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Tuesday, 4 March 1980
Page: 490

Senator Dame MARGARET GUILFOYLE (Victoria) (Minister for Social Security) (3.49)- I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave not granted.

Senator DameMARGARET GUILFOYLEIn July 1977 the Government decided there should be an independent inquiry into the Commonwealth Serum Laboratories Commission's operations and capital works program. The inquiry was carried out jointly by Mr J. B. Reid, Chairman of James Hardie Asbestos Ltd and a director of Broken Hill Pty Co. Ltd, and Sir Gustav Nossal, C.B.E., Director of the Walter and Eliza Hall Institute of Medical Research and Professor of Medical Biology at the University of Melbourne. The report of the inquiry was tabled in the Senate in May 1 978.

The Bill now before the Senate reflects the Government's general acceptance of the report's recommendations. It is proposed that the amendments will come into effect on 1 July 1 980.

The Bill contains a number of amendments to the present act which were recommended by the inquiry. The principal amendments will have the effect of:

(a)   expanding CSL's role to enable it to produce non-biological, as well as biological, pharmaceutical products;

(b)   clearly distinguishing CSL's commercial activities from the national interest activities, that is those carried out at the direction of the Minister, with the Commonwealth 's meeting the cost of these national interest functions;

(c)   allowing an increase in the number of Commissioners; and

(d)   making a number of machinery amendments to improve the efficiency and effectiveness of the Authority.

I draw the attention of honourable senators to clause 10 of the Bill which sets out the new functions of the Commission. A major change in the Commission's functions is the removal of the restriction that the Commission may produce, or undertake research into, only biological products.

The Reid /Nossal report recommends the removal of the biological restriction for a number of reasons. They include the lack of scientific precision in classification of products as either biological or non-biological. This is due to recent major advances in molecular biology permitting the production of some biological products by non-biological means. The production of hormones is an example of this process. In addition, there are many biological and non-biological products which have very similar therapeutic goals, and CSL should have the freedom to produce the most effective product. CSL does not have this freedom at present.

While some biological products, such as penicillins and vaccines, are most beneficial and cost effective medical tools, the production of biologicals represents the less profitable segment of pharmaceutical manufacturing. The Government accepts the view that CSL should be empowered to enter into the commercial production of certain prescribed non-biological products. This will also allow CSL to keep abreast of developments in molecular biology.

Clause 10 of the Bill also authorises CSL to produce, buy, import, supply, sell or export any prescribed pharmaceutical product. Clause 3 defines 'pharmaceutical product' as one for therapeutic use and 'therapeutic use' is given the same meaning as it has in the Therapeutic Goods Act 1966. 1 should emphasise that CSL will not be free to produce any therapeutic products. The Bill provides that "CSL can engage in commercial activities only in relation to a pharmaceutical product that is prescribed in regulations made under the Act which are of course disallowable by the Parliament, or a product which comes within a class of pharmaceutical products so prescribed.

The national interest functions of the Commission are those functions it carries out at the direction of the Minister. For example, the Minister may determine that the Commission undertake research aimed at developing a particular vaccine, or that it maintain a reserve production capacity or hold reserve stocks of a particular product for use in a national emergency. The present Act limits reimbursement of the costs incurred by the Commission in conducting national interest activities to the extent of the Commission's overall financial loss in any particular year.

In recent years, CSL has made a net trading profit on its commercial activities which has been used partly to offset the cost of national interest activities paid to CSL through the Budget. This arrangement disadvantages CSL in the highly competitive market situation, because the net effect is to require the Commission's commercial activities to have, as a first charge, the cost of national interest activities.

The new arrangements, as provided in clause 24 of the Bill, will mean additional expenditure in the short term, but the longer term benefits are considerable. As the costs of national interest activities will be met by the Commonwealth, CSL will not be required to allocate costs arising from its national interest activities against its commercial activities. Consequently, it is envisaged that there will result greater profitability by CSL in its commercial activities, and therefore greater return on capital to the Government; lower pressure for price increases for pharmaceuticals; increased prospects for export growth and thus greater profitability, and lower costs overall through higher volume throughput from export growth. At this stage it is not possible to estimate the benefit in monetary terms of these advantages'. This would not begin to accrue until at least the year after the introduction of the new arrangements.

Under clause 10, the Commission's functions include the operation as a reference centre where so determined by the minister. The present arrangement whereby the Laboratories operate as a World Health Organisation reference centre for blood grouping, influenza and brucellosis should continue. However, whereas at present CSL meets the operating costs of this activity from its commercial operations, this Bill will provide for the Commonwealth to meet this cost, or the cost of such other reference centres as are determined.

In allowing for an increase in the membership of the Commission, the Government is acting on the Reid-Nossal Report's recommendations. At present the number of commissioners is fixed at four, excluding the director. The inquiry considered that the Commission should have available to it a wider range of management, technical and research advice, and therefore recommended that the provision relating to the constitution of the Commission be amended to enable the appointment of up to eight commissioners, in addition to the Director. The Bill also includes a number of provisions designed to assist in improving the efficiency and effectiveness of CSL. These include provisions relating to the financial aspects of the Commission's operations, to procedures for audit and keeping of accounts, to the remuneration of the director and other commissioners and provisions enabling the appointment of an acting director where necessary, and relating to appointments of staff of the Commission. Finally, I reiterate that the government, in putting forward the measures contained in this Bill, is seeking to implement the recommendations of the independent inquiry into the CSL Commission's operations and capital works program. In doing so the Government is acting in the belief that there is a continuing need for the Commonwealth Serum Laboratories, and for this important national asset to be as efficient, progressive and innovative as possible. I commend this Bill to the Senate.

Debate (on motion by Senator Grimes) adjourned.

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