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Monday, 15 June 2009
Page: 3034

Senator CORMANN (1:54 PM) —The National Health Amendment (Pharmaceutical and Other Benefits—Cost Recovery) Bill 2008 implements a 2008-09 budget measure which the government says was an election commitment. However, no such commitment can be found—at least, it cannot be easily found. It must be hidden somewhere in the fine print. What we were able to find, however, was a comment by the now Minister for Health and Ageing, Nicola Roxon, when she spoke on this in the House of Representatives on 31 May 2007. This is what the now Minister for Health and Ageing, Nicola Roxon, said before the election:

The PBAC needs to be independent of government and of industry, and we cannot see the justification for this move to the cost-recovery model. I have asked the government to reconsider this approach given the risk to the independence of the PBAC.

And, of course, what we have now is a total reversal—a 180-degree turnaround. We have a measure which will impose fees at three points. It will impose fees for the original submission for pricing, for listing after successful application and for resubmissions.

The introduction of a cost recovery measure was expected to generate additional revenues of $7 million over four years, with a net cost of $2.2 million. However, the explanatory memorandum states that, once fully operational, annual revenue from fees is expected to total about $9.4 million in 2008-09, rising to $14 million in 2009-10. Irrespective, savings are very small compared to the approximately $7 billion spent on the PBS.

Indicative fees and charges proposed under the scheme as at June 2008 were: a major submission, $119,500; a minor submission, $12,500; a secretariat listing, $1,000; generic products, $500; and pricing arrangements, $25,000. This effectively means that it could cost approximately $145,000 to make a submission. To bring new drugs to market, the costs are estimated to be approximately $315,000, provided there is no complication.

Cost recovery measures were first introduced in the 2005-06 budget, with a proposed implementation day of 1 July 2007. Implementation at that time was delayed due to consultations with the pharmaceutical industry about the Pharmaceutical Benefits Scheme reform process during 2006. When originally proposed in 2005-06, there was concern that the measures were undermining the independence of the PBAC and might result in manufacturers declining to list drugs on the PBS. In fact, in 2005-06 Medicines Australia argued that the operation of the PBAC was a Commonwealth government function and cost recovery measures would be inappropriate.

Arguments in favour of cost recovery suggest a pharmaceutical company receives significant benefit from listing and that it is unreasonable that the taxpayer should pay the bill for listing. However, manufacturers already incur significant costs in preparing a submission and, under such a proposal, the pharmaceutical industry would also have to pay the additional fee when a submission is considered by the PBAC. There are concerns that cost recovery could affect the independence of the PBAC and the PBS. In fact, as I have previously mentioned, the Minister for Health and Ageing raised those concerns in the lead-up to the last election—but, of course, now in government, the minister’s position has changed. We have had a bit of a pattern of this. We have seen it with the changes to the Medicare levy surcharge thresholds; we have seen it with the now broken promise in this year’s budget on the private health insurance rebates; and we are now seeing it in relation to the government’s approach to cost recovery of the Pharmaceutical Benefits Scheme listings. They say one thing in opposition and they do another in government. It is well and truly in line with what Mr Garrett said before the election: ‘Once we get in, we’ll just change it all; don’t you worry about that.’

Cost recovery has been implemented successfully in the TGA process, which has maintained its independence. However, the TGA and the PBAC have very different roles. The TGA decides whether a drug or medical device can be marketed in Australia, whereas the PBAC advises the minister on which drugs should be approved for a public subsidy.

Debate interrupted.