The Federal Budget and Pharma – the pain continues

By Jody Fassina, Independent Political Consultant, JF Consulting 

The Federal Budget has done nothing to allay fears of further PBS deferrals for the pharmaceutical industry, or indeed if there is any chance at all that the Government would reconsider these listings.  The deferment of PBS listings has become a key Government management tool to contain PBS costs and the absence of any budget guidance basically confirms this, now and into the future.

The Budget provides the following forward estimate costs for the PBS.

• 2010/11 – $10,337m
• 2011/12 – $10,794m
• 2012/13 – $11,245m
• 2013/14 – $12,070m
• 2014/15 – $12,882m

Year-on-year this results in percentage increases of 4.4%, 4.2%, 7.3% and 6.7%.  This enables the Government to perpetuate the myth, for as long as possible, that the PBS is growing faster than the rate of inflation and hence maintain pressure on industry in terms of PBS expenditure. Most importantly, it allows the Minister for Health to dismiss industry claims, supported by Medicare data, that the PBS is in fact growing at a rate less than inflation and therefore allow for new approved medicines to be placed on the PBS.

What this also demonstrates is that, with the year-on-year increases being greater than inflation, the February deferrals have not resulted in major savings over the forward estimates; however, the policy of deferrals has certainly become a fiscal management tool for Government to wheel out when required to prevent future PBS listings. The precedent is now firmly in place.

These costs also fail to take into account the impending patent cliff, which could result in savings to the PBS of anywhere up to $2 billion.  The Government clearly and strategically has decided not to factor in the patent cliff so it can maintain its political rhetoric that PBS costs are still growing at an unsustainable rate.

This is a key challenge for the pharma industry – convincing Government and the community at large that the PBS is in fact a sustainable, vital public health program supported by $1.9 billion in savings offered up in the MoU, and the impending patent cliff which will see savings of up to $2 billion. 

It is clear that funds exist to support the ongoing listing of new and innovative medicines for the Australian community; however, as it stands the Government has been relatively successful in demonstrating the need for PBS costs to continue to be reined in.

This Budget confirms by its silence that Government will maintain a tough political stance on the PBS.

The ‘fight’ is most definitely on and the pharmaceutical industry, as well as professional medical groups and patient advocacy, will need to convince the public and the media that Government has got its estimates wrong! This will be vital if there are to be any substantive PBS subsidies in the next few years.

 

Jody Fassina specialises in providing strategic counsel to both corporate and non-profit organisations requiring high level advice on public policy issues of paramount importance to their organisation. Jody has worked as a senior public affairs manager in the corporate sector with Macquarie Bank, a political consultant with a boutique Sydney firm and as a senior policy advisor to federal MPs. He is currently an independent political consultant, having established JF Consulting.

 For more information contact Jody Fassina at fassinaconsulting@bigpond.com

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