Healthy Skepticism Library item: 10263

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Publication type: news

Ranald P.
AUSFTA pressures drive changes to PBS policy
AFTINET Bulletin 2007 May
http://www.aftinet.org.au/

Notes:

From AFTINET Bulletin No. 137 May 2007

Full text:

Health Minister Abbott introduced legislation on May 24 proposing changes to the Pharmaceutical Benefits Scheme (PBS) that he claims will lead to savings for the government of $580 million over four years.

These savings are due to lower wholesale prices paid by the government for generic versions of some common medicines with expired patents. Some of these lower costs will be passed on to consumers through reductions in the PBS subsidized prices we pay at the chemist, currently $4.90 for pensioners and $30.70 for others.

But hidden behind these trumpeted savings is an important change to the pricing of new medicines that are patented, which will mean that pharmaceutical companies can charge very high prices for them. The PBS has in the past kept the wholesale prices of medicines low by comparing the cost of new medicines with the cost of existing medicines with the same health outcomes, known as reference pricing. Prices in Australia are three to ten times lower than in the US because of this policy.
Pharmaceutical companies and the US government argued that reference pricing was a violation of their intellectual property rights when the AUSFTA was negotiated, and have lobbied for changes both in public through the media and through the joint US-Australia Medicines Working Group set up under the AUSFTA. AFTINET has obtained some papers through a Freedom of Information application that shows that such changes were discussed at the Medicines Working Group in January 2006, well before they were first announced by the government in November 2006.

The legislation introduces a new category of medicines known as F1, which will not be subject to reference pricing, and for which the government will pay much higher prices. This is a change that the pharmaceutical companies and the US government have strongly supported.

The government calculates that the reductions in price for generic medicines will outweigh the higher prices for new medicines, but this may not be case in future.

Moreover, some of the higher costs of new medicines to the government may be passed on to consumers. Over the last few years, pharmaceutical companies have been allowed to charge “special patient contributions” and “brand premiums” for PBS medicines on top of the usual PBS subsidized prices paid at the chemist. These can range from a few dollars to hundreds. Health academic Dr Lesley Russell in an article published in the Age on May 8, 2007, estimated that extra charges now applied to one in every six PBS medicines. In some cases, doctors can get an exemption from these extra charges for patients if they show that there is a specific medical need for that drug rather than a cheaper one. But not all doctors do this, and there are no figures on how many patients are actually paying the extra charges.

The PBS Bill section 85b (4), (page 8 of the explanatory memorandum), states that the Special Patient Contribution will be imposed where the Minister and the drug company have been unable to reach agreement about prices.

The patient would have to pay this except “in very special circumstances” where a doctor certifies that other cheaper brands are not suitable. This is a development which could undermine the principle of uniform affordable prices for medicines through the PBS.

What we do know is that many Australians are missing out on prescription drugs and other heath care because of rising costs. A recent international study by the Commonwealth Fund health policy think tank found that 34% of Australians have not filled a prescription, or have not had recommended tests, or failed to see a doctor, because of costs.
In the UK that figure is only 13%, and in Canada it is 26% (www.pharmacydaily.com.au, May 18, 2007).

AFTINET is working with health and consumer groups to analyse the legislation, which is likely to be referred to a Senate Committee for review over the next few weeks. We will provide more information and may ask members to send a strong message to the government against undermining of the PBS.