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Into the 21st Century: Protecting the PBS

Meanwhile, problems never coming in singles, there was the PBS to be protected from moves to create a US-Australia trade agreement. This difficulty had arisen early in Dr Phelp’s tenure when Prime Minister Howard and President Bush agreed to negotiations on a bilateral free trade agreement. Apart from other arising from this idea, a long-standing hostility to the PBS by US pharmaceutical companies meant that it would inevitably be a central factor in the negotiations. Negotiations would take the best part of four years, but the AMA realised straight away that an agreement would have its impact on health, and particularly medicines. It became alarmed (though not surprised) when the PBS was indeed being targeted early on in the negotiations, partly because the US position aggressively supported the argument by US pharmaceuticals: eg, that the scheme unfairly depressed the returns from their investment in research and development, and that it represented some kind of threat to their intellectual property rights. Negotiations continued until final agreement was reached late in 2003. The AMA’s alarm was justified. The agreement included extensive clauses regulating the operation of the PBS, a right of appeal against Pharmaceutical Benefits Advisory Committee (PBAC) decisions, and more protection for the drug companies’ patents.

This was not acceptable to the AMA. It had been campaigning strongly against any limitation on the PBS, warning that it would mean that Australian patients could end up paying at least twice as much for medicines. Making the PBS subject to the agreement, it said, would undermine its ability to negotiate lower prices for Australian patients than those operating in the US. The agreement – understandably, because it so suited US interests - was ratified by the US Congress with huge majorities. In Australia, on the other hand, it had aroused great controversy, thanks in part to the AMA campaign. So, in the treaty ratified in the Australian Parliament late in 2003, appeal against PBAC decisions had been watered down to review only. The Australian legislation also prevented abuse of patent law through a device known as “ever-greening” that allowed the drug companies to make trivial and meaningless modifications to drugs under patent so as to extend the effective life of the patents. The US Government was not happy and, for a while, refused to certify the Australian legislation, which was necessary for the agreement to begin to operate. The agreement finally came into force in January 2005, its form to a significant extent shaped by the AMA campaign to protect the PBS.