Australia budget is a showdown on cancer drug funding, safety net reach

Print 08 May 2015
EJ Lane / FeircePharmaAsia

An Australia government proposal to trim the national drug-coverage budget for innovative drugs by 5%, or U.S.$2.36 billion, has invited a juggernaut of industry opposition already descending on the parliament. The reductions are aimed at the nation's leading drugs, including those for cancer.

In addition to a planned cut of nearly U.S.$4 billion in the Pharmaceutical Benefits Scheme budget over the next 5 years, The Australian cited sources who said the overall health budget was in for a cut of U.S.$5.5 billion.

The changes are expected in the May 12 budget by the conservative Liberal Party-led government of Prime Minister Tony Abbott who has pursued tighter fiscal policies even as the central bank slashes rates to boost growth.

Among other expected changes to the social safety net, tens of thousands of wealthier retirees in Australia will lose access to the age pension under changes targeting what Abbott has described as "liquid assets millionaires."

Meanwhile, drug makers are in an uproar and are building war chests, planning public campaigns, hiring extra lobbying firms and making personal visits to government leaders all the way up to Abbott. The nation also can expect commercials to flood the airwaves, some possibly reminiscent of political attacks that toppled Abbott's predecessor, Kevin Rudd.

Abbott has survived one leadership challenge, though there is grumbling among party his cabinet over some of these austerity moves. The means industry also may have the sympathy of the general public, which has been complaining about the proposed budget cuts.

Medicines Australia represents innovator drug companies that are set to take the biggest hit. Its chairman, Martin Cross, sent a note to Abbott begging his intervention to halt the cuts proposed by his Department of Health, saying there was "unprecedented concern" in the industry.

The newspaper cited other sources as saying Medicines Australia had offered U.S.$1.2 billion in cuts over 5 years, but the department countered by asking for double that amount.

As that back and forth was taking place, a research company came out with a report projecting Australia's pharmaceuticals and healthcare market would continue growing over the next few years despite the cuts.

Business Monitor International estimated drug sales this year to reach nearly U.S.$10.7 billion, a 4.3% increase over last year, while the overall healthcare sector pulls in $121.6 billion, a 4.4% increase.

Nonetheless, industry opposition to the planned cuts also includes the Pharmacy Guild of Australia, which The Australian said was budgeting millions on its own to defeat any plans to control the supply of medicines by cutting U.S.$315.5 million from what it pays pharmacies over the next 5 years in exchange for $1 discounts.

Another drug cut in the budget would remove several of the more popular over-the-counter drugs from the PBS list for an additional savings of U.S.$163 million.

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