The Pharmaceutical Benefits Scheme: Separating Fact from Fiction

Good evening and thank you for the invitation to speak to you on such an important issue - the PBS.

The topic you have given me - The PBS: Separating Fact from Fiction - is topical to say the least.

Let me say from the outset that I am a great supporter and defender of the PBS. That is a fact.

There are many who say that the PBS would not be harmed or diminished or affected in any way by the Australia-US Free Trade Agreement. To me, that is a fiction.

The greatest defence of the PBS would have been to exclude it from the FTA altogether. Another fact!

I'll tell you now why I'm such a fan of the PBS and how it helps Australian patients.

The Australian health system is a major success in international terms.

It is a fact that Australians experience one of the highest disability-free life expectancies in the world.

Clearly, some of the credit for this good state of health is due to Australians' access to high quality, cutting edge, safe and efficacious medicines that maintain and restore their health, prevent ill-health and promote well-being.

Access to a high standard of clinical care is a right, and must never be denied on the basis of age, disability, or perceived societal usefulness.

There is no place for policies and practices that discriminate in terms of access to quality health care service at any age.

National Medicines Policy

The AMA supports each of the four central objectives of the National Medicines Policy. These are:

• Timely access to the medicines that Australians need, at a cost individuals and the community can afford;
• Medicines meeting appropriate standards of quality, safety and efficacy;
• Quality use of medicines; and
• Maintaining a responsible and viable medicines industry.

Timely access to the medicines that Australians need, at a cost that individuals and the community can afford - is implemented by the PBS. That is a fact.

Since its birth in 1948, the PBS has evolved from a scheme for the provision of medicines for life threatening conditions to a scheme for the provision of timely, reliable and affordable access to a very wide range of necessary and cost effective medicines.

This has become particularly vital in recent years with the marked increase in the real cost of medicines.

The AMA supports the principles of the PBS to provide universal access to medicines to the public in an effective, efficient and equitable manner.

That is why we fight for the PBS at every opportunity.

Australia-US Free Trade Agreement

As you know, the AMA campaigned vigorously that the PBS should not have been included in the FTA.

Our job now is to oversee the FTA and what happens to the PBS.

We will continue to lobby government and other stakeholders to ensure that the FTA details, as they are developed, do not threaten the PBS.

The transparency called for by the FTA around decision-making about drugs listed on the PBS must be genuine, and must be mutual - both to protect the viability of the PBS, and to promote the quality use of medicines.

What I mean by this is quite simple.

We support the right of the pharmaceutical companies to know more about the deliberation processes of both the Pharmaceutical Benefits Advisory Committee (PBAC) and Pharmaceutical Benefits Pricing Authority (PBPA).

However, the clinical information in the submissions made by these companies to PBAC and PBPA must also become available.

The first must not happen in isolation from the second.

Open decision-making produces clearer decisions that can be better understood by the public and clinicians.

For example, greater transparency across PBS processes would allow a clear understanding of PBS listings and restrictions.

The AMA supports increasing access to the supply of information and the evidence upon which our understanding is based.

Better informed prescribers and more grounded communication to patients will help provide better health outcomes, and a more viable PBS.

The commercial in confidence secrecy surrounding research data ‑ including the identity of the comparator medicines used in evaluations of the cost effectiveness of new medicines ‑ is a major restraint on the quality use of medicines (QUM) in Australia.

The cost effectiveness data and research made available to the PBAC in assisting it with its recommendations on listing is not currently made available.

Doctors need access to this information, as practicing clinicians, to be informed clinicians.

This added transparency will help us to properly evaluate effectiveness and indeed scrutinise PBAC listings from a position of knowledge.

In order for the use of medicines to be consistent with QUM practices, it is imperative that all information considered by PBAC be available to clinicians to ensure best patient management and outcomes.

Again, greater transparency across the whole paradigm of PBS processes would allow a clear understanding of PBS listings and restrictions.

There are claims that such information is now available from PBAC. This is part of the fiction.

The fact is that the loosening of the confidentiality impositions on what data PBAC is allowed to release does not extend anywhere near what I as a clinician and the members I represent need to know for us to feel properly informed on the comparative aspects of medicines before we prescribe.

You are probably aware of the restrictions imposed by the PBS on the prescribing of certain items.

You may, however, be surprised to learn that the Health Insurance Commission (HIC) can and does initiate proceeding to recover monies for prescribing deemed inappropriate outside these restrictions.

And they do this without any Professional Services Review (PSR)-type preliminary process.

The doctor - the prescriber - is deemed liable for monies expended by the Commonwealth on medication the doctor initiated for a reason outside the listed restrictions.

These legal concerns will be greatly relieved with a much more sensible approach to the "commercial in confidence" stamp on the comparative clinical data provided to PBAC and PBPA by the drug companies.

It is a fact that there is very little detail in the FTA itself.

It is a fiction that the continuation of PBS is guaranteed by the FTA.

The fact is that the impact the FTA has on the PBS will therefore depend entirely on how these details are developed and implemented, over many years to come.

It will require constant vigilance by organisations such as the AMA.

The "independent review process" of PBAC recommendations required by the FTA must be truly independent, and not dominated by any sectional interest - be that industry, professions, consumers, or government.

Any reviewer should be appointed on a case-by-case basis, on the basis of their expertise depending on the nature of each request for review.

Each review must focus on the issues of concern and not re-open the whole application.

Each review must consider only information originally provided to the PBAC and relevant to the requested review.

The reviewer must report back to PBAC, and not directly to government.

Changes to the intellectual property law in Australia must not delay the availability of generic pharmaceuticals.

This would ultimately mean higher PBS prices.

There must be checks and balances to ensure legislative change to implement the FTA does not merely create an opportunity for delay through vexatious litigation or referrals to the review process.

The Government's recent consultation paper on transparency and the review process is a positive step in this direction.

The AMA will continue to go public if necessary to protect the Australian community's stake in the PBS as a vital component of Australian health care.

Indeed, the public expects us to champion their cause in this regard.

Our bottom line is that Australians' access to and affordability of PBS medicines must not be diminished.

Viability of the PBS

The AMA regards the PBS as being:

• a cost-effective way for the Australian public to access essential medicines to both prevent and treat illness; and
• particularly effective in containing the cost and social burden of chronic diseases and psychiatric illness while maintaining and improving quality of life.

In 1994, Australia internationally pioneered the use of a reference pricing model of cost effectiveness for the evaluation of all medicines being submitted for inclusion on the PBS. This is a fact.

And the fact is that this reference pricing model is being adapted and adopted not only by other countries, but even within the US by health maintenance organisations, by some State Governments, and even by the US Federal Government's Medicare and Medicaid schemes.

This is not liked by all of the US pharmaceutical companies - as a matter of fact.

Despite this, the PBS is now looming as a large target for the attention of central expenditure control departments due to both its size and the rate of growth of spending.

The PBS cost $1 billion in 1987 and $5 billion in 2003-04.

The trend rate of growth of spending under the PBS has in recent years been around 6 to 7% per annum in real per capita terms.

While acknowledging that PBAC's Economics Sub Committee takes a global cost-effectiveness approach, the AMA believes that the cost blow-out in the PBS in recent years has been contributed to by a small number of listing decisions that were not truly cost-effective.

However, we recognise that many factors have been contributing to the rapid growth of PBS spending.

These include:

• Community expectations, including expectations of access to new and often very expensive medicines (often fuelled by inappropriate expectations following advertorials and direct advertising);
• Expansion in effective pharmaceutical treatments (which relates to community expectations, prescribing patterns and listing of new medicines);
• The ageing of the population;
• Increasing costs of medicines, due both to the changes in the composition of medicines prescribed and to pressures in support of world parity pricing;
• Social trends including obesity and other diseases of excess;
• Governmental policy around increasing availability of PBS medicines from public hospitals;
• Prescribing trends, often based on best available evidence, bringing with it labelling of leakage;
• The growth of concessional schemes such as the HCC and Gold cards, which in turn relates to increasing income inequality in Australia;
• Growth arising from higher rates of disease detection (eg diabetes); and
• The growth of defensive medicine.

All facts, by the way.

We might hope that policy would be informed by a full understanding of these factors and an attempt to quantify their importance.

In practice, though, it is apparent that little information is shared.

This is an area that the AMA would support work with other stakeholders to address.

The AMA believes that the nature of the problem of the PBS cost blow-out is being over-inflated by the Government.

Overall spending on pharmaceuticals in Australia is, if anything, below average by international standards.

The fact is that Australia spends some 1.0% of GDP on pharmaceuticals, the UK 1.1%, Japan 1.3% and the USA 1.4%.

The AMA believes that Australia's low expenditure on pharmaceuticals relative to GDP reflects the success of Australia's funding systems, such as the PBS, in controlling spending.

The dilemma for Government is to find effective interventions that will maintain the integrity of the PBS - and its very significant health benefits - while managing the costs in an appropriate way.

Any measures to improve affordability of the PBS must not compromise equity of access to necessary medicines.

Suggestions that have been made that might lead to a more sustainable and predictable PBS include:

• Risk sharing between the Government as purchaser and the pharmaceutical industry as seller around predictions of usage of newly listed pharmaceuticals that would provide confidence for both parties that adjustment of prices would be fair and could either be up or down following review;
• Regular review of all listed products for cost effectiveness and quality use; and
• Consideration of ways to better coordinate the registration and reimbursement systems in order to deliver best health outcomes and value via the PBS, which would involve better ways of coordinating the work of the Therapeutic Goods Administration and the various PBS committees;
• Extension of the PBS to public hospitals to allow better continuity of care and ultimately health outcomes with particular benefit to the 'continuity of care' between the community and the hospital;
• Optimal access to PBS medicines should be considered in the context of their use, e.g. private hospitals.
• Continued evaluation of the potential of electronic clinical decision support across hospital and community to align medication use to better health outcomes and achieving value for money;
• Examination of methods of assuring compliance with restrictions to prescribing and also investigate methodology to assure cessation of prescribing when criteria for cessation are included in the listed restrictions;
• Improve equity of access to needed medicines by considering a range of options including co-payments and other payment models;
• Examination of marketing and promotion activities as drivers of demand; and
• Direct-to-consumer advertising of prescription-only medicines.

This leads us to the issue of direct-to-consumer advertising.

Previously pharmaceutical companies in Australia were allowed to aim their advertising only at doctors.

The AMA is concerned that some pharmaceutical companies have recently started advertising prescription medicines direct to the public, highlighting the disease, not naming the medicines.

The fiction is that this is in the public good. It's not. And that's a fact.

There is an extremely fine line between some disease awareness campaigns and direct-to-consumer advertising.

The fact is, the purpose of most advertising is not to educate, it is to persuade people to buy.

As the Principles Statement on Direct to Consumer Advertising of Prescription Medicines put out by the Government's Pharmaceutical Health and Rational Use of Medicines (PHARM) Committee states:

"...the main purpose of direct-to-consumer advertising would be to increase sales of the advertised products, not provide balanced information..."

To make good decisions about the use of medicines, people need balanced, reliable information about the probabilities of benefit and harm from all the alternatives.

We see it as a problem there are currently no requirements or incentives for companies to provide clear warnings about adverse effects, let alone to inform the public about the advantages of cheaper medicines or non-pharmaceutical therapies.

The AMA has urged Medicines Australia (MA), and its member pharmaceutical companies, to think very carefully about this issue before plunging further down this slippery slope.

A lot of misguided policy is based on the Government's 2002 Intergenerational Report.

Intergenerational Report

The AMA rejects the scaremongering that is inherent in that report.

The report suggested that without substantial cuts to essential health services such as the PBS, Australia will not be able to afford its aged population by the year 2042.

This is fiction. Pulp fiction. Rubbish.

There are a number of fundamental flaws in this analysis.

First and foremost, the underlying assumption is that people will continue to be encouraged to retire at ever earlier ages as the surrounding society ages, and that Government revenues will decline against gross domestic product.

The fact is, the report leaves much more unsaid than said.

Details, particularly of underlying assumptions, are scarce, and those that are there are contestable.

In particular, the report ignores future revenue streams, including the vitally important issue of how the community as a whole will manage resources - and the expectations placed on them into the future.

The report assumes that people in the paid (and thus tax paying) workforce will continue the trend of the 1980s and 1990s to early retirement.

In fact it seems that that trend has already started to plateau, with major employers, including government, reversing their previous policies that encouraged older workers to retire well before retirement age.

In an historical sense, it is a nonsense bordering on fiction that a society such as Australia's will fail to adapt its public policy to accommodate changing demographics.

The second, more recently released intergenerational report now proposes better disease prevention and an aim to retain older people in the workforce.

It's time for everybody to get their facts right.

Pharmaceutical quality, safety and efficacy

Medicines meeting appropriate standards of quality, safety and efficacy is the second central objective of the National Medicines Policy.

The Therapeutic Goods Administration (TGA) provides a national framework for the regulation of therapeutic goods in Australia.

It aims to ensure the quality, safety and efficacy of therapeutic goods, including pharmaceuticals.

The AMA has some concerns about the TGA, including its culture of secrecy, and the fact that the TGA is 100% funded by industry on a basis of full cost recovery.

In our view, this jeopardises both the transparency and the legitimacy of TGA processes.

The AMA advocates that good public policy dictates that at least some of the TGA's resources must come from the public purse.

Otherwise sceptics may question the transparency and accountability of the decision-making process.

The public policy aspects of the TGA's role should be at least partly funded from the public purse.

You may not be aware that the TGA is scheduled to disappear some time late next year.

It is to be replaced by a new Trans-Tasman body to regulate the safety, quality, and efficacy of therapeutic products in both Australia and New Zealand.

The comments I have made about the public policy aspects of this regulatory role being at least partly funded from the public purse apply also to this new Trans-Tasman body.

The AMA also has concerns about the possibility that the more laissez-faire NZ attitude to pharmaceutical regulation could become the default situation.

Quality use of medicines (QUM)

QUM - the third central objective of the National Medicines Policy ‑ seeks to ensure judicious, appropriate and safe use of medicines.

In other words - the right person taking pharmaceutical medicines at the right dose, at the right intervals, and for the right length of time.

It is the AMA's view that it is through the QUM framework that government should be working to ensure that the PBS is as cost effective as possible.

One very dangerous fiction, though, is that costs can be saved by having people other than trained doctors prescribe medicines.

Part of this myth - but unfortunately a very real part - is that increasingly some very toxic medicines are being moved "off script", so that they can be bought "over the counter" from pharmacies - and even sometimes in the supermarket, petrol station, or whatever.

Some pharmacies advertise their expertise in providing consultations on health problems such as incontinence.

This could compound health problems.

Overzealous treatment, especially the long-term use of stimulant laxatives, irritant suppositories, and enemas, can lead to diarrhoea, dehydration, cramps, or dependence on laxatives.

The AMA has expressed our grave concern about, and opposition to, these encroachments into the arena of patients' clinical management.

The AMA has advised the Pharmacy Guild to withdraw from these encroachments.

They threaten the close relations between the Guild and the AMA, and they invite reciprocal action by the medical profession.

Our preference would be for an outcome that enhances the traditional relationships between the two professions.

In particular, the AMA is concerned that most pharmacies in Australia do not currently have appropriate locations where private consultations relating to sensitive health issues - such as incontinence or sexual health, or traumatic events such as childhood immunisations - can occur.

The lack of privacy is a major disincentive to people seeking professional advice or treatment on these important health issues.

The Australian Consumers' Association has investigated the quality of professional health advice given in pharmacies (Choice magazine, September 2004).

Choice's experts rated the advice given as 'poor' in 58 out of 87 pharmacies visited, and 'good' in only 20% of cases.

Interestingly, these 'experts' (2 pharmacists and 1 pharmacy technician at a major hospital) found that there is little difference between seeing the pharmacist or an assistant, in the overall findings of their investigation.

Maintaining a responsible and viable medicines industry

Achievement of the integrated objectives of the National Medicines Policy requires the continued existence of a responsible and viable medicines industry in Australia.

This is the fourth central objective of the National Medicines Policy.

We recognise the need to factor in the R&D costs of innovative medicines.

The fact is that the existing Australian PBS price processes do this, and that existing Australian patent laws provide effective support for a viable innovative medicines industry in Australia.

I have been talking far too long. That is an undeniable fact.

I hope I have helped separate some fact from fiction.

I am happy to answer questions, and to discuss the points I have raised.

Thank you.