The PBAC has indicated that it will consider a biosimilar for listing only if it has been approved by the TGA as having comparable safety and effectiveness to the original biological medicine. The PBAC will take its information into account, along with other relevant information, when assessing whether a biosimilar should be listed to allow substitution by a pharmacist.

We should note that the changes in the bill relating to substitution are technical only and are designed to provide clarity for all stakeholders. In fact, the proposed changes relate to any medicines, not just biosimilars. The changes align with the department's current practice and will ensure a transparent and legally robust framework in which decisions regarding the substitutability of PBS medicines can be made. With or without these amendments, the PBAC will continue to advise on the PBS medicines that can be designated as schedule equivalent—that is, substitutable by a pharmacist.

This has been a difficult topic to navigate during the debate both inside and out of the chamber. There has been a lot of information and perhaps some misinformation circulating on the merits or otherwise of the use of biosimilar medicines. As my department has advised the Senate previously, the PBAC always intended to hold a stakeholder forum to discuss and consult on implementation. Invitations to the forum were sent last week to stakeholders, including consumers, clinicians, the pharmaceutical sector, state hospital advisory bodies and the TGA. The forum will be held on 7 July 2015. The PBAC is keen to hear views regarding the application of its recent recommendation about biosimilar medicines and receive feedback on how it will work in practice.

Senators can be assured that the government is confident that reliance on the expert advice of the PBAC is an appropriate way forward. The PBAC will recommend listing or substitution of biosimilar medicines on a case-by-case basis only after their own assessment and where the data is supportive of this. Importantly for consumers, the PBAC will continue to carefully consider the balance of issues, including timely access to new biosimilars, lower costs and the appropriate safeguards for prescribing and patient use. In concert with the work of the PBAC, the Therapeutic Goods Administration is also undertaking consultation on its guidance with respect to biosimilars.

This government, the department and the PBAC recognise the importance of this issue to stakeholders and the importance of this issue globally. To complement the PBAC's stakeholder engagement, the government has committed up to $20 million that will enable an education campaign for consumers and specialist clinicians on the efficacy and safe use of biosimilar medicines. I hope that this assists in providing information to senators, in particular in response to Senator Xenophon's queries.

In relation to other measures, we have heard arguments both for and against pharmacy location rules—how they impact on competition and how they are important for maintaining access to medicines across our cities, country towns and rural centres. This government supports their continuation over the life of the next agreement. This government also supports transparency and evidence based decision making. The review of pharmacy remuneration and regulation, including location rules and wholesaler arrangements, will provide the information needed to ensure that the components of the PBS supply chain are remunerated and regulated appropriately and can operate effectively.

There are also a range of views regarding the merits of community pharmacy expanding its role in health care. An important aspect of introducing new programs is that they will be piloted and evaluated to make sure that these expanded health services are cost-effective and clinically appropriate in the pharmacy setting. In the meantime, the sixth community pharmacy agreement will provide revised remuneration arrangements that will enable pharmacies to innovate and transition from a focus on medicine supply to a focus on medicine management and pharmacy services.

I appreciate the points made in support of our pharmaceutical manufacturers, wholesalers and distributors. Providing access to new medicines and breakthrough treatments will continue to be a major driver for the PBS. We certainly cannot do it without the innovation and quality provided by our innovation and generic medicine sectors or the efficiency provided by the PBS distribution network.

The PBS is designed to pay a fair price for effective medicines, but that is only part of the equation. As you have heard before, the PBS comes at a price. We have an ageing population and increasing rates of chronic disease. New medicines are increasingly complex and expensive. The savings from price reductions in F1 and F2 will continue to support subsidies for new and innovative products. This government has improved listing times for medicines on the PBS and will continue to do so.

The changes in this bill are the result of extensive consultation with a wide range of stakeholders, and they are reasonable. The package contains savings contributions from all sectors of the pharmaceutical supply chain, with benefits to consumers through cheaper medicines, enhanced pharmacy services and funding for access to new and innovative medicines. The measures in the package move the focus of PBS funding towards treatments that would otherwise be out of reach for individuals and important advances in therapy and expensive, complex medicines for serious conditions.

I thank senators again for their comments and I thank all the stakeholders who have worked with the government to develop the proposals and agreements, and who will continue to work with us during the implementation phase. This is a balanced package of measures which provides fair outcomes for pharmacy, the medicines industry, patients and the Australian community. These changes deserve to be supported. They will help strengthen the PBS into the future. They are reasonable, they are necessary and they are needed now.

Bill read a second time.