Healthy Skepticism Library item: 342

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Publication type: news

Allen L.
Claims of soaring drug prices under FTA
Financial Review 2004 May 20

Full text:

Drug prices will escalate by an additional $1.5 billion a year under the free-trade agreement, according to a new report by Australian National University academics.

The report could undermine support for the free-trade deal, which was formally signed by Trade Minister Mark Vaile and US Trade Representative Bob Zoellick at a ceremony in Washington yesterday.

The cost of running the pharmaceutical benefits scheme, already the fastest-growing part of the health budget, will rise from about $6billion a year to $7.5 billion, argues a team of patent law and drug industry experts led by ANU professor of law Peter Drahos in a paper to a senate select committee on the FTA.

Labor is still to formally declare its position on the FTA, but trade spokesman Stephen Conroy said last night the party was very concerned by the report.

“Labor will vote the FTA down if [the deal] undermines the PBS,” he said.

“[The PBS] is a deal breaker for Labor.”

Aspects of the deal will require parliamentary approval but the Greens and the Democrats have already promised to block it.

The government went into damage control last night, with the Minister for Health, Tony Abbott, accusing one of the authors of the report, David Henry, of having campaigned against the FTA from the beginning.

“While I accept that he is an expert, even experts can sometimes be wrong,” Mr Abbott said.

“Why would the federal government enter into an agreement that is going to cost us a lot more money?”

A spokesman for Mr Vaile questioned the report’s numbers.

“It’s a fairly spurious number… which creates the illusion of more sound analysis,” he said.

The ANU report focuses on new dispute resolution protocols introduced by the FTA which, it says, will give Australia little choice but to bow to the pressure of big American drug companies. The protocols allowed drug companies to dispute negative Pharmaceutical Benefits Advisory Committee decisions for the first time.

As a result, the report says, drugs will become dearer, although prices will still be below those in the US, where consumers pay two to three times as much as Australians. And the government could be forced to subsidise new drugs that are no better than existing cheaper ones.

“Drug prices will rise because every single lever in the agreement is set up so that when it is pulled it increases prices; it is a completely unbalanced and asymmetrical agreement as far as the PBS is concerned,” said Professor Henry, a University of Newcastle professor of clinical pharmacology and former member of PBAC.

The academics contend that the full effect of the FTA on the pharmaceutical market will not be felt for at least five years because most of the measures apply to new drugs rather than existing ones and because legislation will need to be enacted and regulations changed.