http://www.abc.net.au/7.30/content/2003/s978123.htm
Pressure for PBS to not be included in free trade agreement
Reporter: Michael Brissenden
KERRY O'BRIEN: For a free trade agreement that American President George W Bush has put his weight behind to be ready for signatures by Christmas, the deal between the US and Australia still has some significant hurdles to overcome.
As officials continue their latest round of intense negotiations in Canberra this week, there's a strong sense that progress is not matching the President's rhetoric.
The biggest hurdle from the Australian perspective is, of course, the notorious protection of America's farm belt.
For instance, the US dairy industry received more than $3 billion Australian in subsidies last year.
But the Americans are looking for some quid pro quos including, potentially Australia's Pharmaceutical Benefits Scheme, which subsidises prescription drugs that would otherwise be out of reach for many Australian consumers.
Ominously, US trade representative Robert Zoellick has described it as a pharmaceutical protection policy.
Political editor Michael Brissenden reports.
MICHAEL BRISSENDEN: For more than 50 years, the Pharmaceutical Benefits Scheme has guaranteed Australians have affordable access to prescription drugs.
The PBS has literally kept people like Jim Carey alive.
JIM CAREY: I guess I wouldn't be here if it weren't for the drugs that I'm taking.
MICHAEL BRISSENDEN: For 30 years, Jim has been taking up to seven pills a day to control a heart condition and dangerously high blood pressure.
If it weren't for the PBS, he and his wife Gwen would have to spend up to $6,000 a year on medicines.
As it is, they pay very little.
And this is why the PBS is a political sacred cow.
But in the health industry, fears are growing that the powerful US drug companies may want to use the current negotiations over a free trade agreement to lead the scheme to the slaughterhouse.
MARTYN GODDARD, AUSTRALIAN CONSUMERS' ASSOCIATION: If it's a matter of the Australian Government making a decision on whether to get major access for agricultural products into the United States versus changes to the PBS, to the PBS process, that the electorate really doesn't understand, that's essentially pretty technical, then I think the PBS is in real danger.
MICHAEL BRISSENDEN: Martyn Goddard knows a lot about consumer policy and a lot about drugs.
He's HIV positive and he takes a handful of them every day.
He's also a clear beneficiary of PBS.
Without it, his drugs would cost him up to $20,000 a year.
But he's also a former member of the Pharmaceutical Benefits Advisory Council, the body that determines what drugs are put on the PBS schedule and how much the drug companies get paid for them.
In the late 80s, the PBS introduced a system known as reference pricing.
It's a complicated process that effectively compares new drugs with similar older drugs.
It calculates if the difference is marginal or major and sets the price the Government is prepared to pay.
Professor David Henry led the team that designed the program.
PROFESSOR DAVID HENRY, NEWCASTLE UNIVERSITY: In Australia, we've developed a program that says we will give you what we think the product is actually worth and that's where this clash is coming in.
They do not like the fact that, say, a drug that offers nothing in addition to what is already there at the moment will get the same price as the drugs that are already here, which is a lower price than they get in the United States and indeed in many other countries.
MICHAEL BRISSENDEN: American drug companies say reference pricing is, in effect, a pharmaceutical protection policy.
And, perhaps, a bargaining chip.
But so far, both the Australian and the American trade negotiators say nothing formal has been put on the table.
And the government steadfastly maintains that the PBS is not up for grabs.
STEPHEN DEADY, AUSTRALIAN CHIEF TRADE NEGOTIATOR: There's nothing in these negotiations that will lead to or limit the ability of the government to provide affordable medicines to Australians through a sustainable PBS, that that will not be affected through the FTA.
MICHAEL BRISSENDEN: What is clear, though, is that the US drug manufacturers have been in President Bush's ear.
Drugs are the most profitable business on the planet and drug companies were far and away the biggest donors to Republican candidates in last year's congressional elections, even bigger than oil companies.
In his visit to Canberra last week, President Bush did raise the matter.
He told our PM there was a perception in the US that other countries benefited from US drug companies' research and development and that schemes like the PBS hindered the US companies from recouping their investment.
And that's enough to set the Opposition running.
SENATOR STEPHEN CONROY, SHADOW TRADE MINISTER: Will the government now rule out any changes to the PBS as a result of the free trade agreement that would increase the cost of medicines to Australians?
SENATOR ROBERT HILL, GOVERNMENT SENATE LEADER: In these negotiations, the Australian Government will preserve our ability to meet fundamental policy objectives and to ensure the maintenance of a sustainable, a sustainable PBS and the provision of affordable medicines for all Australians.
MICHAEL BRISSENDEN: The concern for the government is two-fold.
The first is financial.
Any tinkering with the system that allows drug companies to secure more money for the products would lead to a blow-out in the costs of the PBS.
The second, of course, is political and it's highly unlikely anyone would want to tinker with one of the central planks of the public health system in an election year.
But even Australian drug manufacturers, who carefully profess full support for the PBS, say some changes to the way the advisory council makes its decisions on pricing and scheduling of new drugs are necessary.
KEIRAN SCHNEEMANN, MEDICINES AUSTRALIA: That process, in principle, is very good.
What we don't know is precisely how those decisions are arrived at by the processes put in place.
We want a transparent system.
We want an environment that's predictable.
Any, in any environment, if you want investment and if you want an industry to grow, what's important is that you know where you are.
MICHAEL BRISSENDEN: Transparency is the buzzword.
But critics in the health industry say the drug companies simply want to influence the process and want transparency only on their own terms.
PROFESSOR DAVID HENRY: The industry would like to get into the heads of the committee a little bit more and know what's on their mind but, at the same time, they're not prepared to give up the commercial-in-confidence provisions that they apply to the data when they provide them.
MICHAEL BRISSENDEN: Protectionist or not, the bottom line is the PBS does do it job extremely well.
So well, in fact, that it's attracting considerable interest elsewhere in the world, including the US.
Before the Bush visit, seven US Congressmen co-signed a letter, calling on the free trade negotiators to indicate to the Australians that the US has no interest in negotiating any changes to the PBS.
Some in the States see the PBS as a model worth copying and, above all, that's why the US drug companies have it in their sights.
MARTYN GODDARD: That would be an absolute nightmare for the big American drug companies.
They don't want to have to justify their price on terms of - in terms of what their drugs will actually deliver.
Um, they much prefer to hold patients over a barrel.
And this - the idea of an Australian-type system getting up in the United States would be an absolute nightmare for these companies.
MICHAEL BRISSENDEN: At the moment, though, the issue is still just floating on the edge of the free trade talks.
Both sides are trying to dance around it.
But it's thought the Americans will bring it to the table towards the end of the negotiating process.
Then, it will have to be dealt with, even though it's a political nightmare that seems as much an insurmountable obstacle for the Australian Government as agriculture does for the US.
And with both sides facing elections in the next 12 months, you'd have to say the chances of a free trade agreement landing any time soon would be very slim indeed.