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Thursday, 13 October 1983
Page: 1710

Mr CARLTON(11.03) —This morning I wish to address my remarks to the expenditures through the Department of Health on the pharmaceutical benefits scheme. In this area there is need for fairly urgent action by the Government to overcome very severe problems in the supply of pharmaceuticals to the Australian community. Perhaps I should say that although the trouble goes back many years- and I in- tend to talk about what happened not only under this Government but also during previous governments-the matter came to a head following the economic statement of 19 May 1983 by the Treasurer (Mr Keating), in which he said:

Under the pharmaceutical benefits scheme there are a number of multi-branded pharmaceutical products which bear different rates of subsidy. The Government has decided that for such generally equivalent pharmaceutical products, the price differential between the highest and lowest price brands should be reduced as soon as possible to no more than 5c. Savings in 1983-84 are estimated at $6m.

Within that apparently innocent sounding statement there lies extraordinary turmoil. I do not believe that the Minister for Health (Dr Blewett) understood what was involved in that statement at the time it was made, but I believe that officers of the Deparment of Health knew perfectly well what was involved. I would like to go back over a little of the history of pharmaceutical pricing. Incidentally, although the change announced in the May statement was to have come into operation on 1 July, extensions and further extensions were granted and ultimately, after the failure of negotiations with the Australian Pharmaceutical Manufacturers Association, it came into operation on 1 October. Over the last decade there has been increasing pressure on prices charged by the pharmaceutical manufacturers in Australia, most of whom are multinational companies. A squeeze on pricing has been pursued with considerable vigour by the Department of Health, with the result that over these years prices for drugs obtained through the pharmaceutical benefits scheme-the biggest purchaser of the drugs, in effect, on behalf of the taxpayer-have been very much indeed below average world prices. This policy of putting the squeeze on overseas manufacturers was pursued with the approval, of course, of both the Whitlam and Fraser governments. Certainly, it has had substantial support from within the Department of Health, backed up, I would think, by the Treasury. The obvious beneficial effect has been the provision of drugs to the Australian community at lower cost, but there are difficulities. Those difficulties were becoming extremely apparent by the time I took over the ministry of Health. There were very unfair differences between different companies because the prices were not set in any market-place or by reference to any market. Rather they were set by the Department of Health through the so-called pricing bureau, which held all the cards. The contribution of Australia to world-wide research and development by these companies was at a lower level than, certainly, I judged was fair, if one looked at what should be a fair contribution by a country such as Australia. A squeeze was imposed on local manufacturing plants because it became less profitable to manufacture locally. Export opportunities were lost because Australia, which should have been an export centre for these types of drugs, became much less attractive and companies tended to supply the local region directly from their home bases. Assistance to local medical research through direct grants and contact between the companies was lessened. Opportunities for clinical trials by Australian researchers within the world pharmaceutical scene were being lost. Also, with the closing down of a lot of the local services of these companies, access to direct information of a detailed kind from manufacturers was being cut off. Local testing or advice by such companies became increasingly uneconomic.

All this added up to a big problem about the potential quality of the service to the Australian public. Of course, on the other side, was a very much lower cost to the taxpayer. I judged that we had gone much too far over that decade. I am not claiming a particularly partisan point here, because certainly both sides had indulged in the practice and the Government of which I was a part certainly had done so. I believed that something had to be changed. I had discussions with the Australian Pharmaceutical Manufacturers Association and, in conjunction with the then Minister for Industry and Commerce, the present Leader of the Opposition (Mr Peacock), planned a joint submission to the Cabinet to try to bring about a fairer pricing policy, one which would have quite beneficial effects on the quality of supplies to consumers as well as on the local manufacturing industry. Then, of course, the election came and we were thrown out of office.

After that one hoped that there would be discussions of a reasonable kind between the incoming Minister and the APMA, but the first thing that appeared was this little piece of poison in the May statement. When I saw it I judged that the whole thing had been thrown back into the administrative machine. I did not believe that there had been a full ministerial understanding of this particular item, and I think some of the activities that have taken place since back me up in that. One of the outcomes of the statement was a threat that the purer forms of insulin, the provision of which affect some 30,000 diabetics in Australia, would not be available at the prices that could be charged by the manufacturers. There was, of course, a tremendous outcry from diabetics, and the Government, after considerable public pressure was exerted, adjusted prices to allow those purer forms of insulin to remain on the market. However, in other areas-this is not wholly related to the May statement, rather to the general problem that I have raised-where fewer people are involved, in this particular case I think fewer than 3,000 children, the Government has been totally inflexible in pricing policy. Certain products have been delisted. The products that have been delisted are ones which are designed for infants with an allergy to both cow's milk and soya-based formulae. Only a small number of prescriptions for these products are issued throughout Australia each year. But a family affected by this decision will experience considerable difficulty. The nutritional preparations concerned in this case are Pregestimil and Glucose Nutramigen. They are both produced by Bristol-Myers Co. Pty Ltd under the Mead Johnson label. Bristol-Myers is also in the same trouble over certain small volume cancer drugs. I do not have time to talk about those this morning, but the situation is equally difficult.

Representatives from Bristol-Myers came to me during the early period when I was Minister for Health, saying that because of the small volume of their production in Australia and because of the relatively high overheads in relation to the volume of those two types of drugs, they believed they should have a price increase which would bring the price of the drugs on the Australian market closer to the world average prices for those drugs. I examined their case and was sympathetic towards it. But since I was involved in general negotiations with the industry to try to get an overall satisfactory pricing system, I did not agree to a special price for them at that stage. But I made it clear that I believed their case was justified. The company and other companies in that industry would have expected the new Minister to have continued the negotiations and discussions that I had had with the industry. But they were disabused of this by the May statement of the Treasurer. Also, subsequent meetings with the Minister have not been happy.

Consequently, those two drugs for babies who suffer allergies and must have them have been withdrawn from the PBS list. They are no longer available to families on a subsidised basis and the cost to an individual family for those preparations is about $200 a month. As predicted, the company reached the end of its tether. It had been negotiating for three years to try to get a reasonable pricing structure for the drugs, and I believe its case was justified. A press release from the Minister states:

We are not prepared to bow to blackmail from foreign owned companies.

The Minister said that families who use these products have every reason to be outraged, but that anger should be directed at the company and not at the Government.

The real difficulty is that multinational companies are fair game. I have looked at this case as objectively as I possibly can. I have looked at the whole problem of the industry, and I believe that the Minister in this case is following bad departmental advice. I ask the Minister to reconsider this matter and also to reconsider the situation of overall negotiations with the industry to try to improve the quality and availability of drugs to the Australian public and also build up a good high technology industry.

Mr DEPUTY CHAIRMAN (Mr Millar) —Order! The honourable member's time has expired.