Australia drug prices under threat from US-led global drugs industry

[Guest guest]

Nobody in the world is safe until we remove the corporate control of our

government.

Warning: giving in to the US may have serious side effects

January 4, 2006

Australia's enlightened policy on pricing medicines is under threat from a

US-led global drugs industry which is hungry for profits, report

Faunce and Searles.

WHAT happens when a government begins to restrain pharmaceutical prices?

Having introduced a 12.5 per cent reduction in generic prices and recently

commissioned a review that expected to strengthen the Pharmaceutical

Benefits Scheme's scientific evaluation of drug prices, it is about to find

out.

The Federal Government went to the polls in 2004 having promised that the

trade deal with the US would not lead to higher drug prices. It also

promised that the basic cost-effectiveness mechanism of the PBS process

would be unchanged.

There was a specific article in the trade deal facilitating one of the most

serious threats to drug prices: the process of " evergreening " , whereby drug

companies introduce minor changes to drugs in order to extend patents, and

to prop up prices. The Federal Parliament legislated to place an outer limit

on this tactical process on so-called " blockbuster " drugs which sell in

large volumes.

The Trade Minister, Mark Vaile, has now disclosed the Government may bow to

drug company lobbying and repeal this anti-evergreening legislation. Vaile

has said the industry will need to show the amendment is " commercially

detrimental, not just philosophically detrimental " .

Numerous questions arise. First, what type of evidence should be put

forward? As members of a research program that has been investigating this

issue for the past year, funded by the Australian Research Council (ARC), we

have found no such evidence.

Second, who should evaluate the evidence? Not the Medicines Working Group

established under the trade deal with the US. This was designed to consider

only questions on transparency related to submissions before the PBS

hearings process and independent review. It is not composed of people with

the necessary expertise to evaluate any evidence.

Why has this issue emerged now? In the US, the pharmaceutical industry is

coming under increasing pressure over its vast, uncapped subsidy on drug

prices, coupled with a prohibition on the Government using its buying power

to bargain down prices, as happens in Australia.

Here, the industry is worried about the recent government review of

reference pricing for pharmaceuticals, and about the mandatory 12.5 per cent

price cut in generic drug prices, which it argues has resulted in lower

outlays under the PBS.

The global pharmaceutical industry is concerned about Australia because our

PBS system is often used as an example of world's best practice in the

scientific evaluation of medicine prices for community benefit. It wants to

get rid of this approach around the world. Since the free trade agreement

with the US came into force on January 1, 2004, it has lobbied hard to stop

Australia adopting policies that restrain the price of new so-called

" innovative " drugs.

It wants Australia to adopt the US style of a fully privatised approach to

medicines, in which the industry prices drugs and markets them directly to

patients, not only free of scientific scrutiny about the cost of production,

but also free from independent evaluation of their products' worth.

This issue is crucial for public health in Australia. The Productivity

Commission recently found, for example, that on average an man aged 65 to 74

costs the PBS 18 times that of a man aged 15 to 24.

In 2001 a conservative government in the Canadian province of British

Columbia retained a PBS-type pharmaceutical reference pricing system because

it was found to save up to 10 per cent of its total drug spending.

The anti-evergreening amendments are likely to play a very important

strategic role in any trade dispute with the US. They will provide evidence

of Australia's " legitimate expectations " in relation to any US claim that

Australia is breaching the " spirit " of the agreement.

Jettisoning these amendments will indicate that this Government lacks the

determination to stand up to the pharmaceutical industry on behalf of older

Australians, and will be the start of a process of attrition of the PBS

process by the multinational drug companies.

Without the PBS system of scientific evaluation of drug prices, we could

find ourselves in a situation not uncommon in the US, where those that

cannot afford good health insurance cover either go without medicine, or

rely on the charity of others.

Faunce is project director and Searles is the ARC research

scholar in the Globalisation and Health project at the Centre for Governance

of Knowledge and Development, ANU.