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Tuesday, 3 August 2004
Page: 25417

Senator ALLISON (5:21 PM) —I rise to speak on the US Free Trade Agreement Implementation Bill 2004 and the US Free Trade Agreement Implementation (Customs Tariff) Bill 2004. I cannot think of any more politically motivated bill that the Senate has had to deal with than the ones that are before us today. The Prime Minister wants to shore up his `man of steel' reputation with the President of the United States, and persuade voters that the free trade agreement is good for us and that the United States alliance depends on it. The ALP has capitulated against all of the evidence that this deal is not a good one for Australia, but it needs to make up for its new leader's gaff in calling President Bush an incompetent. And that, I think, is what this is all about. All Australians will pay for these political motivations.

The ALP are not fooling anyone. They are folding on the FTA because they think that the voters they are chasing are worried that the ALP will mess up our relations with the United States. I think it is as simple as that. I look forward to seeing the ALP's amendments to these bills. Senator O'Brien gave us a summary of what they might look like. They sounded pretty minimal. We will probably support them but we are waiting to see the detail. In fact as I understand it the drafting has not even begun.

This is yet another swindle in this whole sorry affair. We all know that the ALP will not insist on those amendments. It might pacify the Labor Left somewhat. They were willing to be rolled on the 30 per cent copayment increase. So who knows? They may be happy with this small gesture. But we all know that those amendments are not a serious attempt to fix the bills. They are not fixable, and the government will not in any case entertain changes. Publishing decisions on the Internet, Productivity Commission reports annually on the impact—and of course we know there will be one—are all very minor changes to what is a very damaging agreement. The ALP will not insist on their amendments. We know in this place that they rarely do. I think that people can see through that, just as people know that the government did not have the courage to walk away from the table when it became absolutely obvious that the free trade agreement was not about free trade and not about the overall benefits to Australia. I think that Australians have been misled on this issue since day one. The government said that it would walk away unless sugar was in. We all know that sugar is not in. It did not walk away, but we have got an agreement.

Senator Boswell —A $40 million package!

Senator ALLISON —Senator Boswell says that we have got a package. Of course we have got a package. We had to assuage the sugar growers—

Senator Boswell —They are very happy with it too.

Senator ALLISON —They may be very happy with it but it has cost taxpayers a great deal of money in order to make them happy. It has nothing to do with a free trade agreement except that it is another signal that it is a total failure.

The government said that the PBS was not on the table. Again and again I asked the question of Senator Patterson almost 12 months ago: is the PBS part of the free trade agreement negotiations? No, she assured the Senate. Not only was it on the table but it has become the sacrificial lamb. The PBS is what is going to make this so-called free trade agreement a total dud. Now the government says, `Sure, we have agreed to some transparency improvements on the PBS but of course they will not cost anything.' The evidence brought to the committee—indeed, the text if not the recommendations of the committee's report—says otherwise.

The PBS is a world recognised scheme that provides equitable and affordable access to essential medicines for all Australians, and it is threatened by this legislation. It is a central pillar of our health system. Spending on pharmaceuticals saves us money by improving health and delaying the need for more expensive acute hospital based treatment. Access to pharmaceuticals also improves the quality of life for many Australians. The PBS covered around 161 million prescriptions in 2003. The PBS has been spectacularly successful in controlling the costs of these drugs, so successful in fact that it has been copied by other countries. And this is the rub. We are dealing with this legislation because the United States pharmaceutical companies do not want to see Australia's success repeated elsewhere.

So, despite the success of this system, the government has decided to open up the PBS to attack by the big pharmaceutical companies. These companies will not have keeping the cost of drugs down as their primary interest. They will not have keeping open future options for increasing competition within the pharmaceutical industry as their primary interest. Like any other corporation their interest is maximising profits, and no-one would blame them for doing that. That is a simple fact of life. Why, otherwise, would people in the United States be paying three to four times more for their drugs than Australians do at the moment? Why, otherwise, would Americans be going across the border into Mexico or into Canada to buy drugs that they cannot afford to buy in their own country? Australia's health care system and policy should never have been part of the trade negotiation. In fact that is what the ALP chair says in his report. Health and the products and services that contribute to our health are not something that should be traded away for elusive gains in beef or cotton or dairy.

The Australian government misled Australians on the FTA and the PBS. They told us that the PBS was not on the table. They are now telling us that the prices of drugs on the PBS will not increase as a result of the FTA and that any changes are purely cosmetic. If that is the case, then why bother? Why did Pharmaceutical Research and Manufacturers of America and Medicines Australia lobby for these provisions within the FTA? If there is to be no real impact, why can we not remove any reference to the pharmaceuticals from the agreement? Labor's report has clearly outlined the myriad ways in which the FTA can and will impact on the PBS and the costs of medicines in this country. The report identifies point by point four major problems with the agreement as it relates to the PBS. These concerns were raised by consumer groups, professional bodies, industry groups and academics. The Doctors Reform Society said today:

The ALP's acquiescence to the Howard government's capitulation to the power of the already hugely profitable US drug industry will see the cost of the PBS rise unnecessarily over the next few years. Our government's response will be to increase copayments to patients. More of our patients will simply not be able to afford the life-saving drug treatments that are available, and some will die.

Labor is clearly aware of all of the problems and all of the risks contained within this FTA and acknowledges in the report that the agreement could have `unforeseen and unintended consequences down the track'. The FTA is in a sense a living agreement. Further work will take place in forums such as the working group set up under it. Many of the details of what it means and how it will be implemented will be sorted out later—trust us—possibly with the help of the dispute resolution mechanism. We cannot predict the actions of the United States or the dispute resolution mechanism into the future. The chair's report says:

The PBS's capacity to contain drug prices affects all Australians and should not be traded off for the potential economic gains in certain areas of the economy.

However, Labor is prepared to trade away the health of Australians and it limply says that it is `most unfortunate that the Australian government has allowed provisions affecting the PBS to be included in the trade agreement'.

Most unfortunate? Why don't we simply say that we are going to stop this? It is not only unfortunate; it is unwise. While it is true that the free trade agreement does not directly undermine the PBS, it still requires subtle and not so subtle modifications to the PBS which place at risk the effectiveness of the PBS in containing the costs of drugs. The Democrats accept that drug prices will not automatically rise, but there is ample evidence that this is highly probable. It would therefore be irresponsible to support the agreement and just hope for the best. The FTA will link Australia's health policy to the nation with arguably the most inefficient and inequitable health and pharmaceutical system in the developed world and one which has the highest health care and pharmaceutical costs in the developed world. It will give the US, and the US pharmaceutical companies in particular, a greater role in determining the shape and the cost of Australia's pharmaceuticals scheme.

There are many concerns in this agreement. Firstly, the FTA principles are about protecting the rights of the pharmaceutical companies. They do not take into account the principles of the rights of the consumer to equitable access to affordable drugs. The third principle contained in annex 2-C—the section on the FTA that explicitly relates to pharmaceuticals—emphasises the value of innovative pharmaceuticals, while the fourth is concerned with the importance of research and development. These principles will be used to guide changes to the PBS. However, annex 2-C contains no corresponding commitment to the importance and value of protecting public health and protecting universal and affordable access to necessary medicines. The rights of the pharmaceutical companies are explicitly documented, yet the rights of the Australian public are not—they are missing. Our PBS and national medicines policy are both founded on the rights of equitable and affordable access to necessary drugs, and yet these do not get a mention in the agreement.

When disagreements arise in relation to the FTA and the pharmaceuticals policy—and arise they will—a three-member panel appointed to adjudicate will use the principles set out in annex 2-C to interpret the agreement and to resolve disputes. These principles, which emphasise innovation and research and development, will be used to decide whether Australia is meeting its obligation in relation to the FTA. Therefore, whenever these are in dispute, under the terms of this agreement the rights of drug companies will be favoured over the rights of Australians to access drugs. The report of Labor's chair says:

... it would seem that the principles set out in Annex 2-C do indeed reflect the agenda of the US pharmaceutical lobby.

The report also states:

... it must note with some concern the possibility that this part of the agreement could have unintended consequences should a dispute ever arise.

Secondly, the pharmaceutical industry has made much of the need for greater transparency within the PBS process. It has been on about that for a long time. However, in this agreement there would seem to be a substantial imbalance in the provision regarding transparency within the FTA. Under the provisions of the agreement, pharmaceutical companies will be able to request a review of negative decisions to list their product. The Australian negotiators say that this is not an appeals process and will not be able to overturn decisions. But, of course, this begs the question: if this process does not have any influence on the decisions, then why bother to have the process? At the very least, it will introduce another layer of complexity into a listing process and will incur administration costs for the PBS, all in the name of satisfying the demands of the US pharmaceutical industry. At the very least, it provides yet another opportunity to put pressure on the PBAC to reward innovation and research and development. Rather than continuing to make decisions on the public's interest, the PBAC will face yet more pressure to give in to industry demands. A decision not to list a drug already places the committee under pressure from a range of interests, such as consumer groups, medical specialists and the media, and yet more processes can only fast-track the way to higher drug prices.

The pharmaceutical industry's call for greater transparency only goes so far. When it comes to greater transparency regarding the results of clinical trials on a particular drug, the drug companies are very reluctant for this to be publicly released. As many commentators have noted, the commercial-in-confidence rights of pharmaceutical companies are guaranteed within the FTA, yet the public are denied access to drug company data despite evidence that drug companies withhold information that could impact on decisions about the use of drugs. In the United States, Pfizer, the world's largest drug maker, pleaded guilty on 13 May this year to numerous civil and criminal charges for illegally promoting the off-label use of gabapentin, or Neurontin. Evidence provided in this case detailed how the company suppressed study results and promoted the use of this drug for at least 11 off-label uses—that is, uses for which it was not approved. I ask: are the pharmaceutical companies happy for this kind of transparency to be applied to them? The answer is obviously no.

In addition to the review process, the agreement sets up a special medicines working group which will contain health officials from the US as well as from Australia. Unfortunately, there is no role for consumers or public health organisations in this group, and we have no information on what the terms of reference for the group are or what processes they will use to meet the terms of reference. It is essentially a closed shop which allows another country to play a role in the design and implementation of Australia's medicines policy. Again, there is no evidence for this increased transparency that the industry is so keen on.

The Labor report says that it is unacceptable that the government has provided them with so little information on the workings of this group and that they are being asked to take on trust that the government will be able to look after the best interests of Australian consumers in the face of intense pressure from our most powerful trading partner—and pressure there will definitely be. There will not be a lot of trust, I imagine, when things start to go pear shaped, however. Deputy US Trade Representative Josette Sheeran Shiner recently declared in testimony to the US Senate Finance Committee that this group will:

... provide a forum for ongoing dialogue on Australia's system of comparing generics to innovative medicines and other emerging health care policy issues.

Senator Kyl told the US Senate:

During our meetings in Australia we suggested such a working group as a way to guarantee that, if our pricing concerns could not be resolved in the FTA, we could continue to discuss the issue. The subject matters that the group might consider are not limited by the agreement, and therefore can be expected to include the importance of market-based pricing.

So it is quite obvious that United States officials believe that this special working group will influence Australian pharmaceutical policy.

Thirdly, the FTA also contains proposals to put drug advertising on the Internet. This will facilitate direct to consumer advertising, known as DTCA, which is currently banned in Australia. Of course the aim of direct to consumer advertising is obviously to increase consumer demand, which it does very well. DTCA is frequently aimed at increasing the use of more expensive, but not necessarily therapeutically superior, brand name medicines. Already drug companies are getting around the restriction on advertising of medicines in Australia by producing infomercials about obesity, impotence et cetera that direct you to your doctor, and are using current affairs and lifestyle programs. Why should we be handing them a free pass? DTCA is legal in the United States but it is not here in Australia. It has led to a substantial increase in patient demand for, and use of, products that are often at odds with best clinical practice. Relaxation of advertising restrictions in the US resulted in a 41.7 per cent increase in sales of heavily promoted medicines compared with 14.4 per cent increases for other medicines. The other consequence of this advertising is the use of pharmaceutical approaches in the treatment of illness rather than the use of more appropriate lifestyle change and other therapies for conditions such as obesity.

Finally, the FTA increases barriers to generic drugs entering the market. The generic versions of drugs play a vital role in keeping drug prices down—and therefore the costs of the PBS down—through providing greater competition. Research at the Australia Institute estimates that, if changes such as those that will result from the FTA succeed in delaying by 24 months market entry of generic versions of just the top five PBS expenditure drugs due to come off patent, this could increase the cost of the PBS by $1.5 billion between 2006 and 2009. I remind the Senate that the stated gains to be made by the free trade agreement overall are $53 million. So we are prepared to give up $1.5 billion in this very small aspect of the PBS part of this legislation for a return of $53 million for farmers. The inquiry summary of the Senate Select Committee on the Free Trade Agreement between Australia and the United States of America goes into great detail regarding the FTA provisions relating to generic drugs and concludes:

The new notification requirement may dissuade generic manufacturers from taking a risk in bringing generics to market before the patent claim is settled. This would be to the detriment of the PBS, which benefits from accessing cheaper generic drugs before litigation is settled.

Yet they are still prepared to pass this legislation.

There are many downsides with this FTA. The impact on the PBS is one. The FTA will open up the PBS to more pressure from pharmaceutical companies, less generic competition and more promotion of pharmaceutical use. All of these will ultimately result in higher drug prices. Will we see the copayment increased to pay for this? That remains to be seen. The government and Labor know of these problems and yet they have decided to trade our pharmaceutical scheme for the possibility of unlikely economic gains in some areas. The PBS will become just another example of collateral damage. The health of Australians is the real loser from the free trade agreement.