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Top 5 – Health in the 2014 Budget

Health has featured strongly in the Abbott Government’s first budget, but not as expected…

1. No PBS Pricing Reforms

The anticipated PBS pricing reforms were absent in last week’s budget despite the recommendations of the Commission of Audit for the introduction of a NZ inspired PHARMAC-style system. Although this is a welcome omission of the budget, the industry is not totally at ease on this front just yet. Finance Minister Mathias Cormann alluded to post-Budget PBS reforms however there is some hope that the significant savings derived by the Simplified Pricing Disclosure will make PBS reforms unnecessary.

2. New Co-Payments

The introduction of co-payments for GP, out-of-hospital pathology and diagnostic imaging services, as well as increased PBS co-payments, are all exceedingly unpopular outside of the pharmaceutical sector. Within it, feelings are mixed. Whilst the creation of a Medical Research Future Fund is very welcome, the Pharmaceutical Society of Australia and the Pharmacy Guild are both very concerned about the flow on affects of the new measures. Savings associated with co-payments usually result from declining utilisation as price sensitive patients fulfil fewer prescriptions. Unmanaged illnesses will impact on hospitals and emergency rooms in particular, whilst under utilisation will impact participants in the distribution chain.

3. $20bn injection into Medical Research

The Medical Research Future Fund is arguably the biggest health outcome of the Abbott Government’s first Budget with a massive investment of $20bn to establish the world’s largest medical research endowment fund. The medical research community has welcomed the commitment to establish the Fund but has voiced some hesitation over the funding mechanism. Around $5bn is expected to be contributed to the Fund by the introduction of co-payments for GP, out-of-hospital pathology and diagnostic imaging services, along with increased PBS co-payments. The funding mechanism has met with fierce political opposition as has the decision to cut funding to the CSIRO and the Australian Research Council.

4. Commercialisation Australia and Innovation Investment Fund gone

Although the Medical Research Future Fund and the absence of further reforms to the PBS (at least for now) is a welcome relief to the biopharmaceutical industry sector, some other Budget decisions are of concern to the sector. The Government’s decision to save an estimated $845 million by axing Commercialisation Australia and the Innovation Investment Fund, as well as reducing the R&D Tax Incentive, is of concern particularly to SMEs and development-stage companies that access and relies on these funds. There is opportunity for the Medical Research Future Fund to not only support medical research, but also the development and commercialisation of arising discoveries that, if the Government allows it, would help counter this funding shortfall.

5. Access to Cancer Therapies

The Government’s decision not to address the issue of better access to cancer therapies in this year’s Budget has disappointed the Cancer Drugs Alliance (CDA). The CDA are pushing for a UK-style Cancer Drugs Fund to be established in Australia, which would operate outside of the PBS, to improve access to new cancer therapies. A substantial number of cancer drugs that have been approved internationally are not currently available on the PBS and the CDA are asking why. With increasing rates of cancer as well as the increasing costs of developing cancer therapies, all stakeholders will need to work together as a matter of priority to optimise timely and equitable access to new cancer medicines.

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