Tuesday, January 10, 2006


Tip your hat to Liberal MP Andrew Laming, Member for Bowan, for his gutsy article in today's Oz challenging the Pharmaceutical Benefits Scheme (PBS). While he well underestimates how much taxpayers are burdened by the clumsy scheme- "we pay $800million too much" -any effort to reform, reduce and remove the PBS must certainly be welcomed.

In essence, the PBS is a 60 year old scheme under which any Australian- from the battler working behind the servo, to Westfield billionaire and soccer fanatic Frank Lowy- can access any drug listed on the scheme for just the low low price of $29.95 (despite the wealth of complaints from groups such as ACOSS and the ALP) . In reality drugs for asthma cost about $80, heart disease $115 and diabetes approximately $200 a dose. In reality the PBS costs taxpayers $6 billion dollars a year too much.

Let me say up front that I'm all for taking care of those that honestly cannot look after themsleves- as a society, its our responsibility. But when "taking care of" turns into smothering with a tax threshold of 48 cents, I have to draw the line. The co-payment of $29.95 can be less than 10 per cent of the actual cost of the drugs. For concession card holders, the "co-payment" is a token fee of just $4.95. Its a great scheme: you can get a pack of cigarettes and fill your prescription for lung cancer medicine with change from a twenty.

So what's the answer? As always- its competition and choice. The problem now is, because of the PBS, the Australian market is dominated by generic drug manufacturers Alphapharm and Sigma Arrow. Neither company produces any new drugs or saves devises new ways to save lives. Rather all they do is reproduce those drugs where the patent has expired on previous drugs. There is then no incentive for new drug development, research or creating cures. After all, with a pay check of $6 billion a year, why bother?

Remove the PBS, force drug companies to compete for our money, and place more of the burden upon the recipient. Uh-oh, that sounds American right? Good! So it should. The only country in the modern world today that has a moral right to an obesity problem is the US. So long as they themselves pick up the tab for the obesity drugs, go ahead and eat that extra chilli-dog.

The next complaint you’ll fire is straight from “Don’t Work and Spend Everyone Else’s Money- For Dummies.” How can we trust these inherently corrupt (whatever) pharmaceutical companies to not extort us out of all our money? Won’t they just repackage existing drugs, force doctors to prescribe them, and charge us an extra $100 or $200? It’s a good argument, information is certainly power in this market, and the keepers of that information is certainly one sided. Or is it? Already on CHOICE magazine’s website, you can obtain a buyers guide to blood pressure monitors, sleep aids, health insurance, anti-depressants, arthritis drugs, paracetamol and prescription medicines- just to name a few. Guaranteed, a free and open drug market in this country will lead to an open war between A Current Affair and Today Tonight, with exposé after exposé.

Laming’s effort is certainly gallant. Telling anyone they should pay for something themselves is never popular- and this is even more true when it comes to health care. But as a fit, healthy overtaxed and insured young male, I’m certainly happy to incur the price hike.


Matt Canavan said...

A couple of comments:

1. Not sure what your problem is with generic suppliers. Surely once a patent expires there is a role for companies to supply drugs at their marginal cost. Also, it is unlikely that Australian policy will have much of an effect on drug innovation considering our size.

2. There is a problem in making public services non-universal. How do you choose which group to support and how do you tackle the disincentives that will be created by penalising people (by taking away benefits) when they work harder? I think they are insurmountable. If as a society we are truly concerned, then why don't just rely on charity. How ethical is it for people to claim they want to help others but then demand we tax other people's money to achieve it? Plus, people should take some responsibility for their actions. There is plenty of work out there and if you are not going to provide for yourself then you shouldn't have access to taxpayer resources.

Timothy Bradley said...

1. Why can't we be innovators? Some of the best medical research in the world is done here in Australia. Can you just imagine what we could have achieved with a profit incentive?

2. I'm confused by your point here? But I think you are saying we either go all or nothing right? No phasing out or means testing for say Medicare? I agree- let the tax-transfer system handle it.

Matt Canavan said...

My point is that Australian regualtions aren't going to enter calculations of drug company execs when deciding where to locate. Potentially they could still locate in Australia even if we had restricted domestic conditions - they will still export most of their product. Surely, a drug company's decision to invest in Australia will be determined by our regulatory, tax and labour conditions, not our drug regulations.