The Government's decision to defer the listing of medicines under the
Pharmaceutical Benefits Scheme
For almost 60 years our world-renowned PBS has subsidised and
delivered to all Australians safe, efficacious and cost-effective medicines. It
makes no sense for the Government to now introduce extraneous barriers which
make it more difficult for those in most need to obtain necessary and life-changing
(even at times life-saving) medicines...The PBS has been the lynchpin for
enabling millions of Australians to live pain-free, active lives, therefore
giving them opportunities to remain in the workforce and/or live independently.
It is one of the fundamental components of Australia's universal health care
Many witnesses clearly stated that the Government's decision to defer
the listing of medicines under the Pharmaceutical Benefits Scheme (PBS) represents
a major change in Government policy.
It was noted that the decision was made without consultation with key
stakeholders and that future listings of medicines on the PBS will be dependent
on cost-savings in other areas.
Of great concern were the long-term effects of the Government's policy
of indefinite deferrals of medicines recommended by the Pharmaceutical Benefits
Advisory Committee (PBAC) including the undermining of the role and standing of
the erosion of the quality of Australia's health system through reduced access
to affordable and appropriate medicines; and, the erosion of the tenets of the
National Medicines Policy.
More importantly, submitters pointed to the introduction of a political element
to the listing of medicines and the complete lack of a transparent process once
the listing process has moved into Cabinet for final decision-making.
The change to the administration of the PBS
The Government has put the view that the deferrals announced in February 2011
are not a major change to the way that the PBS is administered.
The Government's position was explained to the committee by Mr David
Learmonth of the Department of Health and Ageing (DoHA), who noted that 'the
roles of PBAC and government have not changed. The PBAC advises and the
government decides, as has always been the case'.
However, submitters were overwhelmingly of the view that the Government's
decision to refer all medicines recommended by the PBAC for listing with
financial implications to Cabinet for consideration, together with the decision
to defer the listing of medicines, constitutes a significant change to the
administration of the PBS. For example, Ms Carol Bennett, Consumers Health
Forum of Australia (CHF), told the committee:
We believe this is a substantial change from a previous
arrangement where only drugs with a financial impact of over $10 million per
year, in any of the first four years of PBS listing, had to be considered by
This is a major change...
We completely reject the arguments that the decision to
indefinitely defer medicines listing by cabinet does not represent a change in
policy. While we accept that the government has the final say on
recommendations of the PBAC and we know that that has been the case all the way
along, we note that the rejection of listings has only occurred in two previous
While acknowledging that there had been deferrals previously, Ms Bennett
commented that the outcomes between previous deferrals and what is taking place
now are vastly different:
There have been two instances in the past in which drugs have
been deferred when they have been given a positive recommendation by the PBAC.
At the point that you suddenly say, after one PBAC meeting, that seven
medicines and one vaccine are being deferred, that is a change in policy, I
would argue. That is my definition of a change in policy. Certainly, for
consumers, it is the actions that matter. It is not what we say is policy; it
is what actually happens.
The Government has indicated that the decision to defer listings was
expected to be temporary.
However, concerns were raised that there are no indications of when a return to
the previous process can be expected. Ms Helen Tyrrell, Hepatitis Australia,
told the committee:
We note that the reason for the February 2011 cabinet
decision to defer PBS listings has been linked to the government's budget
deficit and stated intention to return the federal budget to surplus by 2013.
The clear expectation was that further deferrals could be expected until a
budget surplus was achieved.
While it was noted that two medicines that were initially deferred have
been reconsidered by Cabinet and subsequently listed, Ms Tyrrell of Hepatitis
Australia noted that the process for reconsideration has not been delineated.
The explanation of the reconsiderations by Mr Learmonth, DoHA, cast little
light on the process:
It was reconsidered in the budget context and the government
made a decision to fund it consistent, again, with the minister saying that if
these things were deferred they would be considered in future as circumstances
The Australian Medical Association noted that the medicine Duodart® for enlarged prostate
had been reconsidered and subsequently listed only four months after being
deferred. They explained that this raised a number of concerns:
It is not clear what circumstances have changed in that short
time to permit the listing of ‘Duodart’. Further, the Government has not
explained why it has decided to now list this one medicine ahead of the other
six that were similarly deferred in February 2011.
While the Government’s basis for deferring listing medicines
on the PBS is unclear, the listing process can only be political. The AMA
considers these listing processes and decisions must be fair, equitable and
transparent, and not subject to political interference.
The AMA contends that Cabinet Ministers are not qualified to make
decisions about which PBAC recommended medicines should not be listed, or those
that should be listed ahead of others.
In addition, the AMA is not aware that Cabinet is provided
with a cost benefit analysis of the impact of deferring the listing of
medicines that takes into account direct and indirect costs and benefits to
patients, the health care system and to the Australian economy.
Submitters found this lack of transparency a major concern, with
Hepatitis Australia commenting that:
As an organisation, Hepatitis Australia supports the
government's push for transparency as part of the National Health Reforms and
believes this principle should also be applied to the Cabinet decision-making
processes around PBS listings.
Ms Tyrrell went on to observe that once people have lost confidence in
the PBS approval system, 'a level of cynicism is to be expected, particularly
regarding the government's future intentions'.
The lack of any indication on the part of the Government about how long
the deferrals will continue other than that they will be reconsidered 'when
circumstances permit' has created uncertainty about how Cabinet is making these
Dr Brendan Shaw, Medicines Australia, explained:
I think we have one sentence that refers to life saving and
no alternatives. But we really have no other guidance about how and when it is
going to occur, how long a deferral will stay in place and, if it is based on
financial circumstances, when those financial circumstances are sufficiently
benign that we would be able to go back to the old process.
Consumer groups similarly expressed great concern about the lack of
information around the deferrals process with Mr David Menadue, National
Association of People Living with HIV/AIDS (NAPWA), commenting that:
...drugs can potentially be backlogged ad infinitem. We have
no way of knowing, as a community group vitally concerned with the progress of
the latest listings of drugs and where they are on in the drug approval
process, whether they are being held up in cabinet or under what time frame
they will be considered.
A flawed Cabinet process
Submitters noted that the listing of medicines under the PBS was
considered a global benchmark for rigorous evaluation and assessment.
The committee heard that the previous system was considered fair, clear and
transparent. Mr John Latham, Pfizer Australia, told the committee that:
The Pharmaceutical Benefits Scheme is envied around the world
as the best system for providing medicines to citizens. This world-class status
is not just based upon the fact that the system provides universal coverage to
the newest medicines; it is more so because the decision making for which
medicines are provided is based upon recommendations made by an independent
group of clinicians and specialists, with cost-effectiveness as the key
determinant for the selection criteria. The prices of new medicines in
Australia are amongst the lowest in the OECD.
Stakeholders and consumers were of the view that the Government's
actions had undermined the integrity of the process.
The Australian Medical Association (AMA), for example, stated:
As far as the AMA can tell from Government announcements,
there appears to be two criteria that Cabinet is now using to defer listing
medicines on the PBS after PBAC has recommended the listing:
- the medicines
are for conditions for which there are existing treatments already available on
the PBS; and
circumstances do not permit listing.
The AMA considers both criteria to be inappropriate. In
respect of the first criterion, the AMA considers it is a false 'saving' as the
market for that type of medicine does not grow but sales of the medicine in
question are funded by reduced sales in its direct competitors.
In respect of the second criterion, because there is no
transparency about the exact circumstances that will permit listing, Cabinet
decisions to list medicines on the PBS are now purely political.
Mr Menadue, NAPWA, also argued that 'Australia is throwing out a robust,
workable system of drug regulation that currently has the confidence of the
community and industry stakeholders alike'.
He captured the sentiment of other submitters when he added that 'if it ain't
broke do not fix it'.
Lack of transparency
Many submitters argued that a completely non-transparent process was
being substituted for the previously transparent process. Ms Bennett, CHF,
...consumers are concerned that there is no transparency in
the new process. We do not know what criteria are being used to decide which
new medicines are listed, whether cabinet is drawing on any additional evidence
apart from that considered by the PBAC, or what expertise is available to
cabinet to make its decisions.
It was also apparent that the Government's actions have created an
unprecedented level of public angst. Ms Bennett emphasised to the committee
that consumer concern on this issue was unparalleled:
CHF has an enormous level of consumer concern about these changes,
unprecedented in our 24 years of advocating for Australian health consumers. In
June, 60 health consumer organisations joined with us to condemn the policy
change and call for its reversal. More have contacted us since then, supporting
our campaign. More than half of the submissions to this inquiry have come from
individual health consumers or consumer organisations. This level of concern
cannot be disregarded.
It was noted that the decision shows disregard for the independent
statutory role of the PBAC which operates at arm's length from the Government.
An independent and expert panel of the PBAC already evaluates the cost-effectiveness
and clinical benefit of all medicines submitted for consideration.
The Council of Social Service Network stated:
The PBAC is an independent statutory body established to
provide expert advice to the Minister. Its advice is based on independent
assessment made in the best interests of the community in terms of health,
safety and cost...The Commonwealth Government is now politicising a process
that used to have expertise, integrity and independence.
Lack of expertise
In contrast to the expertise of the PBAC, submitters pointed out that
'Cabinet members do not have the necessary expertise to assess whether drugs
are clinically necessary and provide value for money, while the members of the
PBAC do have this expertise'.
Similarly, submitters questioned whether this kind of micro-management was a
good use of Cabinet's valuable time.
Cystic Fibrosis Australia explained this concern:
So now we are looking at the possibility of 20 or so
politicians deciding whether consumers will have access to the best affordable
medicines, this is not being decided by experts. A decision like this may
actually end up costing tax payers more money because sick people may have to
seek other more expensive treatments, go into hospital for care and stop taking
part in the workforce.
Concern was also expressed that Cabinet decisions are being made without
any scientific or medical advice on the appropriate order or time period of
Ms Tyrrell of Hepatitis Australia explained:
As the cabinet process is non-transparent, it is impossible
to know if the politicians who are now making these decisions have critical
information available to them. For example, deferring the hepatitis C treatment
drugs would work against the goals of the Third National Hepatitis C Strategy,
which was approved by all of Australia's health ministers only last year.
A critical misunderstanding –
population v patient level assessment of medicines
The lack of Cabinet scientific and medical expertise appropriate for
making decisions on whether or not to list a medicine is evidenced by a failure
to appreciate the difference between an assessment at a population level and an
assessment at an individual level. It is also apparent in a range of evidence
provided to the committee that for certain deferred medicines the nominated
'alternatives' are not, in fact, necessarily alternatives at the patient level.
DoHA has submitted that 'alternative medicines exist for all the
deferred medicines, except for one'.
However, the committee heard that although alternative medicines might exist
for the majority of deferred medicines, this was an assessment that had been
made at the level of the general population. At the level of individuals the
circumstances may be different: there may be a range of people where the listed
medicine may not be able to be used as patients may not respond to it or they
may experience adverse effects. In such cases those people may have no access
to an alternative at an affordable price. As discussed in chapter 5, listing of
only one medicine for a particular condition means that some consumers have
access to an appropriate medicine, whereas others do not.
Ms Liliana Bulfone of Deakin University challenged the Government regarding
the availability of alternative medicines. She stated that 'we are not sure
that this claim holds any weight or is valid for a few reasons'.
Ms Bulfone went on to state that whereas a medicine may be 'equivalent' at
a population level it may not be equivalent at an individual level:
There is the group of drugs that have been recommended for
listing on the basis of the fact that they are no worse than what is already
there. They are essentially cost minimised, which means their cost is limited
by the cost of the currently available therapies. I think it needs to be
appreciated that when a drug is equivalent at a population level it does not
mean the drug is interchangeable patient by patient. If you have got 50 per
cent responders and 10 per cent having adverse events with one drug and you
also have 50 per cent responders and 10 per cent having side effects with
another drug, it does not mean that they are the same patients that are going
to respond and have adverse events.
Dr Bill Ketelbey of Pfizer Australia also contested the DoHA submission
regarding the availability of alternative medicines listed on the PBS. He told
the committee that 'the therapies proposed in the Department of Health's
submission as alternatives to Pfizer's deferred medicines are not appropriate
for all patients'.
Dr Ketelbey went on to provide an example of where a medicine described as
not clinically interchangeable in the Therapeutic Goods Administration (TGA)
approved product information had been nominated as an 'alternative' medicine in
the DoHA submission.
AstraZeneca Australia also contested the DoHA submission regarding the
availability of alternative medicines listed on the PBS. They argued that given
'the lack of consultation with relevant Stakeholders (in particular patients
and their treating healthcare professionals) prior to making the decision to
defer listing...it is unclear as to the source of advice used to ascertain if
indeed currently listed medicines provide true alternatives to the deferred
Similarly, Janssen-Cilag Australia, in answer to a question on notice,
contradicted the evidence presented by Mr Learmonth, DoHA, regarding the
interchangeability of paliperidone and risperidone. Mr Learmonth had stated
Most of these drugs (deferred in February) were cost
-minimised or 'me too' drugs, with no added efficacy or health outcome and no
less toxicity than existing treatments but with a net cost to the government.
For example, paliperidone long acting, known as Invega Sustenna, which is a
treatment for schizophrenia, was recommended by the PBAC on the grounds that it
is of similar efficacy and toxicity to the existing long-acting therapy,
Risperdal Consta, but it has a net cost to government. Both of these long
acting injections are made by the same company, Janssen-Cilag. In fact
paliperidone, or Invega Sustenna, is a metabolite of risperidone. This simply
means that paliperidone is the substance that the body converts risperidone
into when that drug is taken.
Janssen-Cilag Australia explained that there are in fact significant pharmacokinetic
differences between paliperidone and risperidone:
Contrary to Mr Learmonth’s statement, there are clear
pharmacokinetic differences between paliperidone and risperidone long-acting
Paliperidone palmitate is formulated as a water soluble
suspension with a particle size distribution that has sustained release
properties designed for once-monthly (4 weekly) intramuscular injections, with
a rapid uptake to therapeutic plasma levels. In contrast, due to its extremely
low water solubility, risperidone long-acting dissolves slowly, taking 21 days
from the first injection to release risperidone.
After absorption, paliperidone palmitate is hydrolysed to
paliperidone (9-hydroxyrisperidone). Although 9-hyroxyrisperidone is an active
metabolite of risperidone, paliperidone palmitate and risperidone long-acting
injections are not interchangeable due to substantial differences in their
Firstly, the differing pharmacokinetic profile of risperidone
LAI results in a two-weekly injection interval, with an eight week delay to
attaining therapeutic drug levels. To accommodate this delay to efficacy, six
weeks (or more) of daily administration of oral antipsychotics (risperidone) is
required. In contrast, the rapid and sustained pharmacokinetic release profile
of paliperidone palmitate ensures early symptom improvement (by day 4 after
initiation) and attainment of therapeutic plasma levels within 1 week of
initiation, with efficacy maintained during a longer, 4-weekly injection interval.
In clinical practice, this means paliperidone palmitate can
be used in the acute patient setting, where clinicians are required to release
patients back into the community within 8-10 days where possible.
Secondly, paliperidone palmitate is primarily excreted by the
kidneys whereas risperidone long-acting injection relies mostly on liver
metabolism for elimination. A lack of reliance on liver metabolism is an important
pharmacokinetic difference, minimising the risk of inter-patient variability in
the ability to metabolise and/or eliminate paliperidone palmitate as follows: enables
use of paliperidone palmitate in patients with mild to moderate liver impairment
without dose adjustment or concern for drug accumulation due to abnormal
hepatic function; ensures no impact on the metabolism of paliperidone palmitate
due to smoking, which can induce liver metabolism of some long-acting
antipsychotics, resulting in the requirement for higher doses; and, ensures no
impact that genetic polymorphisms may have on an individual variation in the
ability to metabolise antipsychotics; for example, there can be ‘fast’ or ‘slow’
hepatic metabolisers of risperidone.
Therefore, unlike risperidone LAI, the pharmacokinetic
features of paliperidone palmitate LAI result in rapid attainment of therapeutic
plasma levels and efficacy, maintenance of therapeutic concentrations allowing
for 4-weekly dosing, with minimal inter-patient variability due to a lack of
Positive Life NSW also submitted that in the case of a major health
condition such as HIV/AIDS there is often a range of co-morbid health
conditions requiring treatment, in addition to antiretroviral (ARV) therapies.
They noted that 'potential interactions between ARV medications and the
medications prescribed for other health conditions can become complex and
further restrict prescribing options'. This is exacerbated when PBS listings of
new and innovative medicines have been held up.
In a critical admission, Mr Learmonth of the Department of Health and
Ageing acknowledged that 'It is potentially true' that a medicine which does
not provide clinical superiority on a population assessment to other already
listed 'alternative' medicines, may provide therapeutic superiority on an individual
level for patients for whom the currently available medicines are ineffective.
Ms Bennett also raised concerns that Cabinet, which already has
substantial and pressing responsibilities, does not have enough time to
consider every medicine that has already been approved by the PBAC and
We are now looking at a situation where you have got the
federal cabinet involved in the micromanagement of decisions about every single
drug that goes up in the context of all the other considerations that federal
cabinet must have and that creates a problem of access. It creates a problem of
transparency because we do not know on what basis every single one of those
drugs is being considered by the cabinet. It will ultimately create a backlog
of drugs that are going up to cabinet and being deferred. The PBAC is meeting
three times a year. If the cabinet is considering every one of those drugs,
that becomes a real issue in terms of resources and how much the cabinet can
actually do to consider every one of those drugs that goes up. Consumer access
is the concern because quite clearly it may well become compromised if the
number of applications that are going through to the cabinet become backlogged
because there are simply not the resources to consider them all.
Lack of criteria for decisions
Along with concerns about delays in the listing of vital
medicines, submitters pointed to the lack of formal criteria used by Cabinet in
reaching its decisions. AstraZeneca Australia submitted that:
The deferrals policy is characterised by a lack of clarity
regarding the criteria used to select medicines for deferral, a lack of consistency
between the stated 'criteria' and the medicines which have subsequently been
selected for deferral and a lack of transparency regarding the source of advice
used to facilitate the decision-making process.
The committee heard evidence that the Government applies no
formal criteria or definitions when making decisions on which medicines to list
subsequent to the PBAC process. Mr Learmonth, DoHA, stated that Cabinet:
...has based its judgment on certain key facts about or
attributes of the medicine—the nature of the disease that is being treated, its
severity, whether there are alternative therapies available and so on.
The committee notes that the Government has concentrated on 'listing medicines
that treat serious or life-threatening conditions where there are no
alternative treatments on the PBS'.
When asked for a definition of this phrase Mr Learmonth did not provide
one, stating instead that:
It is a statement of principle the government has made. These
are questions of judgment for the government under the circumstances and based
on the facts.
Many submitters expressed grave concern that the lack of defined
criteria for Cabinet decision-making has led to significant uncertainty for
patients, practitioners and industry.
This was articulated in a joint submission from Cancer Council Australia, the
Clinical Oncological Society of Australia and the Medical Oncology Group of
One of the key problems created by subjecting decisions
regarding PBS listings to the Cabinet process is that there is no transparency
around the criteria, advice or processes used to arrive at these decisions.
This is a backward step when so much has been done in recent
years to improve the transparency of the PBAC listing process.
Submitters pointed out that unlike decisions made by Cabinet, the PBAC
process is well-understood and well-respected, and a formal set of criteria are
outlined in the relevant legislation.
Deakin Health Economics, Deakin University, stated that:
Our greatest concern is that a set of non-disclosed and
potentially arbitrary set of criteria (if any exist!) are being used to divide
a list of positive recommendations made by PBAC into two groups: (a)
recommendations that should be implemented without delay; and (b)
recommendations whose implementation be deferred.
The criteria that have been used to divide the list of PBAC's
recommendations into those should be implemented without delay and those that
can be delayed have not been articulated by the Government.
In addition, evidence was heard that the new system of Cabinet deferral
of listings is not evidence-based. Mr Paul Murdoch, Australian Pain Management
Association (APMA), commented that the Government:
...has claimed to be committed to evidence based decision
making. It has also sought, quite rightly, to introduce a greater transparency
to a range of health technology assessment processes, including of course the
listing of pharmaceuticals and covering a wide range of other areas. This new
policy in our view is directly contrary to these principles, being neither evidence
based nor transparent. It is important to note that integrity, particularly of
a system, is hard to establish but very easy to lose.
The committee notes that two medicines that had been deferred have
subsequently been listed. Committee members were keen to ascertain whether
there had been a change in criteria used by the Government when reviewing that
decision. In response, Mr Learmonth, DoHA, stated that 'there are no
criteria in any form by which Cabinet makes these decisions – in any form'.
The committee notes that the decision to defer listings of PBAC
recommended medicines under the PBS constitutes a major, unnecessary and
unwelcome change in government policy. The Government has exchanged a
well-respected, criteria-bound, evidence-based and transparent system for a
system that is none of these things. Cabinet is duplicating an already existing
process, albeit without the appropriate qualifications or information available
to the PBAC. This is wasteful. Micromanaging the process in this way also
represents a poor use of Cabinet's time and is likely to result in significant
and unacceptable delays.
The committee notes that a decision not to list a medicine under the PBS
because it is deemed that alternatives are available represents a profound lack
of understanding of how medicines work. Medicines may work at a population
level, however, they may not be interchangeable at the individual level. Or if
they are, they may not lead to the same benefits to patients or individual
health outcomes. For any condition this potentially creates two classes of
people; those who have access to a suitable medicine that is subsidised and
those who do not. The committee finds this unacceptable.
The committee also considers it unacceptable that Cabinet attempts to
make these decisions without criteria of any description being published and
against which such decisions are measured. Not only will this lead to poor decision-making
but it will introduce great uncertainty for industry, consumer groups and
Impact of the change to the administration of the PBS
Submitters pointed to a number of issues arising from the change to the
administration of the PBS. These included the undermining of Australia's
broader health policy including the long-term viability of the PBS and quality
of the health system, the possible politicisation of the approval process, and
the reintroduction of uncertainty in the approval process.
Long-term implications for the
quality of Australia's health system
Evidence received by the committee raised concerns that the Government's
decision to defer the listing of medicines on the PBS was occurring in
isolation, divorced from the broader health policy context and outside of other
PBS reform processes. Mr Menadue, NAPWA, explained to the committee that:
There has been an ongoing PBS reform process that has been
implemented across many aspects of the regulatory process and which has been
delivered with consultation and buy-in from industry and patients alike. This
was also done in a spirit of collaboration and transparency. The PBS deferrals
currently upon us are not part of this, and they are most unwelcome.
The committee heard from Mr Mark Glover of Allergan Australia that
discussions about how to deliver savings and reform to the PBS should take
place in a broad policy context, rather than at the level of individual
medicines and their deferral.
It was argued that the deferral was not only a short-term policy but also was
outside the normal Budget processes. Mr Latham, Pfizer Australia, commented
We believe it is an example of a short-term policy with
significant unintended consequences to both patients and manufacturers. It
provides very limited financial gain to the government but significant
disadvantage for consumers, reflected in the number of submissions that have
been received from consumer organisations.
The decision is also confusing in terms of the rationale and
placement of these changes prior to delivery of a formal Commonwealth Budget,
and outside of the scope and processes agreed for other proposed PBS reform
matters being delivered.
Concerns were expressed that over the longer-term, through the deferral
decision, and the consequent lack of alternative medicines, Australia stood to
downgrade its medical system to be more akin to the New Zealand model.
The committee heard that the New Zealand model is one in which only one
molecule is listed per class, limiting access to suitable medicines. Further, in
this system, medicines are tendered for, rather than being listed on a
cost-effectiveness basis. Dr Simon Fisher concluded that this would not be
called a modern healthcare system, and is not a system that Australian healthcare
consumers would aspire to.
Dr Brendan Shaw of Medicines Australia elaborated:
...you have a government for budgetary reasons saying that we
cannot list these medicines. I am not saying that Australia has reached the New
Zealand model yet—I would happily debate that. But my concern is that
government is starting to say things like 'Yes, these medicines are cost
effective and we can see that a modern industrialised country should be able to
access these but we cannot afford them.' My concern is that if we continue down
that path will we head towards that model.
Dr Shaw explained that access to medicines in New Zealand is now very
When you look at what has happened in New Zealand over the
last 20 years, the industry has basically abandoned New Zealand. There are
medicines available there. Some of the medicines available in New Zealand are
forty years old and have become lesser used in Australia. Basically, a lot of
the New Zealand market is now run out of Australia because of the commercial environment
in New Zealand. Patients in New Zealand have to wait much longer for medicines
than patients in Australia. There is various data that we are happy to provide
you with that shows that New Zealand, in terms of access to medicines, is one
of the worst countries in the OECD.
Dr Shaw also explained to the committee that the New Zealand model has
had a serious impact on health outcomes:
We are starting to see worse health outcomes in
cardiovascular disease from the delay in listing medicines there. Patients in
New Zealand have to wait many more years than in Australia. There are adverse
events in hospitals when the government switches suppliers. New Zealand is
characterised by having much older medicines than Australia. We have patients
sometimes approaching the companies here in Australia trying to get access to
medicines because they are not available in New Zealand.
The committee notes that the process of deferring listings of medicines without
clear criteria and on a false assessment of 'savings' will, over time,
substantially erode both the quality and equity of access to medicines that has
long been at the core of the Australian health system. The capping of the
pharmaceutical scheme in New Zealand has produced just these effects. This is
Politicisation of the approval
Many submitters raised concerns that the approval process has become, or
will become politicised.
It was feared that the new process would be more vulnerable to lobbying, with
larger interest groups and those able to launch expensive campaigns potentially
gaining greater influence. The spectre of listings being conditional on
opposition support for other areas of government policy was also raised.
For example, Ms Bennett, CHF, commented:
...the lack of any transparency has created real consumer
concern that a new political element has now been added to the process. In the
absence of any credible explanation of why some medicines have been deferred
while others have been listed, there is really no other conclusion that
consumers can reach. Consumers are concerned that the listing process will
become open to political whims and external interference. Consumers do not want
a situation in which drugs are listed on the PBS to win votes or boost opinion
polls; nor do they want a process which allows those consumer organisations
with the loudest voices or the most media and political nous to see their drugs
listed while other groups must wait indefinitely. And they absolutely do not
want to see a process in which pharmaceutical companies can directly lobby
cabinet members to achieve a positive outcome.
Medicines Australia echoed these concerns and stated that:
Recent statements suggest the Government is prepared to link
access to future medicines to Opposition support for its policies in other
areas, most notably its proposed changes to the private health insurance rebate
Medicines Australia argued 'there is widespread disappointment in the
community at these statements because they represent the over-politicisation of
the long-standing, evidence-based process that previously characterised the
listing of medicines'.
They illustrated this link further, quoting from Minister Roxon's press
conference on 21 June:
...in the future, listing innovative new drugs like Erbitux
and Gilenya will become harder and harder if the Opposition continues to block
sensible savings measures. It's time for the Opposition to stand up and act
responsibly to recognise that savings that are captured in measures like the
private health insurance proposals and the Chronic Disease Dental Scheme are
essential if we are to keep Australia's health system and Pharmaceutical
Benefits Scheme sustainable.
We need to be able to do that and this is a very important
long term question, I think, for the Opposition to have to start behaving
responsibly if they want these sorts of innovative drugs to be able to be
funded in the future.
Committee members strongly reject the false association the Government
attempts to make between opposition to the Government's attacks on one part of
the health system and continuing access to new medicines that have been
recommended as cost-effective by the PBAC.
A number of submitters were worried that the decision could lead to
increased lobbying by pharmaceutical companies. Ms Sandra Younie of Deakin
It certainly leaves the government open to being seen to be
making decisions not on a transparent basis and that they may be subjected to
pressure. It is sort of like management by squeaky wheel. Whoever yells the
most, whoever has the most money to throw at a marketing campaign after a drug
has been deferred—it leaves you open to that.
The committee also heard that government may be subject to lobbying by
health consumers. Dr Christine Walker, Chronic Illness Alliance, commented:
This is sometimes both created and manipulated by the
industry itself, but it is also based on emotions of the consumers rather than
on the evidence that they may not be able to understand fully. It would be much
harder for elected officials to withstand that kind of emotiveness than for an
The Mental Health Council of Australia also pointed to problems arising
from lobbying by consumer groups:
Introducing a Cabinet review process may undermine the
independence of these decisions. For example, different sections of the health
and health consumer sector are funded to provide the best possible voice for
their constituents at the coalface of policy and program development, and on
occasion the success of one part of the health sector can come at the cost of
others within the health and health consumer sector. While it is important to
have each part of the sector advocating for the best outcomes for their
constituency, decisions about PBS listings need to remain independent from the
influence of the health and health consumer sector and other interested
parties. Ensuring that Cabinet decisions consider the independent advice
offered by the PBAC may go some way to alleviating concerns about independence.
Finally, the committee heard concerns that consumers who are reliant on
medicines that are less commonly used, or who do not have access to such good
advocates or lobbyists may become disadvantaged in a more politicised approval
environment. Ms Bennett explained:
For consumers, that is a real concern—particularly when there
is no clear criteria on which cabinet is making decisions—if it means that the loudest
groups, the most resourced groups or companies that are the most able to get
the ear of government may well end up getting their drug listed on the PBS
versus a small, niche-market drug for a group of consumers who may not have the
same public profile or benefits to government that may be delivered from the
listing of that drug. It creates a real concern.
This disadvantage was explained further by Mr Matthew Pitt of the Brain
Tumour Alliance Australia:
Unfortunately the people who do have brain tumours tend not
to stay around in advocacy for various reasons, not least is the morbidity and
mortality and also the trauma caused by it. Even given our numbers we actually
have a reduced political power and a reduced presence because of the impact of
the disease on families. We are doubly afflicted.
Implications for the PBAC
Submitters expressed concern that over time the professionalism and
pre-eminence of the PBAC would be eroded, as a direct consequence of the
decision for cabinet to consider all listings. AstraZeneca Australia argued
By overriding the recommendations made by its own Expert
Committee, the Government risks undermining the very system which is recognised
throughout the world as a model for delivering optimal health outcomes in a
cost-effective and equitable manner.
APMA submitted that the decision will:
...compromise the ability of the Government to attract and
retain the services of the highly qualified and eminent experts who currently
undertake the assessment and analysis, and must over time influence the
considerations undertaken by this expert body. Repeated rejections of
recommendations by experts, well aware of the sound basis of their
recommendations and the degree to which they reflect the intentions of
Parliament through adherence to the legislatively mandated assessment criteria,
must inevitably lead consciously or unconsciously to changes in how the
assessment is undertaken and their conclusions and recommendations are derived. 
Mr Murdoch of APMA, explained to the committee:
The membership of the PBAC is of eminent people who are also
very, very busy. I think that, from their integrity, they would be reluctant to
continue to contribute their valuable time to a process that is not treated
seriously by the government.
APMA also expressed concern that 'it could also tempt future Governments
to appoint less independent experts to avoid having to regularly reject
recommendations to list large numbers of medicines'.
Mr Murdoch explained further to the committee that the availability of
sufficiently eminent people:
...is likely to be threatened where the eminent experts are
not able to do their job. Were it not or even if it is, each time a government
overturns or refuses to agree with an expert recommendation, such as one from
the PBAC, it will invariably lead to at least some controversy. It presents
political difficulties for a government so the temptation will inevitably be,
irrespective of the composition of the government, to avoid that by having PBAC
members who are not likely to cause controversies.
The committee is concerned that the deferral decision stands to damage
the independence and reputation of the PBAC. If the recommendations of the PBAC
are not even considered by Cabinet it will become increasingly difficult to
attract and retain the calibre of people that presently comprise the PBAC.
Compliance with the intent of the Memorandum of Understanding
The Memorandum of Understanding (MOU) between Medicines Australia and
the Commonwealth Government was signed in May 2011, and was subsequently
announced in the 2010–11 Budget.
The committee heard that pharmaceutical companies have engaged in
significant cooperative work with the Government aimed at streamlining both the
TGA approval process and the PBAC approval process. Yet, the final Cabinet
approval process had sometimes taken a long time. This problem had been
resolved when the MOU was concluded; ensuring that in future Cabinet would take
no longer than six months to make a decision on approval. As Mr Latham, Pfizer Australia,
explained 'there are other things in there as well, but that predictability was
one of the main things that we asked for'.
A decision to defer listings now introduces great uncertainty into a
system that had become more streamlined and more predictable. As Mr Latham
They did not say no. If they had said no, then fine, but they
did not. They did not say yes and they did not say no. It is the decision that
you have when you are not having a decision. If they had said no, that is fine,
but they did not; they said it is deferred. That is the uncertainty that we are
Mr Murdoch of APMA told the committee that he considered that the
decision to defer listing indefinitely can, in fact, be considered a rejection
of a listing. He explained:
During this session I intend to talk about the new government
policy to reject rather than defer pharmaceutical listing. I think that is a
semantic means of downplaying the seriousness and implications of this new
approach. In almost any other legal jurisdiction, a decision such as the one
taken by cabinet to date would be deemed to be refusal.
Mr Latham went on to explain to the committee that this new level of
uncertainty was occurring right at the very end of a long process:
These things take 10 years to come through and then all of a
sudden you are that close and then it falls down at the end and we are told we
cannot afford it. We should be talking about whether we can or cannot afford it
rather than putting this thing into limbo for the next 18 months because we are
told this decision is going to apply until we come back into surplus. That is
where we have a problem as an industry and as Australians.
Mr Learmonth, DoHA, responded to these comments and stated:
It is true that the deferrals represent a change. It is also
true that what the industry wanted and were looking for was stability, and that
is why they proceeded with discussion and negotiation of an MOU with the
government. This is different, however, to what the MOU does as a negotiated
document. The MOU represents and reflects the scope of that agreement. In this
case, the intent of the MOU itself is clear. Notwithstanding what anyone's
motivation might have been for generating and negotiating one, the intent of
the document is clear. Indeed, there is an intent clause which spells it out.
Clause 3 of the MOU states:
"Both parties intend that the MOU will promote the
efficiency and sustainability of the PBS and support, by the provision of a
stable pricing policy environment, a viable and responsible medicines industry
in Australia ..."
Clause 4 of the MOU states:
"The Commonwealth undertakes not to implement new
policy to generate a price-related savings from the PBS during the period of
the agreement, that is, measures that would change the ex-manufacturer price of
particular medicines, other than reflected by this MOU."
This is the undertaking reflected in the MOU. This is the
intent of the MOU—to provide certainty with respect to pricing and no more.
Recommendations to the PBAC and the PBPA have always required government
approval, and the referral of all listings with a financial impact for cabinet
consideration is consistent with the commitments made under the MOU. This is
not new pricing policy.
Finally, it has been suggested that the Commonwealth has
departed from clause 29 of the MOU, specifically:
"For those submissions required to be approved by
Cabinet, the Commonwealth will use its best endeavours to implement a maximum
time frame of six months for consideration and decision by Cabinet."
Since this came into effect the government has consistently
met or indeed bettered this timetable for consideration, with two of the last
high-cost listings being considered by cabinet within one month of pricing
being agreed. I think that is the record.
Yet, both submitters and witnesses argued, in relation to clause 29 of
the MOU, that the decision to defer listings on the PBS was in fact inconsistent
with the spirit or intent of the MOU.
Others went further. Mr Latham, Pfizer Australia, told the committee that 'the
unilateral decision on 25 February to indefinitely defer listings of new
medicines on the PBS is a clear breach of the MOU'.
The MOU between the Government and Medicines Australia was cited as a
good example of a cooperative approach to addressing the question of
sustainable health expenditure, unlike the unilateral decision to defer listing
of medicines. Mr Latham submitted that:
From the commercial side, the industry and the government
signed a memorandum of understanding in September last year which demonstrated
our joint commitment to sustainable health expenditure. The MOU was the result
of the medicines industry and the government working hand in hand to solve PBS
funding issues caused then by the GFC. By working collaboratively, we produced
a sensible and well-thought-out agreement. Taxpayers maintained access to new
medicines, the government banked nearly $2 billion in the forward estimates and
the industry was assured that it would receive a predictable business
environment in which it could make decisions about investment and employment.
Deakin Health Economics submitted that the lack of adherence to the
spirit of the MOU may have unforeseen consequences:
It is our opinion that the lack of adherence to the spirit of
the MOU is short-sighted as it is possible, if not likely, that the failure of
the government to act in good faith in this instance will have repercussions
for future negotiations between the pharmaceutical industry and government.
Furthermore, it is possible that the failure of the government to uphold the
spirit of the MOU will have flow-on effects for negotiations of agreements
between government and other industries.
Lack of consultation
Many submitters told the committee that the deferral announcement was
completely unexpected and the changes were implemented without consultation
with industry, consumer or patient groups.
Many submitters, in good faith, had worked closely and cooperatively with government
on addressing changes to the PBS that would address financial sustainability,
so the fact that this decision was announced suddenly and without warning caused
great disappointment amongst stakeholders.
Ms Tyrrell, Hepatitis Australia, stated:
With regard to the consultation process, Hepatitis Australia
was both surprised and shocked by the Gillard government's decision in February
2011 to depart from the established practice and defer PBS listings. This
decision appears to demonstrate a disturbing lack of respect for health
consumer consultation prior to instigating major changes in established
practice which have a direct impact on the health and wellbeing of people in
need of subsidised quality medicines.
Mundipharma also noted that it had little consultation in relation to
the deferral of its medicine and that 'apart from the initial phone call late
on 24 February (the day prior to the Minister’s announcement) neither the Government
nor the Department had taken any initiative to proactively contact Mundipharma
to discuss this important decision'. Mundipharma went on to note that apart
from this call 'all interactions with both the Government and the Department of
Health & Ageing have been initiated by Mundipharma'.
Noting their disappointment about the lack of consultation, Mundipharma outlined
the consequences for the company:
Until that time, Mundipharma was given every reason to
believe the process for the listing of Targin® tablets was proceeding on track
according to normal Departmental processes. Had earlier advice been received,
issues around the importation from the UK of stock of considerable value and consequent
associated financial loss to Mundipharma could obviously have been avoided.
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