Jennie George (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Environment and Heritage) Share this | Hansard source

I am pleased to have the opportunity to speak on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 before us because it relates to issues of major concern to the people I represent in the electorate of Throsby—that is, access and affordability of health services and, specifically, access and affordability of medicines which are essential. As our shadow minister indicated in her contribution this morning, Labor is very committed to the PBS and to strengthening it for the future.

The origins of the PBS date back some 60 years, with the first benefits flowing in June 1948, when the then Labor government decided that penicillin should be made available to all Australians, rich or poor, free of charge. The origins of the scheme had always contemplated social equity outcomes and the principles of accessibility and affordability. There is no doubt that, since the forties, the PBS, as it operates in Australia, has become the envy of many people around the world for its ability to control costs to consumers while at the same time having a workable and predictable system for the industry as a whole. The principles which underlie our PBS are those which say that drugs which are both effective and cost-effective should be made available to all Australians, with a subsidy provided by the government to maintain a measure of affordability. On my understanding and from reading what other people say, it certainly has provided an excellent model for the robust assessment and funding of new medicines. Sometimes we may get a little anxious about the time it takes for the listing of medicines—for example, my colleague Sharon Bird, in the seat of Cunningham, and I ran a very forceful campaign about the listing of Herceptin. We would rather it had been put on the PBS earlier than when it finally was listed, but we do appreciate that there are measures that have to be undertaken to ensure that the analysis is rigorous and that the drugs are provided in a cost-effective manner.

Labor’s approach to the PBS and to the proposed changes outlined in this bill continues to be based on three core principles. The first is ensuring sustainability in economic terms for the long term, and that is particularly important with an ageing population. The second very important principle for communities of the nature I represent is that the drugs required continue to be affordable. As well, we should use the PBS as part of a broader prevention strategy, including the way we manage chronic disease. Our shadow minister addressed that matter in some of her concluding statements on this debate.

Overall, despite any limitations that we might see in the system, Australians do have excellent access to the medicines that they need. And, because there is a robust process for the expert assessment of the cost-effectiveness of new drugs by the Pharmaceutical Benefits Advisory Committee, medicines are ultimately supplied at a price that the government—and through the government, of course, the taxpayers—can afford.

I raise this matter because, in my early years as a member of parliament representing Throsby, it seemed to me that the whole future of our Pharmaceutical Benefits Scheme may have been at serious risk because it was placed on the negotiating table in the free trade agreement between Australia and the United States of America. No doubt at that time the US pharmaceutical companies—which make megabucks of profit from the supply of medicines—would have liked to have the fundamentals of our PBS taken away so that they could maximise their access to our markets at prices that would have been beyond the reach of many people in our communities. I will just quote a statement made by the US Undersecretary of Commerce, Mr Grant Aldonan, at the time that these negotiations were occurring. He said:

There is a sense of unfairness in the United States about these issues because you as consumers pay higher prices under a free market while consumers in Australia and elsehwere benefit from low-reference pricing under schemes like the PBS.

At that time, the community spoke up in support of the PBS. I think it was community protests about the possibility that the PBS might be undermined that led the government to adopt a much tougher stance towards the end of the negotiations than appeared apparent at the beginning. The facts speak for themselves. I refer to a study conducted by the National Centre for Social and Economic Modelling at about that time. It showed that the Australian PBS overwhelmingly benefited low-income earners and the aged. It showed that the poorest 20 per cent of Australians were getting 41 per cent of the benefits of the then $4.5 billion spent on this scheme. Professor Ann Harding—well known to many of us as a very competent economist—described in that report that the PBS was ‘socially just’ because in fact it delivered maximum benefits to low-income Australians and also helped those with poorer health who tended to be older Australians. She said:

The study shows clearly it is a very progressive, pro-poor scheme and it is on the basis that I think the PBS continues to enjoy bipartisan support and the confidence of the Australian community.

As I indicated earlier, at the time the free trade negotiations were occurring, there was a sense in which those very foundations of a very progressive ‘pro-poor scheme’, as Ann Harding described it, could be at risk. Had it been at risk at the time, let us have a look at a couple of examples of negative consequences. The Australia Institute—a well-known research and advocacy body—undertook comprehensive research which compared the prices of the most common drugs in the United States and Australia. The study found that the wholesale prices of the 10 most commonly prescribed drugs were from at least 74 per cent to a massive 306 per cent more expensive in the United States than in Australia.

If you look at the drug Celebrex, which is taken by a lot of Australians to treat arthritis, you will see that the wholesale price in Australia at that time was $24.97 compared to a massive $101.48 in the United States—that is, a 306 per cent increase in the US price over our price. The very common drug Ventolin, which many asthmatics use, costs $11.47 wholesale in Australia while in America that same drug costs $42.90—that is, a 274 per cent price differential. It is great that at the conclusion of those negotiations the foundations of the PBS remained in place, although analysis of those negotiations did point to some loopholes that were still potentially capable of being exploited in terms of the evergreening provisions.

Labor have no difficulty in continuing to assert our support for the PBS. We have no difficulty in saying we want to ensure its economic sustainability but we want to do it in a way in which needed drugs continue to be affordable and accessible to the people we represent. In that regard, I have to say that I think the government does not have a great record with respect to the management of the PBS. Since 1996, expenditure on the PBS has fluctuated considerably. The government has failed to manage the growth in PBS expenditure. In 2005, we saw the government implementing increases in the copayments that patients are required to pay when they have their prescriptions filled.

It is interesting to note that, as a result of those increases in copayments, three million fewer PBS scripts were filled in 2005-06 compared to the previous financial year. It is impossible to know with any certainty whether this reduction in the number of scripts filled was the outcome of a sensible saving measure or indeed, as I suspect, the outcome of the fact that more and more Australians, particularly pensioners and low-income earners, were forgoing their medication because of cost imposts.

Last year we also saw the Minister for Health and Ageing approve special price increases for a range of commonly prescribed PBS medicines, including treatments for reflux, ulcers and blood pressure and for commonly prescribed antibiotics. Once again, patients were forced to pay more because the Howard government was unable to deliver on the implementation of its 12.5 per cent generic price cut policy. So past experience leads me to feel somewhat anxious about whether and how the cost savings that flow from this bill will be affected. At the beginning of every year, many constituents complain to me about the ever-increasing costs of medicines and changes to the safety net provisions. At the start of this year, when the standard patient charge for prescription medicines rose by $1.20 to $30.70 and costs for concession card holders rose to $4.90, people contacted my office saying that, particularly if they are a low-income family with children, $30.70 per script—when in winter two or three children might come down with the same illness, as well as mum and dad—has a substantial impact on their disposable incomes.

So not only did the cost of filling prescriptions rise but also we saw the safety net provisions increase. The concessional rate for prescription drugs rose so it could only be obtained if families spent in the order of $960 in the year. For pensioners, the cap rose to $274. Each year we face endless cost rises, which strike at the heart of the issue of affordability and accessibility. That is bad enough, even though we assume that at the start of the year these charges will increase. What I saw happening in my electorate—and I presume other members have had complaints from their constituents—is that, on top of these increases in the cost of prescription medicines and in the safety net thresholds, hidden surcharges were applied to many common medicines as a result of the government’s inability to deliver price outcomes with the pharmaceutical companies. We were told that, when a cheaper generic drug entered the market, the government was automatically going to slash the price of rival medications by 12.5 per cent. If the drug company refused to price-cut—which is obviously what was occurring—it is the people I represent who pay the difference. Let me take you to a couple of examples that were brought to my attention. Medicines that had a surcharge applied are fairly common medicines. They included Zantac, for reflux and ulcers, for which the hidden surcharge was $4.18. For Tritace, a medicine for blood pressure, the surcharge was $3.25. For Zoton, prescribed for reflux, it was $3.63. For Amoxycillin, the antibiotic, it was $0.58.

It is the fear of the unknown as we go down the route of the amendments to this bill that causes me some concern. Forcing price reductions and trying to establish proper benchmarks in a competitive environment is all well and good, and it helps to ensure the sustainability of the PBS, but we have to ask the question: who is going to bear the costs? If the companies bear the costs, well and good, but if the ordinary citizen has to bear the cost, then that would cause the people on this side of the chamber some concern. I again point to the fact that in 2005-06 three million fewer PBS scripts were filled compared to the previous year. One can only speculate as to the reason for that, but certainly, in terms of the number of people who come to see me, the issue of affordability is becoming a serious matter.

So, in looking at the details of the bill, Labor has no difference with the stated intention of the reform to give Australians continued access to new and expensive medicines while the PBS remains economically sustainable into the future—that is fine as far as it goes. I will not go into the detail, because the shadow minister indicated the specific changes, but provisions cover the creation of formularies for classification of medicines to differentiate between single and branded and generic medicines, the removal of ongoing price links between formularies and the introduction of pricing mechanisms to reduce price to government, including price disclosures for all new brands. They are all welcome reforms. While savings to the government to keep the PBS sustainable are essential, if the savings result in the extra costs being passed on to the consumer, then that would be of great concern to me and the people I represent. The government argues—certainly in the second reading speech when the minister introduced the proposals, and publicly—that the changes will lead to savings of about $3 billion over 10 years, but in looking at the detail of the bill I cannot see the provision that will guarantee that these savings will happen in a manner that does not adversely affect consumers. This is a major flaw in the legislation which I trust will get detailed scrutiny and answers in the Senate.

These PBS reforms are far-reaching and complicated. They are put forward at a time when the rate of growth of the PBS is less than inflation, despite the listing of expensive new products such as Herceptin, which I referred to earlier. They also come at a time when there is growing recognition that many patients go without needed health care and essential medicines because of increasing costs. As well as being mindful of ensuring the sustainability of the PBS into the future, in my view there should be in-depth scrutiny and expert assessment of the health and social costs of the changes encompassed by this bill. In other words, we need more than the bottom line economic indicators of success. We also need to see whether the savings that are going to be affected by the changes to the pricing of medications do not have any deleterious economic and equity outcomes.

With those remarks, let me reiterate what I said at the beginning of my speech, which is that Labor is committed to the PBS. As indicated by the comments of Professor Ann Harding, the PBS has clearly been a very progressive and pro-poor scheme which has served the interests of our nation and our citizens very well. With an ageing population there is the added dimension of economic sustainability, but again I pose the very important consideration that the economic sustainability and the cost savings which are going to be effected should be done in a manner that does not compromise the fundamental principles of the PBS. From the time we provided penicillin free of charge to all, whether they be rich or poor, one of those fundamental principles is the continued access to, and affordability of, essential medications.

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