Conclusions and recommendations
The Government's decision to defer the listing of certain medicines
under the Pharmaceutical Benefits Scheme (PBS), despite positive
recommendations by the Pharmaceutical Benefits Advisory Committee (PBAC), and the
decision to subject all future listings with financial implications for the
budget to Cabinet review, constitutes a major, unnecessary and unwelcome change
in government policy. This profound and ill-considered change in policy puts at
risk affordable access to medicines for Australians, and will have significant
consequences for the pharmaceutical sector, including research and development.
The committee notes the PBS has operated effectively to provide
Australian patients with affordable access to necessary medicines since its
establishment in 1948, and is a central feature of Australia's health system. A
series of reforms have been progressively implemented, in consultation with
industry and stakeholders, to improve the operation, cost-effectiveness and
timeliness of the PBS system. The benefits of recent reforms have yet to be
The committee acknowledges that the cost of the PBS has continued to
grow due to a number of factors including an ageing population, growth in
population and the development of new treatments. However, evidence received by
the committee has demonstrated that reforms implemented throughout the PBS's
history have worked to ensure that the PBS remains sustainable. Submitters
strongly argued that the PBS remains affordable for a wealthy country like
Australia. Committee members agree with this sentiment.
The committee also acknowledges that it is the Government's
responsibility to be mindful of budgetary constraints, however it considers
that responsible fiscal management should be applied at a whole of government
level as opposed to trying to create savings through piecemeal and ill-advised
The February 2011 announcement of the deferral of the listing of seven
medicines which had been recommended for listing on the PBS by PBAC was claimed
by the Government to be a legitimate decision in light of Australia's fiscal
position and Budget deficit. In addition to these deferrals, the Government
advised that Cabinet would consider all PBAC recommendations for listing of
medicines on the PBS that represented a cost to the Government, not just those with
cost implications over $10 million per annum. Again, this was claimed to
be based on responsible fiscal management:
Given the need for fiscal discipline to achieve the
Government's intention to return the Budget to surplus in 2012–13, all changes
to the PBS with financial implications will be considered by the Cabinet.
This announcement came as a complete surprise to industry, consumer and
patient groups alike and constituted a significant departure from previous
policy. Many organisations felt that they had been negotiating in good faith with
the Government regarding ways to ensure the sustainability of the PBS, and were
disappointed that they had not been consulted with, or informed prior to, the
public announcement on the decision. The committee is concerned that the
failure of government to consult with industry and stakeholders prior to taking
this decision to change the listing process and the possible contravention at
least of the spirit of the Memorandum of Understanding (MOU) entered into by
the Government and Medicines Australia will have repercussions when it comes to
future negotiations with industry.
The committee heard universal praise regarding the way that the PBAC
carries out its statutory role of comprehensively assessing and recommending
the suitability of medicines using health economic models. Submitters argued
that the PBAC decision-making process is world-class, as its decisions are
based upon recommendations made by an independent group of clinicians and
specialists, with cost-effectiveness as a key determinant.
However, with Cabinet now making decisions about the listing of all medicines
with a cost to government without clear criteria or timelines, the integrity of
the PBS is at risk. Unlike PBAC processes, it appears that no criteria of any
form have been used by Cabinet in coming to its decisions in relation to
deferrals and listings. Clearly, the lack of transparency of Cabinet's
decision-making process, and the absence of a clear timeframe for the reconsideration
and listing of deferred medicines, undermines the integrity of PBS: the Government
has abandoned a well-respected, time-honoured, criteria-bound, evidence-based
and transparent system for a system which reflects none of these qualities.
In light of the evidence received, the committee is concerned that the
change in policy will lead to a politicisation of the listing process in a
number of respects. First, there is a risk Cabinet decision-making will become
vulnerable to lobbying. Further, the better resourced stand to exert greater
influence, to the exclusion of those smaller and less well-represented groups. Finally,
it was noted that the Government has sought to make future listings dependent
upon gaining opposition support for other savings measures. The committee is of
the view that any such politicisation will only serve to undermine the
integrity and quality of Australia's listing process.
Further, the committee is concerned that the independence and reputation
of the PBAC will be irreversibly damaged by the referral of all listings for
Cabinet consideration. Should the recommendations of the PBAC be regularly
rejected it will become increasingly difficult to attract and retain experts of
the calibre that presently comprise the PBAC. As a result, the Government of
the day may be tempted to appoint less independent PBAC members in order to
avoid controversy over deferral decisions.
This Cabinet's lack of understanding of the PBS and medicines policy is
evidenced by the Cabinet's failure to appreciate the difference between an
assessment of a medicine's effectiveness at a population level as opposed to
effectiveness at an individual level.
The Government has argued that for some deferred medicines there is an
alternative already listed on the PBS. However, it is indisputable that
medicines may not always be interchangeable for individuals: for some patients
these deferred medicines represent a more appropriate treatment, or in some
cases, the only effective treatment. The committee considers that the Government's
view that medicines with 'alternatives' listed under the PBS can be deferred is
based on a poor understanding of the complexities inherent in assessing the
effectiveness of medicines for individuals. This essentially creates two
classes of people: those who have access to a suitable medicine that is
subsidised; and those who do not. In the committee's view, it is unacceptable
that, by deferring the listing of these alternatives on the basis that others
are available, the Government is undermining the PBS by hindering affordable
access to these life-changing treatments.
The Government has made much of the need to be fiscally responsible in
the current economic climate. However, the evidence received by the committee
called into question the level of the savings that will actually flow to the
Government as a result of the deferral. Witnesses stated that the savings
calculations were flawed as they did not take into account patients switching
from old medications to new medications. In addition, evidence suggested that
patients receiving appropriate treatment will require fewer hospitalisations,
fewer appointments with health professionals and fewer treatments to address
side-effects and adverse events. Further, the quality of life of consumers will
be improved as will their ability to participate in the economy. The committee
is of the view that this policy may well only result in comparatively small
savings in the short-term and in the long-term the cost of not listing
medicines may significantly outstrip these small savings.
Submitters, including both Medicines Australia and the Generic Medicines
Industry Association, opposed the Government's position that new medicines will
not be listed until savings are found to offset listing costs and argued that
this is not the way to fund or manage the PBS. The committee agrees with this position
and is of the view that health outcomes of Australian patients should not be
compromised due to the Government's budgetary considerations.
Many Australian health consumers, particularly those with chronic
conditions, already experience significant financial burdens. The committee is
concerned that the decision to defer listings will exacerbate the financial
distress of some consumers as the deferral may result in consumers either being
unable to afford the medicines they need, or having to go without other
essential items in order to purchase unlisted medications. This represents
unacceptable cost-shifting to patients who can least afford to bear an
increased financial burden. In addition, Australia may end up with a two-tiered
system in which newer, more effective treatments will be out of reach for
lower-income patients who cannot afford to pay the unlisted price for medicines.
The committee considers that a lack of timely access to affordable
appropriate alternative medications will not only have dire consequences in
terms of quality of life and adverse events for individual Australian patients.
It will also have repercussions for broader public wellbeing and demands on the
public health system.
The committee is very concerned about the uncertainty which has arisen
from the Government's decision to defer the listing of medicines. While
companies will always manage risk in making business decisions, prior to the Government's
deferral decision risk assessments were based on a long-standing understanding
of the PBAC evaluation process and the criteria employed in the assessment of a
listing application. However, in the current circumstances, companies are not
aware of the criteria which Cabinet is using to make decisions on deferrals–this
creates additional risk for companies operating in Australia. The committee is
of the view that this added layer of uncertainty will undoubtedly impact on
investment decisions by the pharmaceutical sector, to the detriment of health
The committee considers that the Government's decision to defer the
listing of medicines, and subject all future listing decisions to Cabinet
consideration, may have significant implications for the discovery and
development of new medicines, and the access of Australian patients to
important clinical trials. The committee is concerned that this will disrupt a
chain of processes that will ultimately compromise Australian health consumers'
access to appropriate and effective medications.
The committee considers that the unprecedented changes introduced by the
Government to the listing of medicines in Australia is unacceptable and is
based on short-term and ill-conceived policy goals. The Government has taken a world-class
and rigorous evaluation process and replaced it with non-transparent Cabinet
deliberations. This will result in poor outcomes for consumers and the health
system generally. The committee considers that the Government is exposing
Australia's health system to significant risk and should immediately list all
medicines deferred and return to the system of Cabinet consideration of
medicines with a financial impact over $10 million.
The committee recommends that the Government withdraw the statement made
on 25 February 2011 regarding the deferral of the listing of new
medicines and the new rules applying to listings from that point forward.
The committee recommends that the Government retract the statement that
PBAC listing recommendations will not be proceeded with until savings are found
to offset the costs of listing those medicines under the PBS.
The committee recommends that the Government should explicitly state
that it rejects any implication that the listing of new medicines requires
savings to be made elsewhere in the health portfolio.
The Government should restate its commitment to making an explicit
decision regarding the listing of new medicines on the PBS within the terms and
intent of the Memorandum of Understanding signed with Medicines Australia on
6 May 2010 and re-signed on 28 September 2010.
That the Government reinstate the '$10 million rule' so that medicines
that have a financial impact of less than $10 million in each year over the
forward estimates can be listed on the PBS Schedule by the minister without
waiting for Cabinet approval.
Senator Scott Ryan
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