Pre Budget Overview and the Pharma Industry

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By Jody Fassina, Independent Political Consultant, JF Consulting

Against the backdrop of recently released treasury documents under FOI and subsequent media reports claiming they demonstrated Treasurer Wayne Swan had no idea how to implement the mining resource rent tax, next Tuesday will be the Treasurers’ 4th and most difficult Budget – with the pharmaceutical industry at the forefront of the Government’s near manic commitment to bring the Federal Budget back into surplus by 2012/13.

The $1.9b in savings Government secured from industry via the MoU was followed by the announcement in February, by Minister Nicola Roxon, that Cabinet had decided to defer listing of six new drugs that had received positive recommendation by the PBAC. And that in future all PBAC recommendations would be decided by Cabinet.  This has established a totally new political environment for the pharma industry.

The Budget next week is unlikely to offer any joy for the industry.  There is no sign of a reversal in regards to the Government deferring future drug approvals or providing guidance on when past deferrals will be reconsidered, other than the Minister’s statements that they will be reconsidered when ‘fiscal circumstances allow’.

What the Budget will provide however, is the Government’s estimate over the next four years of what it believes the cost of the PBS will be to Australian taxpayers.  This will be interesting as only last Friday, at a gathering of industry and consumer health groups, the Health Minister claimed the PBS was continuing to grow at an unsustainable 6% per annum, and was totally dismissive of industry claims, derived from Medicare data, that the PBS was in fact growing at less than the inflation rate of 3.3.

Given the concern and uncertainty created by Cabinet’s decision to defer the listing of new drugs, it will be interesting to see whether the Budget forward estimates for PBS expenditure provide some insight into the savings this decision is meant to have delivered for Government. 

Will there be more pain for the pharma industry in the Budget?  While crystal ball gazing is always fraught with difficulty, the Government has belatedly ruled out any change to the patient co-payment, but would look at other measures such as expanding pre-existing therapeutic groups.  Given the Government’s actions to date, nothing can be ruled out.

Who would have thought that under the MoU with the Government committing to use best endeavours to consider PBAC recommendations within six months that its response would be to do just that, and indeed announce the deferral of multiple drugs to a time not yet committed to!!

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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