US wants Australia to modify PBS as part of Trade Deal
US government negotiators are pressing the Australian government to agree to modifications to the government subsidised pharmaceutical benefits scheme in exchange for allowing Australian farmers better access to US markets, as part of a free trade agreement.
Under the scheme, the Australian government subsidises approved drugs and negotiates heavily discounted prices from the manufacturer. Patients, who pay what is often a nominal "co-payment" on a prescription, are then able to receive them far more cheaply than they otherwise would.
Assistant US trade representative Ralph Ives confirmed at the conclusion of the first week's negotiations in Canberra that the scheme was on the agenda at the behest of the Pharmaceutical Research and Manufacturers of America (PhRMA).
"We understand the strong feelings of Australia towards the PBS [pharmaceutical benefits scheme] . . . I'll take the information I got here and go back to PhRMA, and we'll see where we go from here," Mr Ives said.
The 50 year old scheme guarantees drug companies a larger market-mostly poorer consumers-while allowing the government to negotiate "price for volume" discounts. To qualify for inclusion under the scheme, applications for new drugs are assessed for whether they deliver health advantages and are cost effective compared with drugs that are already listed.
In January PhRMA lobbied US trade negotiators to seek Australian government commitments to "refrain from trade distorting, abusive, or discriminatory price controls," which, it claimed, constituted "significant trade barriers." In its submission, PhRMA complained that innovation by drug companies should not be "hampered by stop-gap policies such as current 'reference pricing' priorities."
Australia's lead trade negotiator, Stephen Deady, said discussions on government procurement policies, the provision affecting the scheme, will be held over until the month preceding the next round of negotiations in Washington, DC, in May.
Steven Haynes, the director of strategic relations for Medicines Australia-PhRMA's Australia counterpart-confirmed meeting with US trade negotiators last week but said it was too early to comment on the likely provisions of the free trade agreement at this stage.
Martyn Goddard, senior policy officer with the Australian Consumers' Association, is worried that the Australian government will agree to weaken the cost effectiveness test for new drugs and precipitate the financial demise of the scheme. He said: "If the cost of getting an agreement is fiddling about with a [pharmaceutical benefits scheme] pricing process that hardly anybody understands then they may well just do that."
Mr Goddard believes that part of PhRMA's hostility to the scheme is due to its impact as a global role-model for governments. "Other countries look to the [scheme] as a model of how to control the high cost of new medicines, and the big companies don't like that."
Australia's trade minister, Mark Vaile, insists that the government will defend the scheme in negotiations. All major opposition political parties oppose the inclusion of the scheme within the ambit of the negotiations.
A recent opinion poll, undertaken by UMR research and commissioned by trade deal opponents, showed that 89% of respondents would oppose a trade deal if that "could make it more expensive to buy prescription drugs."
- Bob Burton