Sue Dunlevy From: The Australian July 20, 2011 12:00AM
ELEVEN major drug companies have threatened to stop bringing new medicines to Australia and halt clinical trials over the Gillard government's decision to let cabinet choose which drugs get subsidised on the pharmaceutical benefits scheme.
The companies have been joined in their outcry by consumer groups, academics and doctors, who have condemned the process and warned that cabinet's new role in approving every new medicine subsidy risks a situation where drugs may be funded only if they will win votes.
More than 50 consumer, medical and pharmaceutical groups have raised a storm of protest at the new policy in submissions to a Senate inquiry. They warn that the lack of formal criteria to guide decisions will leave cabinet open to claims it is "unfair or biased".
For 62 years, governments have accepted the advice of the independent and expert Pharmaceutical Benefits Advisory Committee about which medicines should be subsidised. In February, the Gillard government deferred seven PBAC recommendations to save about $120 million.
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Until February, cabinet only had a role in considering subsidies for medicines that cost more than $10m a year. However, in almost every case it approved subsidies for high-cost drugs recommended by the PBAC, which applies a rigorous cost-effectiveness test to drug approvals. Only two drugs -- Viagra and nicotine patches -- were knocked back by cabinet.
Now the government says cabinet will have a role every time in deciding which drugs should get a subsidy, after PBAC has completed its cost-effectiveness studies.
Eleven drug companies, including the world's largest, Pfizer, as well as GlaxoSmithKline and Astra Zeneca, say the uncertainty that results from cabinet's new drug subsidy process means clinical trials may stop, and it will be difficult to mount a business case for bringing new medicines to Australia.
The government's new subsidy approval policy stunned drug company chiefs as it came just months after legislation was passed to cement an agreement with pharmaceutical companies that would cut $1.9 billion from the price government pays for medicines over four years.
This memorandum of understanding was meant to deliver business certainty to medicine companies for the next five years.
In the memorandum of understanding signed before last year's federal budget, the commonwealth said it undertook "not to implement new policy to generate price-related savings from the PBS during the period of the agreement".
The Department of Health and Ageing says PBAC recommendations have always required government approval and "this is not a new pricing policy".
"It is taking a consistent approach to all listings with a financial impact by ensuring they are subject to the same processes already applied to those listings with a financial impact greater than $10m in any year," its submission says.
Drug companies have told the Senate committee that cabinet's decision to defer drug subsidies breaches the spirit of this agreement and is the reason drug companies may decide not to bring new medicines to Australia.
The government says there has not been any breach of the agreement and the companies are still actively seeking to list new drugs on the PBS, with 62 submissions at this month's meeting of the PBAC, a similar number to previous meetings.
Pharmaceutical company Janssen says it spent $12m on PBAC fees, training for mental health nurses and building up stocks of its schizophrenia drug after it was approved by PBAC, only to have it knocked back by cabinet.
"The current lack of predictability in Australia's reimbursement system is likely to affect the priority given to introducing new medicines in Australia compared with other nations," Janssen has told the Senate committee.
GlaxoSmithKline says: "Increased uncertainty about the use of a medicine in Australia will make it increasingly difficult for us to secure local sites as part of global phase II and phase III clinical trials."
Drug company Novo Nordisk has warned that, unless the government gives an assurance the new subsidy policy will be reversed, "this will most certainly impair Novo Nordisk's ability to bring its significant pipeline of innovative anti-diabetic medicines to Australia".
iNova Pharmaceuticals says it wants to bring new medicines to treat asthma and chronic obstructive pulmonary disease and skin cancer to Australia. "However, arrangements to bring these therapies to Australian patients require certainty of the PBS listing timeframes which is currently proving difficult in light of the recent PBS deferrals," the company says.
Health Minister Nicola Roxon is on leave and was unavailable for comment last night but she has strongly defended cabinet's new role in approving drug subsidies.
"While PBAC's enduring success is reflected in the fact successive governments have rarely had to differ from its recommendations, ultimately it is and always has been government's responsibility to decide whether to list a new drug," she told the Consumers Health Forum in April.
Medicines that could be held back from Australia include drugs being developed to treat cancer, diabetes, heart disease, and mental health and respiratory problems.
The drug companies argue that approving the drugs could create savings in the long run through reduced health costs.
The Department of Health and Ageing in its submission to the inquiry justifies cabinet's new role in medicine approval on the grounds of "current fiscal circumstances". It says that although subsidies for seven new medicines were delayed, 124 new medicines were listed on the drug subsidy scheme between January 1 and July 31 this year at a cost of $561m over five years. A further 33 medicines worth $287m will be listed later this year.
Some life-saving medicines can cost up to $40,000 a year, and government subsidies are essential to make them affordable to patients, cutting their cost to just $34.20 a month, or $5.40 for pensioners.
