If past behaviour is the best predictor of future behaviour, the pharma industry had reason to be concerned about potential surprises in the 2011 Budget. The announcement of the formation of Therapeutic Groups in the 2009-10 Budget rocked the industry to its core. It set off a chain of events that in 2010 lead to the historic signing of a MOU between Medicines Australia (MA) and the Government.
MA members welcomed the certainty the MOU initiatives were designed to deliver. Not least was the agreement that, in exchange for $1.5 billion in Government savings, no new therapeutic groups would be formed. The MOU had its critics and took a rollercoaster ride through a Senate Enquiry, but the Bill supporting the MOU was finally passed in November 2010.
Certainty for another four years. Or so we thought.
Canberra, here we come…
In February, the Health Minister took the unexpected move of taking all medicines recommended for PBS listing to Cabinet for approval. Traditionally, this only occurred when medicines were expected to cost the PBS more than $10 million per year.
Citing the need to return the Budget to surplus, Cabinet deferred the PBS listing of seven medicines indefinitely. This rattled the industry and brought into question the value of the MOU and the transparency of the relationship between MA and the Government.
The pharma lobbying machine fired up. Companies united in vocalising their disapproval of another hurdle being placed on the path of bringing new medicines to market. This fever of activity culminated with Managing Directors and senior pharmaceutical executives descending on Canberra en masse in the week leading up to the Budget’s announcement. They were ready and willing to again go into battle to defend the PBS’s sustainability and voice their opposition to Cabinet deferrals. It was also clear they wanted to ascertain immediately the impact on their businesses of any potential Budget-night surprises.
Although the PBS accounts for only 18 per cent of the total Health spend, it rarely escapes the attention of those drafting the Budget. However, when the Treasurer handed down his financial blueprint for the coming year, it became clear the PBS had finally dropped under the radar.
With even patient co-payments remaining a rumour, the fact that there were no major PBS reforms in the Budget meant the industry breathed a collective sigh of relief.
Whilst an apparent backflip has moved the vaccine Prevenar 13 from “deferred” to “listed”, the Health Minister has stated that Cabinet will continue to defer PBS listings, at least until the Government brings the Budget back into surplus. The industry can breathe easy for 12 months and, now the Budget papers have been dissected, MA has finally demonstrated the fruit of the MOU.