Alannah Mactiernan (Perth, Australian Labor Party) Share this | Hansard source

Many of my colleagues have set out very well and very powerfully just what the impact of the National Health Amendment (Pharmaceutical Benefits) Bill 2014 will be on so many people. This $1.3 billion tax increase on medicines will impact differentially on the sickest and those on the lowest income levels in our society. It is a tax hike that by its very nature is regressive. We just cannot support it. My colleagues have also pointed out over and over again the fundamental hypocrisy we see here. This $1.3 billion extra impost on sick people is said to be necessary in order to keep this sustainable, yet we find that allegedly this $1.3 billion is going into a health fund and not into the sustainability of the PBS.

I agree with the government—and I think Labor can demonstrate that it absolutely grasped this while it was in government—that there is immense pressure on governments and on parliamentarians to support more and more expensive drugs being added to the PBS. I will talk later in my address about some of the lobbying efforts that go on by the pharmaceutical companies to achieve that. There is no doubt that there is significant pressure on the PBS. I note and understand—and I think I have this right—that Labor got this figure down by introducing an accelerated pricing disclosure mechanism. It was able in its last budget for the first time to claw back some of the cost of the Pharmaceutical Benefits Scheme.

I understand that is not a total answer. There is so much more that can be done to make this scheme far more efficient. This should be the line of attack. It is completely unacceptable that the percentage of genetic medicines in Australia is so much lower than that in comparable countries, such as the United Kingdom, the United States and Europe. We have within our system some I think quite profound structural flaws that are preventing us moving towards a greater reliance on generic medicines. We are actually paying a premium for no additional benefit to the consumer.

Let me go through how this works. Many members will be aware that when a patent expires the first new bioequivalent drug that is added to the PBS has to be at least 16 per cent cheaper than the originator drug and then the generic manufacturers compete for market share by offering the competitor brands to pharmacies for lower prices than the list price paid to the originator. From 2007 we had a move in the right direction when the weighted average disclosed price was introduced. Pharmacists were required to submit sales information, net of discounts, to governments that then calculated the weighted average price. Based on that information the government reduced the price paid for these medicines. I think it is very arguable that there are a number of things we can do to bring those prices down far more dramatically.

An analysis done by Professor Philip Clarke from the University of Melbourne found that Australia pays $1.8 billion a year for the 20 most expensive generic drugs, whereas if we were paying English prices that would be reduced by some $735 million. He used the example of atorvastatin, which costs the Australian government $514 million. If we could pay the same price as the English for that drug, it would cost $119 million. Just that one drug would be saving the taxpayer $429 million. If we were paying the New Zealand price, we would be saving $448 million. These are very substantial savings that can be made.

We have got a couple of structural problems. One of our structural problems is that we are not bringing this new pricing mechanism into the pricing disclosure cycle quickly enough. In England, for example, the pricing disclosure mechanism is undertaken every three months rather than every year. I do note that it was the Labor government that brought in an acceleration of this price disclosure to attempt to bring down the costs of these medicines. But there is also another real structural flaw that I think we have to address. In the United Kingdom, where the pharmaceutical costs are borne by the National Health Service, there is a very great incentive for the provider, the National Health Service, to prescribe the generic drugs.

There is no such incentive for private doctors in Australia to prescribe the generic drugs, because it does not impact on their budgeting in any way as it does impact on the budgeting of the National Health Service. Let me remind you, we are talking about drugs that are considered to be bioequivalents. Whilst there is an incentive for the pharmacist to try to move the generic, because the pharmacist can buy the generic at a lower price than the originator drug, the pharmacist has to persuade the consumer to accept the generic, lower-cost drug. But there is absolutely no incentive for the consumer to buy the lower priced drug. Rather than increasing the co-payment, a much smarter way of going about this would be to consider offering a discount to consumers if they were to elect to accept one of those generic medicines. Whilst that would not change the subsidy that was payable by the government immediately, you would suddenly start finding that the weighted average was very different and you would start getting a much greater percentage of generics.

Let's look at how far we are from some other jurisdictions. In 2010, a survey in the US market found that 84 per cent of the volume of the US market was filled by generic medicines, whereas in Australia only 35.4 per cent by volume were generic medicines and only 12.4 per cent by value were generic medicines. We are not exploiting the financial benefit that we can get from generic medicines in the way that has been done in the United States and the United Kingdom. We are paying far too much for our drugs and we need to add a price signal. If we were really smart about this we would reduce the co-payment for the acquisition of generic drugs, rather than charging an increase on a co-payment. This would start to see us bring that percentage down so that we could get to something that more closely resembles the situation in these other developed jurisdictions. That would then start freeing up money for us to look at funding drugs like Kalydeco for cystic fibrosis sufferers. There is a real need for us to get this in hand, but we are attacking this at the wrong end. We are providing far too much of our PBS money to people on originator drugs.

One of the things that has most profoundly stunned me since I arrived in parliament is the lobbying that is undertaken by the pharmaceutical companies and the sheer number of events that are put on by pharmaceutical companies. The PBS is designed to have a very rational assessment of new drugs that are to be brought onto the system where we look at the drug, compare the effectiveness of the drug to that of any existing drug and then make a sound, scientific cost-benefit analysis. You can look at the pharmaceutical companies and the events that they have just sponsored in the short time that I have been here. There have been sponsored events by Medicines Australia, the Generic Medicines Industry Association, Arias, Diabetes Australia, Rare Voices Australia, Lung Foundation Australia, the Pulmonary Hypertension Association, the Cure Brain Cancer Foundation and the Australian Self Medication Industry, and National Seniors are trying to get people to lobby for the introduction of vaccinations. The list goes on, and you can understand it. People who have conditions are approached by the pharmaceutical companies to lobby for a drug and presumably to pressure government to accept drugs, put drugs on or promote drugs notwithstanding the fact that we have a very clear, very scientific system in place for the fair and rational assessment to get these drugs onto the PBS.

I totally support the position that the opposition is taking here. This co-payment is unfair. We do need to contain the cost of the PBS so that we can embrace new drugs that are coming onto the market, but let us do this intelligently, let us do this by getting proper benefit out of generic drugs and not overpaying the pharmaceutical companies, which is what we are doing today.

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