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Wednesday, 17 November 2010
Page: 1426

Senator FIERRAVANTI-WELLS (11:01 AM) —I rise to speak on the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010. I will start by saying that the coalition support the intent of the MOU and do so in the context of the PBS system. We want, at the outset, to acknowledge the many strengths of the existing PBS system. It has in its time offered a wide range of older and newer prescription medicines in a way that has led to the Australian public having a high degree of confidence in it. Maintaining the integrity of the system is very important, and for this reason we support the $1.9 billion savings measure sought to be achieved by this bill.

This bill builds on the extensive reforms of the PBS which were introduced by the coalition government in 2007. However, the issue that the coalition has at this juncture is the extent of consultation. As Senator Moore correctly pointed out, when those reforms were introduced they were not without pain. But they were as a consequence of an extensive and very wide ranging consultation process that, in the view of the coalition, has not been followed in this instance. The 2007 reforms were indeed radical, but they were undertaken after extensive consultation with all stakeholders. That wide-ranging consultation probably ensured that there was widespread acceptance of the reforms. As coalition senators specified in the additional comments that we put forward, that was no doubt a strong reason for the fact that the reforms will yield well in excess of the anticipated savings in the PBS.

The 2007 reforms were intended to be implemented in stages. We are now seeing the fruits of those reforms. From the various assessments it seems that the reforms are likely to yield double the amount that was anticipated. We are probably looking at $6 billion worth of reform. That, of course, is very much supported. Those reforms came with the commitment of the whole industry. In our view, had there been a much more broad-ranging and much more in-depth consultation with all relevant stakeholders in this instance concerning the bill we are discussing today, it is possible—and, again, we pointed this out in our comments—that the identified savings of $1.9 billion and further savings could have been made by the PBS. Broader consultation, in our view, would more likely have resulted in much broader consensus and commitment and could potentially have resulted in much more equitable—and I stress the word ‘equitable’—savings being identified.

In looking at the background to the MOU, how it came into existence, one cannot avoid comments about the chequered history of this Minister for Health and Ageing when it comes to savings measures. Senator Moore tried to attribute to the coalition some sort of conspiratorial attitude. The reality is that you have had in the past an example—and we saw this in 2007—of extensive consultation leading to wide-ranging reforms. In this instance, and it is very clear from the evidence that was given at the inquiry, we saw the Department of Health and Ageing go out to consult with industry about the 2007 reforms and then all of a sudden we saw an MOU come into existence with one body—namely, Medicines Australia. One wonders how this came about. Mr Learmonth, on behalf of the department, was at pains to tell us that the proposal came very much at the suggestion of Medicines Australia and appeared to have been a last-minute thing.

Let us look at another scenario, a scenario that may not be too far off the mark, where, all of a sudden, the minister demands a certain amount of savings over the forward estimates and then the negotiations are worked backwards to arrive at the 23 per cent price reduction that is going to be applicable to F2 medicines in the cycle. I have my suspicions that this would have enabled the minister to lock in savings over the forward estimates and to try and rebuild her image and her chequered history of implementing savings measures. Whilst it may not be conducive to public policy, it is very clear that, although it may be appropriate to pursue measures to better match the price that the government pays to the market price, it is important that this government consult in a much broader sense, and that is the issue.

In light of some of the comments that Senator Moore made, it is interesting that the MOU provides for no new therapeutic groups to be formed for the duration of the agreement. Obviously, it is a trade-off—and an important trade-off as far as Medicines Australia were concerned. I also want to make reference to another term of the MOU—that is, the attempt to make changes in administrative processes to streamline the listing of new medicines. Interestingly, the MOU has a commitment and the Commonwealth will use its best endeavours to implement a maximum time frame of six months for consideration and decision in relation to the listing of new drugs. At estimates we were told that the period of just over six months that it is taking for cabinet to approve the listing of new medicines has blown out to 10 months. The government is prepared to put this in the MOU, and clearly its best endeavours thus far are not achieving much because the six-month period is blowing out to 10 months. So I wish the stakeholders well in this but I think it is going to be very much a hollow commitment, like many of the government’s other commitments.

I will just summarise the coalition’s position. We will not stand in the way of the savings in this proposal but we believe that the savings could be achieved via a more equitable negotiation of the MOU. In our report the coalition senators clearly set out that it is our view that these so-called reforms to the PBS have been handled very ineptly by the government. Key sections of the pharmaceutical industry with manifestly material interests in the nature of the reforms have been excluded from the negotiations that led to the MOU, which is now the basis of the bill before the Senate. Secondly, and more importantly, the reforms in our view are ill considered, targeting only medicines from the F2 formulary and overlooking the opportunity for considerable cost savings to the PBS and patients through the reforms of F1 listings. Also some of the administrative elements of the changes introduced by these reforms have not been thought through properly and could have highly disruptive impacts on pharmacies, bearing in mind the impact that this will have on wholesalers to ensure the timely supply of pharmaceuticals to community pharmacies and in turn to patients. As for the views of the generic medicines industry, the consumer health groups and the wholesalers, in our view, under these new changes, it appears that there has been a failure to consult them, or at least there is a blatant disregard for the concerns that have been raised.

We are very conscious of the need to contain the rising costs of medicines under the Pharmaceutical Benefits Scheme. As I indicated, we support the general thrust of the reforms in the bill but, as a matter of good public policy, the burden of reform should fall more equitably across all affected parties in the pharmaceutical sector and more evenly between the members of not just Medicines Australia but other groups such as GMIA and other stakeholders involved. As I indicated, our compelling concern is about the government’s failure to adequately consult with all parties with a material interest, and they are, I would like to specifically reiterate: the Generic Medicines Industry Association, the National Pharmaceutical Services Association and the Consumer Health Forum.

Of course, generic medicines drive competition and cost savings for consumers and the government. Our concern is that the government’s proposal may compromise access to affordable, high-quality medicines in the long term. Significant price cuts without volume drivers under this measure may detrimentally affect the viability of the sector which drives PBS savings for the government. These issues could have been avoided through better consultation and actual negotiation with all stakeholders—and our focus is on ‘all’ stakeholders. Evidence suggests that additional savings could be achieved in consultation with all key stakeholders and should be fully explored by the government.

Of course, the coalition successfully implemented a 10-year reform plan for the PBS in 2007, which as I have indicated will deliver far more savings than anticipated. Indeed, the government’s own Impact of PBS reform report shows that the coalition’s reforms will deliver savings of up to $5.8 billion over the 10-year implementation period, compared to the estimated $3 billion under the government’s proposal.

On this basis, the coalition is not in a position to support the bill given the outstanding issues. We do support the intent of the MOU and believe the stated savings and more can be achieved through better consultation, and we stand ready to expeditiously support measures which will achieve this end. To that end, in light of the various concerns that we raised, the deficiencies of process and our misgivings over the content of some of the reforms, the coalition senators outlined in their report that the bill should not be supported in its present form but should be re-presented at a later date following a proper and comprehensive negotiation process or, alternatively, that this bill be withdrawn and a new bill be introduced.

On that basis, we set out four recommendations. I foreshadow that I will be moving a second reading amendment which gives effect to these recommendations, which are: firstly, that ‘the MOU negotiated between the Commonwealth and Medicines Australia be set aside’; secondly, that ‘the Commonwealth undertake a fresh set of negotiations to develop a new MOU which will secure the identified $1.9 billion cost savings in a more equitable manner’; thirdly, that ‘all parties possessing a material interest in the outcome of the proposed reforms or whose material interests are affected by the reforms be involved in the negotiations, including the members of the GMiA, the Pharmacy Guild of Australia and the National Pharmaceutical Services Association’; and, fourthly, that ‘the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 be amended in light of the contents of the new MOU and be re-presented to the parliament in amended form for reconsideration and approval or, alternatively, that the government withdraw the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010 and a new bill be introduced’. I move the second reading amendment standing in my name:

At the end of the motion, add: but that further consideration of the bill be an order of the day for the first sitting day after:

(a)   the Government sets aside the memorandum of understanding signed between the Government and Medicines Australia on 6 May 2010;

(b)   the Government has entered into a fresh set of negotiations to develop a new MOU which will secure the identified $1.9 billion cost savings or other potential savings to the PBS;

(c)   all parties possessing a material interest in the outcome of the proposed reforms or whose material interests are affected by the reforms, including the members of the GMIA, the Pharmacy Guild of Australia and the National Pharmaceutical Services Association, have been consulted in the negotiations for a new MOU; and

(d)   the Government has circulated in the Senate amendments to the bill to reflect the contents of the new MOU.