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Thursday, 12 August 2004
Page: 26377

Senator HILL (Minister for Defence) (5:04 PM) —Whilst I take some advice on that particular issue, I will try to answer the previous question that Senator Harris put to me. As best I understood it, there was a concern about price. I want to draw Senator Harris's attention to the very significant growth of generics within the PBS under the existing system—a growth that we believe will continue and that might even improve with the modifications that are included in this enabling legislation in relation to listing. There are now more than 700 generic products on the PBS, covering more than 180 different medicines. They already represent about 20 per cent of PBS-subsidised medicines. As I just said, the role of generic medicines is likely to expand over the next few years as the patents of several high-cost drugs are expected to expire. Somebody made mention of that this morning as if these changes would be a threat to that occurring, which is not correct.

As a matter of interest, the way price referencing works under the PBS is tougher than in most other countries. We have recently strengthened price referencing. We have improved the method for comparing monthly treatment costs within particular groups of drugs. The impact is that, when a generic product is listed on the PBS at a price lower than its branded counterparts, the list price for the branded counterparts comes down to the level of the generic. That is consistent with our view that not only do we want the generics to get a fair opportunity because they provide downward pressure on prices but also we want to make sure that that flows through.

Also, where appropriate, generic drugs are fast-tracked onto the PBS in a matter of weeks and the changes I mentioned a moment ago, we believe, through greater transparency, are going to even further improve that listing process. They should be able to be fast-tracked because they are the same chemical entity as the branded version of the product and therefore do not need to be evaluated by the PBAC.

I would also like to remind Senator Harris of the changes that we included in the 2002-03 budget as a specific initiative to encourage participation by generic companies and uptake of generic medicines by consumers. These included changes to prescribing software to prevent software defaulting to the prescribing of branded product to the exclusion of the generic product, provision of generic medicines information for pharmacists and consumers and to increase awareness and understanding as part of the overall PBS awareness campaign. In exchange for these initiatives, generic companies offered price cuts on a wide range of generic products. As a result of that, the price of dozens of generic products was reduced and their branded equivalent price was referenced to them.

Contrary to what is being said by some, the government is very supportive of generics. It has a track record that demonstrates real efforts to assist the generic side of the industry and that assistance is being manifested in increased access and better price outcomes. As I have been saying for four days, there was nothing that the government was going to do in the free trade agreement with the United States that was in any way going to prejudice the benefits that we see from that growth in generics. We believe it is in the Australian national interest. That growth potential is something we will always determine to preserve.

I think it was Senator Harris who was talking about the purchase of drugs and asking why there seems to be a distinction. As I understand it, it is likely to flow from the fact that Medicade in the United States, I am advised, purchases the drugs and then resells them; whereas the PBS system in Australia is a subsidy rather than a purchase-reselling system. You may well find the language is different because it is being applied to differing systems. In neither case is the agreement intended in any way to reduce the capacity to obtain cheaper products through the generic options.