1. New AFTINET leaflet about PBS
2. Write to Mark Vaile about the PBS: sample letter below
3. US wants reform of ‘unfair’ PBS
4. US trade deal may triple drug cost

1. New AFTINET leaflet about PBS

In the USFTA negotiations the US is targeting the price referencing system of the Pharmaceutical Benefits Scheme. AFTINET has produced a one page leaflet about the impact of this on prices of medicines. It is based on the Australia Institute’s latest report comparing medicine prices in the US and Australia. The leaflet can be viewed here in HTML format or downloaded here in PDF format.

We have also prepared a sample letter to the Trade Minister (copied below), which is referred to in the leaflet. Please distribute these through your networks. If you print the leaflet, if possible please try to copy the sample letter onto the back.

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2. Write to Mark Vaile about the PBS: sample letter below

This is a great time for you and your organisation to write to the Trade Minister asking him to exclude reference pricing from the USFTA. Below is a sample letter which you can use as the basis for your letter. The letter is also here in HTML format for viewing and printing.

Mr. Mark Vaile
Minister for Trade
Parliament House
Canberra ACT 2600

email: mark.vaile.mp@aph.gov.au

Dear Mr Vaile,

I am writing to you to request that you exclude the reference pricing facility of the Pharmaceutical Benefits Scheme from the negotiations for a Free Trade Agreement with the United States (USFTA).

The US Under Secretary of Commerce, Mr. Grant Aldonan, has stated publicly that the US wishes to challenge reference pricing as part of the negotiations. The Australian Financial Review of 13 August 2003 quotes Mr. Aldonan as saying that ‘there is a sense of unfairness in the US’ because US consumers paid high prices under a free market while consumers in Australia and elsewhere benefited from low ‘reference prices’ under schemes like the PBS (‘US wants reform of ‘unfair’ PBS, Australian Financial Review 13 August 2003).

The Australia Institute has undertaken research comparing prices of the most common drugs in the US and Australia (The Australia Institute, (2003) ‘Comparing Drug Prices in Australia and the US: The implications of the US-Australia Free Trade Agreement’, 25 July 2003, www.tai.org.au). It found that the wholesale prices of ten of the most commonly prescribed drugs in Australia are at least 79 per cent to 306 per cent more expensive in the US. The report concluded that if reference pricing were removed under the USFTA negotiations, it is clear that prices for drugs in Australia would rise significantly.

Reference pricing makes drugs affordable to Australians, including those on low incomes, and I am very concerned that you have not been prepared to state that it is off the agenda in the USFTA negotiations. Important social policies such as this should not be traded away in secret trade negotiations. Trade agreements should be subject to a full parliamentary vote, not simply signed off by Cabinet.

I look forward to your response.

Yours sincerely,

(Name & Address)

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3. ‘US wants reform of ‘unfair’ PBS’

Geoff Winestock and Mark Davis, Australian Financial Review, 12/08/2003

Washington is pushing Australia to rejig its $4.5 billion subsidised medicines system to boost the revenues of US drug companies, a senior US trade official said yesterday. Describing the agenda for free-trade talks due to be completed by the end of the year, Grant Aldonas, US Under Secretary of Commerce, told a meeting in Sydney the US wanted to "clean up" Australia's Pharmaceutical Benefits Scheme which delivers cheap medicines to Australian consumers. He said the US was "ploughing the ground politically" because it believed that the PBS "undercut" the patent rights of US drug companies such as Pfizer.

Australian officials have said that the PBS is off the agenda for trade talks, trying to damp down fears among health consumer groups a deal could lead to higher drug prices here. But Mr Aldonas, who handles international trade issues, implied that drug prices should rise, saying that the US wanted consumers in other countries to share more of the burden of paying for research and development for advanced drugs.

"There is a sense of unfairness in the US," he said, because US consumers paid high prices under a free market while consumers in Australia and elsewhere benefited from low "reference prices" under schemes like the PBS. The US pharmaceutical industry has been pushing for reforms to the PBS so they can charge the government higher prices for their medicines.

Drugs listed on the PBS receive government subsidies, dramatically reducing the cost to consumers and boosting sales for the manufacturers. But the quid pro quo for manufacturers is that the prices they can charge for listed drugs are regulated. The manufacturers have criticised the PBS "reference pricing" system, under which prices of new medicines on the PBS were not allowed to be any higher than the cheapest similar drug already on the market.

They argue that the prices they receive when selling their medicines under the PBS are not high enough to recoup their investment in developing new drugs. Mr Aldonas also confirmed that the US is trying to break CSL's monopoly on provision of blood plasma products in Australia.

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4. US trade deal may triple drug cost

By Sharri Markson, Sunday Telegraph, 3 Aug 2003

COMMON prescription drugs would triple in price if cost controls were lifted under a US/Australia free trade agreement (FTA), a new study has warned. US drug companies are lobbying for price controls, in place under the Pharmaceutical Benefits Scheme (PBS), to be eliminated as part of the agreement.

A study undertaken by the Australia Institute and obtained exclusively by The Sunday Telegraph warns changes to the PBS could be devastating. It claims prices for common medications used for ailments such as asthma, high blood pressure and arthritis, could rise by more than 300 per cent. Institute executive director Dr Clive Hamilton said the PBS was a key negotiating point in the free-trade agreement.

"If the American drug companies get their way we will see a large rise in the cost of medicines in Australia," he said. "Some vital medicines would be out of reach of low-income Australians, particularly pensioners. "The Australian Government will trade that off against rights to the American market for agricultural goods."

There are estimates the agricultural rights will provide a net benefit to Australia of $4 billion annually, directed at select farming industries. But this would come at the cost of higher medicine prices for Australian consumers, he said.

Australian and US trade negotiators reported good progress after bilateral talks in Washington this week, but also warned that they may not meet the end of the year deadline set by US president George Bush. Lead US negotiator Ralph Ives said the countries exchanged initial market opening offers for goods and services during the third round of talks in Honolulu. The two sides will exchange requests, in late August or early September, on how they would like those offers improved, he said. Steve Deady, chief negotiator for Australia, said Canberra wanted a "big package on market access" but would consider transition periods for sensitive US commodities.

The Australia Institute study examined the cost of the 10 most prescribed drugs in Australia in 2002 and compared them with US prices. The largest price difference was for arthritis drug Celebrex which tripled in cost from $24.97 wholesale to $101.48 in the US.

Asthma sufferers would also have to pay more with Ventolin, costing $42.90 in the US compared with $11.47 here. Lipitor, a cholesterol drug used by around 5.2 million Australians, would rise from $49.95 to $89.50. Antidepressant drug Zoloft would double from $29.28 to $62.57. Cholesterol drugs Zocor and Pravachol would also both rise from $48.89 and $43.55 to $103.45 and $75.96, respectively.

Dr Hamilton said US negotiators were placing enormous pressure on the Federal Government to change the PBS as part of the FTA. A spokesman for Trade Minister Mark Vaile said the Government was committed to the scheme and that US had so far not requested for any changes to be made to it. "The US pharmaceutical industry isn't clear what they may seek from Australia," he said. "However, the US chief negotiator Ralph Ives has made it clear that they are not going after the PBS." The federal government last week wrapped up its third round of negotiations in Hawaii. The next round of FTA negotiations are scheduled for Canberra in October.

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