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Community Affairs References Committee
16/03/2017
Price regulation associated with the Prostheses List Framework

CAMPBELL, Professor Terry, Chair, Prostheses List Advisory Committee

CHAIR: Welcome. I will just double-check that you have been given information on parliamentary privilege and the protection of witnesses and evidence?

Prof. Campbell : I got an email with a bunch of dot points to that effect.

CHAIR: That is it.

Prof. Campbell : I have not molested any witnesses, I promise you!

CHAIR: Sorry?

Prof. Campbell : I have not been molested nor have I molested any witnesses!

Senator DASTYARI: The day is still young!

CHAIR: Sam, can you not encourage people! I remind witnesses that the Senate has resolved that an officer of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers. This resolution prohibits only questions about opinions on matters of policy and does not preclude questions asking about explanations of policies or factual questions about when or how policies were adopted. We have your submission, which is submission No. 1. I invite you to make an opening statement and then we will pepper you with questions.

Prof. Campbell : I do not have very much to say. I can tell you a little bit about the background from which I came, if that would help, or not. If you would prefer not, I do not mind. I am a clinical cardiologist with a background in research and teaching. My background is not particularly in devices and I was pretty clearly not asked to chair this committee because of my expertise in devices. I had a number of years on the old ADEC in the 1990s and a long period on PBAC in the last 20 years. I think I was brought in partly because of that expertise in cost-effectiveness analysis as applied to pharmaceuticals—which I am discovering rapidly is a much easier area to work in than devices—and partly, if you like, as an honest broker or somebody who could try to get a disparate group of stakeholders to at least talk about the issues that have been raised and which you have been talking about for the last two days.

It is turning into a fairly difficult task, and I guess I do not have to tell you that. It is not easy, it is not straightforward. It is not like the PBAC, where there is a single payer, so forth and so on. Our approach to this—we have only had five meetings so far, looking at reforms—is that basically the committee works in two different areas in parallel: one is the reform process, which is what we are mainly talking about today, and the other is trying to keep businesses usual going until such a time as we have got enough of the reform process done to make recommendations to the minister that might change how we do business as usual. But we cannot just stop business as usual, so each meeting will have 100 or more new applications to look at as well as getting on with the business as usual.

The work plan should be available to you; it is available publicly. The membership of the committee is public. We have gone out of our way to make as much as we can public. After every meeting we put out a public statement as to what we are doing. I am still very much at the getting-my-head-around-all-the-issues stage and discussing ways forward. I think it is fair to say that we have looked at pretty much every option that has been raised in what I have seen, and I have only seen a fraction of your deliberations. But for ideas like price disclosure and reference pricing and so forth: as you will see from the work plan, these are the stuff of what we are looking at and how we might go about it. Basically, we are in the process—mid-process—of developing positions on each of those. On none of them do we really have a firm position yet which would allow us to put definite recommendations to the minister. But that is very much my goal, to have that done this year.

Senator DASTYARI: We have had a really fascinating two days of evidence. I am not sure how much of it you have had a chance to listen in on. I am sure a lot of it comes to things that you already know, but for us it has been quite an eye-opening experience.

There appear to be three players involved in this arrangement, if you will. There are the private health insurance companies; there are the hospitals, who sit at the centre; and then there are the device manufacturers.

Prof. Campbell : There are the patients too.

Senator DASTYARI: Well, there are the patients as well. But I am speaking in terms of the transaction, the money flow—

Prof. Campbell : Sure.

Senator DASTYARI: You are right, of course: the patients should be at the heart of it all. There seems to be an element of the circular firing squad, in that each of the three groups blames another group or the other two groups about who is responsible for what.

Prof. Campbell : Yes.

Senator DASTYARI: Beyond that, there is a broader dispute about what actual savings are achievable. All three are represented on your board—is that correct?

Prof. Campbell : All three are on the board. In fact, all four are on the board, because we have consumer reps.

Senator DASTYARI: You have consumer groups as well. I was wondering if perhaps—

Prof. Campbell : Conflict of interest!

Senator DASTYARI: Yes. I was going to say that it seems to be a conflict of interest but also that each of the groups is at pains to protect their part of the patch and say that it is the other groups who are the ones that are costing us. I do not know how we reconcile that, and how you are reconciling that, because it is quite a challenge when there are so many vested interests and people protecting their own patch.

Prof. Campbell : It is a huge challenge; you are right. How I am going to manage it I do not yet know, to be honest. 'So far so good' is a fair enough comment. The first thing I did was to have a very frank and full discussion about conflicts of interest in which I made it plain that I understand everyone in the committee is conflicted one way or another. We make a very big deal as to declarations at PBAC and MSAC, I know. We talk about them if needs be; to some extent that is my call and to some extent it is the whole committee's call.

Senator DASTYARI: But some of them are so obvious. The industry representatives are going to look after the industry.

Prof. Campbell : By definition conflicted, and essentially that is why—

Senator DASTYARI: They are chosen because they—

Prof. Campbell : they are there.

Senator DASTYARI: Yes.

Prof. Campbell : I like to think that I am not representing any of those other than, potentially, the patients. And I like to think that I am reasonable at getting people who disagree to talk about issues and to try to come to some sort of conclusion, albeit one that they might not like. That is going to be tested, obviously. We have not really got down to that really hard call yet, because, as I said, we are still data gathering. The research is being done by people like Philip Clark. Various option papers are being drafted and we will discuss them at subsequent meetings.

Senator DASTYARI: The data-gathering component: to what extent is what you are gathering new data that was not gathered previously? To what extent is this information that was already being obtained by the department, or by others, and that you are just collating?

Prof. Campbell : It is both.

Senator DASTYARI: What is the new data that your committee—

Prof. Campbell : The new data, I hope—and I have not yet seen it—is the data that we will get from IPAA, from Minister Hunt's letter to IPAA, asking for the data they have on the actual costs. As I understand it, it covers public and private.

There have been a lot of comments about visibility over prices, and I do not have any more visibility over real prices than the people who were talking about it this morning. This morning was the only bit of the hearings that I have managed to see. We will see. That should be new data that should give some actual numbers.

Senator DASTYARI: Is that going to be publicly available?

Prof. Campbell : That is not my call. I do not know, to be honest. I do not know who owns the data. All I know is that the minister wrote very recently asking for the data. The data have apparently arrived.

Senator DASTYARI: Are they under obligation to give it to the minister? Is that by choice?

Prof. Campbell : You would have to ask the department that one, I am afraid.

Senator DASTYARI: I think the department is here; I will ask them.

Prof. Campbell : Yes, sure. I presume they are under an obligation if the minister asks but I do not know because I did not ask. That will help because it will give us some sort of a handle on the quantum of the differences, assuming there are differences, and I have no reason to doubt that there will be differences.

Senator DASTYARI: Your committee though does not have device manufacturers who are not part of the MTAA, does it?

Prof. Campbell : I do not think so. I am not sure. We certainly have MTAA reps on it. I did not select the committee. I was not involved in the selection of the committee. It was already selected when I was asked to chair it.

Senator DASTYARI: Did the minister select the committee?

Prof. Campbell : The previous minister selected the committee.

Senator DASTYARI: It is a committee of how many? Is it 15?

Prof. Campbell : It is something like that. I do not have the number in my head. I think it is more like 20 but it might be 15.

Senator DASTYARI: It feels like 20.

Prof. Campbell : And it has got the subcommittees, the clinical advisory committee.

Senator DASTYARI: Are you a full-time professor working on this now?

Prof. Campbell : No, I am full-time Deputy Dean of Medicine at the University of New South Wales.

Senator DASTYARI: That is why I thought you had taken leave for this.

Prof. Campbell : No, but I am putting quite a bit of time into it.

Senator DASTYARI: Is there a secretariat provided by the department?

Prof. Campbell : Absolutely, you are going to be talking to them next, I believe.

Senator DASTYARI: So they are going to come as a part of the department. How does it work? Are you effectively chairing the board.

Prof. Campbell : I am effectively chairing the board. I am effectively herding the cats, if you like, and trying to get constructive discussions going about things we should look into and questions we should ask. The department then goes off and gathers the data and gets the research done. The idea is to bring the various strands one at a time, or some in parallel, together to come up with some recommendations that we will be putting up to the minister that might change things.

Senator DASTYARI: And has the secretariat for that—we will talk to the department next—obviously been provided by the department and is being housed in the department as far as you are aware?

Prof. Campbell : Yes, it is in Sirius in Woden.

Senator GRIFF: What comment can you make of the historical price-setting process, particularly during the 2001 to 2005-06 period when costs skyrocketed substantially?

Prof. Campbell : The only comment I could make is that I am aware of it. I have seen the graph. I have been told about it. I saw what you were told this morning. I have no reason to change it or embellish it other than to believe it. They clearly went up rapidly during that period and went to a level at which they have remained more or less static ever since. Does that answer your question? I am not sure what you wanted me to say.

Senator GRIFF: Being new, I imagine that is all you could say but I just wondered whether you had any involvement with it in the past and had any understanding.

Prof. Campbell : I had no involvement. In fact I had never heard of the PLAC until last August.

Senator DASTYARI: Lucky you.

Senator GRIFF: Why is it not considered internationally and with other state based pricing availability?

Prof. Campbell : It is going to. That is what we are doing. The work plan is to start doing those things. If there is an answer to this issue that you are deliberating about, it is not going to be one answer; it is going to be multiple things in parallel including national and international reference prices and that is what the IPPA data will help us with, for example. It is going to potentially be price disclosure if we can make that useful. It may be a number of other things. The previous minister already started. One of the other possibilities is to take 7½ per cent or 10 per cent off the prices.

Senator GRIFF: Can you explain the 25 per cent rule that is often brought up?

Prof. Campbell : Not very well. It is on my agenda to do something about it and to look into it very carefully. But my understanding is that, if a new player comes along, it is a catch-22, arguably. If a new player comes along with a widget that looks and sounds the same as the existing widgets but does not have 25 per cent of the market—which is unlikely since it is a new player—they do not get a look in, or they did not when the prices were being set, because we do not use that mechanism now.

Senator GRIFF: You do not use the 25 per cent?

Prof. Campbell : Nearly everything that we have looked at since I have been chair has already fitted into one of the existing groupings, and the way it has worked in the past, and the way the 'business as usual' still works till further notice, is that if it is in grouping X then it gets the price of grouping X, if we agree that it belongs in grouping X. There are one or two that are in train where we are using it very much as the new frontier, if you like. They are new and they do not clearly fit into any of the existing groupings, and that is where I am working with my colleagues in MSAC and the TGA, because I think what we need to do there is to do a proper evaluation, and in some cases that has already been done by MSAC as part of their work for deciding on MBS item numbers et cetera, coming up with a cost-effective price. That would then, to me, be a much more sensible starting point for a price than what the sponsor says he or she wants, which has historically been more or less how those numbers were got to until that was stopped in 2005 or whenever it was. Does that make sense?

Senator GRIFF: Yes. Do you expect a staged implementation of the reform process?

Prof. Campbell : Yes.

Senator GRIFF: Over what period of time do you see this?

Prof. Campbell : Obviously all I can do is make recommendations. It is not really up to me over what period they will be implemented, but I am hoping we will be ready with our recommendations, or at least a number of them, well before the end of this year.

Senator GRIFF: And the plan will be to review all existing prices for the 10,700—

Prof. Campbell : The plan at the moment is not to review all existing prices but to look at a number of groups. That is out there in the public domain, and the one we are starting with is hips and knees. We are then potentially looking at cardiac and maybe ophthalmic, the big ones. There are 11,500 items. We are not going to look at all of them in that way. It is just not doable with the staff we have, and I do not see how you could justify creating a staff just to do that. But a lot would follow from those investigations if it turns out that there are strong arguments and a case to be made for lowering the price based on the prices at which they really are cost-effective. I am not second-guessing that, but if they are not cost-effective at current prices we can recommend lowering them.

Senator GRIFF: Who will make that decision? Is that your committee?

Prof. Campbell : The minister.

Senator GRIFF: Will it come up from the CAGs or the Health Economics Subcommittee? Who actually will determine it?

Prof. Campbell : PLAC will make the decision in terms of the wording of a recommendation. Whether it is acted on or not is obviously up to the minister. But, in making that decision, we will be taking advice from CAGs and from our Health Economics Subcommittee, which is health economists who sit on the PLAC.

Senator DUNIAM: I need some help understanding this 25 per cent utilisation.

Prof. Campbell : Yes, I got diverted there, didn't I? I do not think I really finished it.

Senator DUNIAM: I would love you to. I would just like to understand.

Prof. Campbell : I can tell you my understanding.

Senator DUNIAM: Yes, if you could.

Prof. Campbell : If I get it wrong, my departmental colleagues can correct it later.

Senator DUNIAM: Absolutely.

Prof. Campbell : But my understanding is that when it was used—and, as I say, we have not used it in my time to determine a price—the suppliers, or potential suppliers, would get together and submit their prices, and then some sort of average would be worked out. Exactly how that happens in detail I do not know, but the point that I think gets people exercised is that, in order to get a seat at that table and get your price into the prices that would be added up and then divided by N—in other words, to be one of the N—you had to have 25 per cent of the market. So, if you come along with a new device that is a lot cheaper than all of the others but you have not yet achieved significant sales in this country because you are not on the Prostheses List, that is the catch-22 that I referred to earlier.

Senator DUNIAM: Yes. So how was that mandated?

Prof. Campbell : I have no idea, and I do not know that it ever was mandated. It does appear historically to have been used, but I was not involved in it at all.

Senator DUNIAM: You say you have not used it in the deliberations.

Prof. Campbell : We have only looked at—as I said a minute ago—one or two items where in the normal course of events there was no obvious price to give them. Most of the hundreds and hundreds that we have looked at it, even in my short time, have fitted straight into one of the groupings, and the current status quo is they just get that grouping price. I cannot second guess our process; that would not be fair to the new items. We are just letting that go on in the background until any changes that end up being implemented by the government take place, and then we might have to look at the others then, but we would be looking at them in groups rather than individually. So it has been only one or two, and they are not completed yet. We are still negotiating about the price. We are using MSAC processes to do that: cost-effectiveness, health technology and assessment processes, not 25 per cent rules.

CHAIR: I am still a bit confused, do the costs include—

Prof. Campbell : Do you mean costs or prices? I am very sensitive about the difference!

CHAIR: Sorry, prices. I can understand your sensitivity. Does that include service?

Prof. Campbell : I think what you are asking me is: does the benefit that is listed against an item on the prosthesis list include services? My understanding is, yes, but they are not—once again, that is historic, and I really do not know. I think you need to ask the next group that. The processes that I just referred to in terms of new items coming along: we are looking at the device, the prosthesis.

CHAIR: The prosthesis itself.

Prof. Campbell : Yes. I have made this very clear, and I have not had pushed back from the committee, at least not openly, that if there are to be services mixed up with the device, and I understand sometimes they are justifiable, potentially at least, arguable, they need to be separated out so we can see what the widget price is and what the services are—Do we want them? Are they necessary? Are they cost-effective? et cetera—look at the two things separately. I have not had an instance of that came across my table yet, but that would be how I look at it.

Senator DASTYARI: There is a joint replacement registry that shows which are the most effective hip, knee and shoulder replacements that are to be used as the benchmark for devices as the most cost-effective. Why is it there for those and not for other devices? Is it just a function of history, as far as your work?

Prof. Campbell : As far as I am aware, it is largely a function of history. I am aware that the cardiology groups have been trying to get something similar going but have not really succeeded. Just to go back, whether it is there to look at which is the most cost-effective, I am a clear on that. My understanding is that it is a registry and the main metric that it is interested in, and I stand to be corrected on this, is revision rates.

Senator DASTYARI: That is how something like the DePuy—

Prof. Campbell : Was picked up.

Senator DASTYARI: was picked up.

Prof. Campbell : You get a signal. If you are looking at revision rates systematically—monthly or whatever they were doing—you would get a signal: 'Hey, these are being revised eight per cent of the time in two years.' It should be one.

Senator DASTYARI: I assume there would be a cost implication, with people going back.

Prof. Campbell : Of course. Quite apart from the trouble, suffering and cost to the patient, there is a cost to the system as well from having another hip replacement.

Senator DASTYARI: Are you looking at having a registry as part of your process? Is that something that is within the bounds of what you looking at?

Prof. Campbell : I do not think of it as being within the bounds. The registries are traditionally run by either the royal colleges or the craft groups. Certainly we are looking at using what registries are available and encouraging and maybe recommending that has be created. I do not see PLAC as creating them unless, following such a recommendation, we are told to get involved in it. It is certainly not on my radar at the moment as something that PLAC would actually do.

Senator DASTYARI: You are saying that as you understand that it was more around revision rates and that sort of thing. That could easily be adapted, though, to look also at cost and cost effectiveness, could not it?

Prof. Campbell : Well, it could, but it would be a fairly trivial exercise if, as is usually the case in my understanding, they are all really much of a muchness, with the odd exception. You have obviously quite reasonably picked on the exception, but most of them last very well for a very long period of time. Assuming they all cost about the same to the system, which they do, the cost effectiveness is going to be the same for all of them.

Senator DASTYARI: The current system lets manufacturers set their own price, as opposed to medicine companies, which have to negotiate the PBAC.

Prof. Campbell : That is something we are looking at changing. That is partly what the reform process is about. That is what I was getting at when I said that we are going to use HTA, health technology assessment, the sort of processes MSAC use. I have had extensive discussions with my colleague the chair of MSAC, whom I have known for many years anyway—

Senator DASTYARI: Explain to me the difference. With PBAC, PBAC set the price?

Prof. Campbell : Yes, but the PBS is the sole buyer. It is a different situation altogether. PBAC negotiates the price. To be more precise, PBAC looks at whether we are talking about a new drug or a generic. If it is a generic it is straightforward—generally, cost minimisation against the existing products. And at the same time, if it is a first generic, the price of the whole class might—

Senator DASTYARI: Collapse, yes.

Prof. Campbell : Which we are not doing with devices at the moment, but we are obviously looking at doing.

Senator DASTYARI: You are looking at doing that?

Prof. Campbell : Oh, yes. What was the question?

Senator DASTYARI: It was looking at the difference in how PBAC sets prices as opposed to manufacturers.

Prof. Campbell : A submission will come in and they will ask for a price. Very extensive analysis is undertaken—going on for a long period of time; it is a much more organised process—by HTA professionals, who will say, 'Yes, it is cost-effective, but at $5,000, not $10,000.' They will have to either drop their price or tighten up the restriction, as we call it, so that you are giving the drug to those who are going to benefit the most. The effectiveness will vary—

Senator DASTYARI: It is one pool of money.

Prof. Campbell : Yes. Some people may give a marginal benefit and it may be predictable that others will get a bigger benefit. It is not always predictable, but it often is. We may say, 'It is cost-effective for $5,000 in that group, but not in that group.' Then there are tit-tat negotiations but basically they have to either reduce their price or come up with some other way of getting around it if they want the drug on the PBS. They can market the drug if the TGA has already approved it, but nobody in Australia is going to buy it by and large, as opposed to other regimes where—

Senator DASTYARI: From what you have said so far—you are early in the process—it sounds like you are looking at quite a potential wholesale change to how pricing is done.

Prof. Campbell : We are absolutely looking at that. What I am not at all confident of yet is what that might deliver. I am worried, for example, that cutting X million dollars off here will be X million dollars that will just pop up somewhere else, either in the private system or the public system.

Senator DASTYARI: At the moment when do you expect you will have your report to government?

Prof. Campbell : It is not one report; it is an ongoing process. I am hoping that we will be long down the track by the end of the year. We have monthly meetings planned for the rest of the year.

Senator DASTYARI: This is obviously a moving feast, but do you expect by the end of the year to have your first recommendations to government?

Prof. Campbell : Before that. We are not going to bunch them. We will do them as we—

Senator DASTYARI: As you do them, are they going to be in the form of reports to government?

Prof. Campbell : Yes.

Senator DASTYARI: So you will be writing to the minister?

Prof. Campbell : Well, to the minister.

Senator DASTYARI: And then the minister can decide?

Prof. Campbell : Yes.

Senator DASTYARI: We will put pressure on the minister to release it but that is a matter between us and the minister as far as you are concerned.

Prof. Campbell : That is right.

Senator DASTYARI: Do you expect you will have the first one done by the end of the year? It sounds like it is going to take quite a while though.

Prof. Campbell : You have seen how complicated it is. Unintended consequences have been happening again and again if you look at the history of this business. It does not make a lot of sense—

Senator DASTYARI: For those of us who were hoping to have this done and dusted in the next year and a half, is that being too optimistic in your opinion?

Prof. Campbell : It depends what done and dusted looks like. The previous minister did cut the prices of some. That could happen again—tomorrow. That is one way of doing it if you are in a hurry. What I do not know and I think you need to explore before recommending various things, is what is workable and what is not workable and what the unintended consequences might be, so far as we can work them out. That I do not have my head around yet.

CHAIR: Thank you for your evidence.