Cubism – Cube Blog

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

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 

Cube attended a post-budget discussion yesterday led by Chris Caton, Chief Economist at BT Financial Group, dissecting the 2010 Federal budget announcement. Contrary to 2009 forecasts – made during the height of the global economic crisis – the Government is aiming to drive the budget back into surplus within just three years.

As predicted, health is high on the priority list in this year’s budget. A total new investment of $7.3 billion in the National Health and Hospitals Network over five years hit the headlines yesterday, funded by major reforms and tax increases across three economic sectors.

Where have the savings been made?

The 2010 Federal budget – a healthy balance?

Increases in tax revenue across three core sectors will be used to fund the pledged health reform. As pre-announced in the media two weeks ago, taxes on tobacco have increased by 25%; a $9 billion Resource Super Profit Tax on the mineral industry was announced last week; and significant reforms within healthcare through the Pharmaceutical Benefits Scheme (PBS) and a new Community Pharmacy Agreement are predicted to deliver a total $2.5 billion in net savings over five years from 2010-11.

PBS reform plans began back in 2007 and are expected to generate about $6 billion in savings. Designed to take advantage of patent expiry, cuts to the price of prescription medicines are expected to generate $2 billion savings to the Government and about $300 million to patients over four years. Economic experts at the post-budget discussion suggested that leaning against the steady growth in PBS spending seen in recent years was an appropriate measure.

Where is the money going to be spent?

Whilst tax increases are not always popular and reforms can take time, the cuts will help fund the Government’s new health commitment. These savings will provide an additional $2.2 billion to meet the needs of Australia’s healthcare system, including:

1. $355 million for almost 450 GP ‘Super Clinics’
2. $417 million to enhance after-hours services, making them more streamlined
3. $523 million to provide practice nurses in all GP surgeries  
4. $467 million to rollout the national e-Health strategy, introducing individual electronic health records

Distilling the debate down to a grassroots level, patients may receive cheaper scripts, better access to GPs and practice nurses, shorter waiting lists for elective surgery and emergency department care, and better chronic disease management.

The current Government has placed a major focus in the national health system in an election year and time will quickly show the outcome of its decisions.