Healthy Skepticism Library item: 341

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Publication type: news

Lester T.
Trade agreement may threaten PBS
ABC News 2004 May 19

Full text:

KERRY O’BRIEN: The Pharmaceutical Benefits Scheme is one of the pillars of Australia’s health system.

Just ask anyone who has had to buy the more expensive drugs not listed on the PBS.

Last week’s Federal Budget gives an insight into just how much the PBS assists those who require expensive treatment.

In the Budget, Treasurer Peter Costello announced that taxpayers would subsidise two new drugs for about 40 Australians with the rare enzyme deficiency, Fabry’s disease.

The cost – $250,000 per patient, per year.

But with Australia and the US taking the next step towards a free trade agreement in Washington overnight, some are claiming both taxpayers and consumers will be paying more for prescriptions.

Business and economics editor Tim Lester reports.

TIM LESTER: In Washington, a ceremonial signing of the free trade agreement the US and Australian governments hope will win legislative approval in coming months.

In fact, behind the flags and anthems both sides face hurdles.

On the Australian side, one issue could spoil the deal.

Will we pay more for our prescription drugs?

TOM FAUNCE, AUSTRALIAN NATIONAL UNIVERSITY : We think it’s going to be disastrous for the PBS.

TIM LESTER: Canberra medicine and law lecturer Tom Faunce and David Henry, a Newcastle clinical psychologist, helped write a stinging assessment of what the free trade agreement will do to the Pharmaceutical Benefits Scheme that keeps a lid on prescription drug prices that Australians pay.

TOM FAUNCE: As Australians we have a world-class system in the PBS that is being used as a benchmark by even American states.

DR DAVID JONES, MAINE GP: I have a lot of older patients who truly do go without appropriate treatment because they can’t afford it.

TIM LESTER: They just can’t buy…?

DR DAVID JONES: They just can’t buy the medicines.

TIM LESTER: In recent years, Americans have become aware of how much more they pay for prescription drugs than others.

When we met retired American couple Granville and Marie Lamb, they’d found a way around their $1,500-a-month medicine bill — drive across the border into Canada and buy the drugs for half the price.

GRANVILLE LAMB: Well, I don’t think any of them likes to do it, but you do what you have to do to get your drug.

TOM FAUNCE: Australian drugs cost currently about a quarter of the price they do in America.

TIM LESTER: But Tom Faunce and David Henry insist a new review committee to be formed under the free trade deal will change our drug prices forever.

PROFESSOR DAVID HENRY, CLINICAL PHARMACOLOGIST: In Australia, for what we’re paying at the moment, the drugs we’re buying at the moment, we would pay more than $1.5 billion a year more and we would buy no extra health benefits from that.

ALAN OXLEY, FREE TRADE BUSINESS GROUP: I think whoever says that should stop smoking whatever they’re smoking.

TIM LESTER: A former Australian trade ambassador, Alan Oxley, has been lobbying on behalf of business for the deal.

ALAN OXLEY: This agreement changes in no way the Government’s capacity to list drugs and price them and those who claim otherwise are, in fact, telling a very large fib.

TIM LESTER: Both sides concede the agreement lacks detail on just how much power the new review body will have over our PBS.

A Government official told me today all we have to do is have a review process, we don’t have to have a review process the US likes.

But critics would argue — why would the US agree if it gives them no influence?

On this part of the free trade agreement they see the fingerprints of America’s powerful pharmaceutical lobby.

PROF DAVID HENRY: I don’t think there’s any question about it at all.

The pharmaceutical companies essentially rort the rules for multilateral trade agreements and they’re writing the rules for the bilateral trade agreements — they’ve done this before.

They have had the Australian PBS in their sights for years.

This body will really be, I think, the straw that breaks the camel’s back.

ALAN OXLEY: It’s not forcing any decisions.

It’s requiring the people to make the decisions to show how and why they take them.

That’s an improvement for all of us in all parts of life.

TIM LESTER: Even if the review process is that powerless, the agreement’s critics say it will hurt generic drug makers and force Australia to take intellectual property rights much further than we should.

These are among issues that might cause the Australian Senate to baulk at enabling legislation needed for the deal to go through.

Though, if it does, Alan Oxley’s jaw will drop.

ALAN OXLEY: We’d be a laughing stock.

I think other countries would just be incredulous at the idea that a chance to have a free trade agreement with the world’s leading economy and to get some agricultural access, which is so hard to get, it’s almost gold, even it was less than people wanted, they be amazed that someone would turn their back on it.

TIM LESTER: In the US, Congress looks likely to pass the deal.

American business wants it for the Australian access it would give their manufacturers.

The one missing voice so far is Democratic presidential candidate John Kerry.

A spokeswoman for the man who could be elected president before the trade pact comes into force, says John Kerry is still reviewing it and is undecided.

And from the US, signs they’ve used some contentious parts of the free trade agreement very differently to us.

LINDA WEISS, UNIVERSITY OF SYDNEY: American farmers have already been putting quite precise dollar estimates on the gains that they expect to win from eliminating our quarantine standards.

TIM LESTER: This recent assessment of the agreement from one of the powerful American agricultural lobby groups bases all its stated benefits to US exporters on changes to Australia’s quarantine and food safety regulations.

And concludes: “Failure to get these barriers removed will tip the scales considerably against expanded United States exports to Australia.”

But who said anything about changing our quarantine and food standards?

LINDA WEISS: It’s quite clear from all the literature that we can see that the reduction and eventual elimination of our quarantine standards is not just a side-effect of these new arrangements.

It’s actually – it’s a stated goal of both trade officials and US farmers.

ALAN OXLEY: Quite frankly our quarantine system’s in a mess.

Our trading partners are playing games with it.

The European community has taken a major challenge under the WTO procedures against the basic processes.

And what’s wrong with our system is that the processes just aren’t up to scratch.

What the Americans now have the right is every now and again to ask to observe the processes and see how it’s going.

A bit of external accountability will actually improve the processes, I think.

TIM LESTER: Having looked at the views on this from America’s side, politics and economics lecturer Linda Weiss sees a far greater threat to our quarantine standards.

LINDA WEISS: This clean and green status, which gives us a very strong competitive advantage in agriculture and, incidentally, minimises the risk of the use of toxic pesticides, all this is about to be destroyed forever under the deal.

TIM LESTER: In trade deals, the tougher the issue, the more vague the language is likely to be.

That way both sides can go back to their constituents and put a good face on it.

Little wonder the sections on pharmaceutical benefits and quarantine lack some detail.

And already it’s clear on these issues at least – there are different in interpretation on either side of the Pacific.

KERRY O’BRIEN: And of course, there’s a tough road ahead both through the Congress and the Australian Parliament.