For better personal health outcomes, and for the fiscal health of the nation, the byzantine system of pharmaceutical regulations needs drastic renovation.
A longstanding concern has long been the financial sustainability of the Pharmaceutical Benefits Scheme, which provides subsidised prescription item drugs to Australian residents. The government negotiates with manufacturers the price of items prior to their listing in the subsidised PBS schedule, and consumers then make a co-payment toward each listed item purchase with the taxpayer covering the rest.
Under the PBS the maximum cost for a PBS-listed item at a pharmacy is presently $37.70 for general patients and $6.10 for concessional patients, with "safety nets" reducing the direct cost of drugs borne by patients should they need to buy large quantities.
Completing the transactional process, pharmacists purchasing the PBS-listed items at the outset from the wholesaler or supplier are later reimbursed by government for the difference between the dispensed price (including additional handling fees and charges) and the consumer co-payment.
With the commonwealth budgeting an estimated $9.8 billion in spending on the PBS during the current financial year, covering some 298 million dispensed prescriptions, the longstanding policy concern has been that PBS expenditures might prove fiscally unmanageable.
The main PBS cost drivers include an ageing population, a rising incidence of chronic diseases needing treatments, and policy decisions including which drugs should be PBS-listed, with 170 new or amended listings since December 2014 costing an extra $1.6 billion over five years.
The Intergenerational Report paints a rather optimistic picture of fairly stable PBS funding as a share of GDP into the mid-2020s, but the 2014 Commission of Audit report noted potential listing cost pressures via new biologic medicines which are more complex to produce and whose PBS subsidisation costs are somewhat unforseen.
So from a prudent policy perspective there is a need to invoke reforms putting the PBS on a more financially sustainable basis while maintaining support for the genuinely needy to obtain affordable, quality medicine.
As noted previously Australia already has a regime of co-payments applicable to prescription medicines, but the last co-payment increase under the PBS took place a decade ago when it was increased by 21 per cent.
With the price of generic drugs falling, politicians should have the courage of their efficiency convictions to revisit this issue, enabling consumers to more effectively ration their own demands as they face more of the full costs of the medications they use.
But there is far more to ensuring an sustainable system of prescription medicine subsidisation than shifting more of the burden of financing directly to users.
Intellectual property systems such as patenting have long been rationalised as necessary to enable innovators to earn sufficient returns from investments they make in new goods and services, but the downside is IP regimes limit dynamic competition thus raising consumer prices.
Analysts in the United States, for example, have suggested that patents are particularly problematic in prescription drug markets since they allow big pharmaceutical companies to charge prices which are hugely above the marginal cost of producing drugs.
There is little reason to think that similar problems don't extend to Australia, and so it has been a boon for consumers that as major brand drugs lose their patent protection they tend to get sold as generic drug varieties at much lower prices.
The government has tried to take some advantage of this "patent cliff" to help reduce the overall costs of PBS financing, with Howard, Gillard and Abbott having negotiated price cuts for off-patent drugs listed on the PBS schedule.
Australia has also moved toward a system whereby the price of drugs paid effectively by pharmacies are disclosed, enabling government to adjust PBS subsidies with the aim of better reflecting the actual price at which the medicines are being sold.
But even if these changes have provided consumer benefits, several Australian health economists have warned that we are possibly still paying too much for generic drugs compared with patients in New Zealand, Britain, and elsewhere.
This is because, in part, there is a lag between the price disclosures being made and the adjustments rendered to the PBS.
There have also been suggestions that Australia introduce a vigorous, regular tendering process for drugs to get PBS listing, similar to that across the Tasman, in the hope that excessive prices paid by consumers (and associated taxpayer subsidies for affected items) will keep dropping.
If government were to do that it might help manage the burgeoning list of items on the PBS subsidisation list, providing fresh opportunities to pull medications off the PBS that either lack sufficient efficacy or are now cheaply available on the market.
But it is impossible to ignore the effects of broader regulatory policies that have contributed to historically excessive prices for certain medications in Australia.
The current pharmacy rules, recently negotiated between the federal government and the Pharmacy Guild of Australia, impinge upon the workability of the PBS, and indirectly upon its fiscal sustainability, by virtue of conditions restricting ownership and location of pharmacies.
Among these rules are stipulations that pharmacies are only be owned by registered pharmacists, that a new pharmacy can't be open within a set distance of an existing approved pharmacy, and a pharmacy must not be directly accessible to the public from within a supermarket.
The recent competition policy review headed by economist Ian Harper indicated the "ownership and location regulations impose costs on consumers directly and indirectly by erecting barriers to entry to the market for dispensing PBS medicines".
These archaic conditions need to be dust-binned so that suppliers of pharmaceuticals are sufficiently numerous and diverse to promote greater price competition for consumer benefit, which should ultimately flow through to reduced fiscal pressure to the extent that drugs are PBS-listed.
Another obstacle is posed by extensive delays in receiving approvals from the Therapeutic Goods Administration to sell medicines on the Australian market.
A good suggestion would be for Australia to assume a "mutual recognition" approach toward drug marketing approvals, piggybacking on clinical and efficacy approvals already made overseas, speeding up the introduction of new and potentially life-saving medicines.
Prime Minister Turnbull gladdened many reform advocates in this country with his rousing speeches encouraging Australians to embrace enterprise and initiative.
Let us now see if those fine sentiments are backed up his government by the likes of pharmaceutical sector reform.
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