Monday, 15 July 2013

Plibersek admits,,, 18/3/13

Minister for Health
Doorstop on the Price of Medicines/Antimicrobial Resistance
Senate Courtyard, Parliament House, Canberra
18 March 2013

Tanya Plibersek: Good morning. I've just come out in case people have any questions
about the Grattan Institute report that was released today in relation to the pricing of
generic medicines. I think it's very important to say that this is an interesting report
and well worth further examination, but it's also true that Australia has made very
substantial savings in the area of generic medicines in recent years.
We've recently had a $1.2 billion price cut for generic medicines, we're going to see
another billion dollars saved shortly, and indeed on April 1 we'll see another 60
medicines take a price cut. We've seen so far about 1400 brands of over 100
medicines take price cuts because of our generic pricing policy. This has led to better
prices for consumers and of course better value for taxpayers. That's not to say that
we can't make further improvements in the future, but the gains have already been
We'll save around $9 billion between 2010 and 2015 on the basis that generics will
drop in price and also because we've made price changes to high volume drugs like
some statins. And because of those billions of dollars that we're saving with better
drug pricing policies, we've been able to invest a great deal more in new drugs, listing
many new medicines on the pharmaceutical benefits schedule.
Just recently I listed two new medicines for Hepatitis C, for example. Those two
medicines on their own will cost $220 million. So there are some very substantial new
investments to be made in the pharmaceutical benefits schedule, and saving money
with the older drugs, those coming off patent, allow us to invest in the innovative
new medicines that are being discovered all the time.
It's critical that we get good value for taxpayers…
Excuse me for a sec. [Coughs] Sorry.

It's critical that we good value for taxpayers, but just looking overseas at the systems
that other countries have and adopting them wholesale, I don't think does provide a
solution for Australia.
Taking New Zealand, which is one of the examples used in these reports: it's true that
New Zealand does get good price for generic medicines, but they have a great deal
less choice for patients. Because they have a tendering system, they'll have one
brand of a particular medicine. That means that if that brand suits you that's fine, if it
doesn't suit you because you might be allergic to a component that makes up that
medicine, then you miss out. It also takes much longer for new medicines to be listed
in New Zealand and they have a much smaller range of medicines. There are about 84
medicines that we use here in Australia that simply aren't available in New Zealand
because they've decided not to list them there for subsidy at all.
Canada is the other example that's used in this report and indeed both the New
Zealand and the Canadian systems have some things going for them, but when you

compare us with Canada, we still actually spend a smaller proportion of our health
budget subsidising medicines than the Canadians do.
So, looking at just the price of generics on their own is not the way to build a
comprehensive medicine subsidy system. We need to make sure that we have a wide
variety of medicines available for patients, we need to make sure that the newest,
most innovative medicines are also available for patients. And, from our perspective,
it is much better to have a number of suppliers of medicines rather than sticking with
just one supplier, as New Zealand for example does, because if that company has a
problem, if their supply chain is broken for some reason, then you can experience
medicine shortages, and indeed we've seen those shortages around the world at
different times.
So, in summary I guess, good report, very interesting, but I think we need to
acknowledge that the Australian system is already a strong one that's delivering
substantial savings that are being reinvested in terrific, new, innovative medicines
that are being discovered all the time.
Question: Minister why is the pricing authority not independent of the drug
companies? That would seem like quite a no-brainer.
Tanya Plibersek: Sorry. Well we have very strong negotiations with pharmaceutical
companies on the basis of price. The role of the pricing authority, I don't think you
could overstate that. The majority of negotiations are done between the department
and the relevant drug companies. And we've seen some very interesting and
innovative pricing mechanisms in recent years including, for example, for the drugs I
mentioned earlier for Hepatitis C, a risk-share arrangement with the two companies
that are making these drugs. So that if the estimates of the number of people who

use the drugs is higher than anticipated, those drugs will be provided at a discounted,
or even free, price, depending on the volume of drugs that are being used in the
Question: So you don't think drug companies have an undue influence on the pricing
Tanya Plibersek: Oh no, I think the drug companies are doing the exact opposite.
They'd tell you that we drive a very hard bargain indeed.
Question: Minister do you maintain your commitment to Medicines Australia that
you won't seek any price related savings to the PBS before July 2014?

Tanya Plibersek: Well there'll continue to be price drops as part of the memorandum
of understanding when we go through processes like we will on April 1. We'll see 60
medicines drop in price because of expanded and accelerated price disclosure. Our
commitment is that we won't change the rules, and that commitment stands. We've
got a memorandum of understanding, that'll last till 2014, and we'll honour that
memorandum of understanding.
Question: Do you think there might be scope to make further savings beyond July
Tanya Plibersek: Oh well there's always an interest from government in making sure
that every dollar that we spend on health is a dollar well spent. And of course we'll
continue to look at all of the evidence to see whether there are other areas in the
future where we're better able to spend those health dollars effectively. What I
would say is that there have been very substantial savings already and that those
have meant that we've been able to list terrific new medicines that are being
invented all the time.
Question: Minister it's not just New Zealand that we're paying more than, it's our
own public hospitals which are paying 63 times less for some of these medicines than
our PBS. If Australian public hospitals can buy these drugs cheaper, why are we over
paying [indistinct]?
Tanya Plibersek: What's happening in public hospitals, Sue, is that patients are being
started on these drugs and then they continue to take them out in the community. I
think it's fair to say that the companies are happy to take a very low price indeed so
that patients will be initiated on their particular brand of medicine, so that when that
patient goes out into the community, they stay on that particular brand of medicines.
Question: The report says that the 16 per cent price cut that you enforce for offpatent medicines is timid compared to the price cut demanded by other countries

including, at one end of the scale the Canadian provinces which have demanded an
82 per cent price cut on six generic medicines. Is there - do you think that 16 per cent
is enough, or will you be pushing for a greater cut when you negotiate the next
agreement with medicines industry?
Tanya Plibersek: Well, we've seen a number of medicines cut by around 80 per cent,
even more than 80 per cent. As you say, the Canadian experience is that they've cut
only six medicines by that amount. We're seeing that many that will be cut above 80
per cent, indeed over 83 per cent. We're looking at one that will be close to 86 per
cent. I mean, these are very large cuts in Australia as well. The difference is the
Canadians have just picked six medicines and imposed the same level of cut on them.
We're using a market mechanism to achieve savings of a similar magnitude, and as I
said earlier, in fact the Canadians spend a larger proportion of their health budget on
subsidising medicines than we do in Australia.

Question: Chemists are getting the biggest-selling drug in this country, atorvastatin
the cholesterol medicine, for free in some cases and as little as $2 a pill while the
Government and taxpayers are paying up to $51 for the same medicine. These
chemists are making a $50,000 a year profit each from just that one medicine. Why
should taxpayers be providing be providing the med subsidy?
Tanya Plibersek: And indeed the statins review lead to a 25 per cent immediate cut in
the price of a couple of the statins and we'll continue to see price decreases as more
medicines become off-patent. We've seen very large decreases in the cost of some
medicines already, and that policy of expanded and accelerated price disclosure will
mean that we'll see market-led drops in price continue. One of the issues that we
need to consider as a government is price and getting the very best value for
taxpayers' dollars, but there are a couple of other things that we need to consider as
We need to consider, for example, certainty of supply. Where you've got a tendering
arrangement, as you see in New Zealand, it's possible that if one manufacturer has
problems that you see national shortages of particular drugs, and indeed New
Zealand has experienced that very problem. We've also got a pharmaceutical industry
here in Australia that includes generic manufacturers and innovator manufacturers
that exported about $4.3 billion worth of product last year. Part of the reason for that
is that we have a competitive market for pharmaceuticals here where a number of
different products can enter the market and compete against one another. New
Zealand, in contract, has a manuf… one generic medicine manufacturer, because they
have this process of tendering for one drug in a class.
The other problem that you get if you're tendering for one drug in a class is if, for
example, the medicine that is chosen to be listed has traces of gluten in it and you're
gluten intolerant, you can't take that medicine, too bad. It means that more

expensive innovator medicines, because the independent body that decides which
medicines will be funded, because that body has a set budget each year, if you're a
person who's got a rare condition that needs an expensive medicine to treat the
likelihood that it will be listed more slowly or not at all increases.
There are certainly things that are worth reading in this report, but the idea that you
can just pick and choose elements of other countries' systems and that automatically
gives us a better, stronger system, I think is incorrect. We've achieved very significant
savings, those savings are being reinvested in better, newer medicines for Australian
patients, and indeed if you compare us to the systems that are being named we
actually get extremely good value for money for the newer, innovative medicines. We
still spend less as a proportion of our health budget on drugs than Canada does, one
of the systems that's being highlighted, and we have a great deal more patient choice
and security of supply than New Zealand, the other country that's being highlighted.
Question: [Inaudible question]
Tanya Plibersek: I've met just a couple of months ago with the committee of experts
that's working on anti-microbial resistance. We are doing a great deal through our
National Prescribing Service to reduce the incidence of antibiotics, but patients
should be very aware that it's not a good idea to take antibiotics unless you really,
really need them. The fewer antibiotics you can take in your lifetime, the better for
Thanks everyone.

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