ausfta & medicines in australia a methodology for identifying and measuring the impact of the...

AUSFTA & medicines in Australia

A methodology for identifying and measuring the impact of the Australia - United States Free Trade Agreement (AUSFTA) on the price, demand and

supply of pharmaceuticals in Australia

Andrew Searles

PhD Scholar

Discipline of Clinical Pharmacology

University of Newcastle

Australia


The study

• One component of a larger project that is examining the impact of trade agreements on medicines in Australia

• Collaboration of seven researchers at the Australian National University & University of Newcastle – Dr Tom Faunce– Professor David Henry– Professor Peter Drahos– Dr Evan Doran– Ms Brita Pekarsky – Mr Warwick Neville– Mr Andrew Searles– Backgrounds in medicine, pharmacology, sociology, law,

economics and statistics• The component being outlined today focuses on

AUSFTA


Background - AUSFTA

• AUSFTA - January 2005

• Sharing skills & technology

• Comparative advantage – lower prices for many goods and services

• In Australia – concern over the inclusion of pharmaceuticals

• Particular concern that AUSFTA might impact on the operation of the “PBS”


Background - PBS

• Pharmaceutical Benefits Scheme (PBS)– Set up about 50 years ago under the National Health Act (1953)

– Enables medicines to be supplied to Australians under a Commonwealth subsidy

• About A$28 …. to A$3 a script• Ensures access to affordable essential medicines for all

Australians

– Listing on the PBS• Pharmaceutical Benefits Advisory Committee (PBAC) must

recommend to the Minister that a new medicine be listed.• Ultimately the Health Minister must approve the listing, but it

can only get to the Minister IF PBAC approves listing• PBAC is a lynchpin of Australia’s medicine’s policy


Background - PBS

• PBAC considers – cost and effectiveness of a medicine – including a comparison with the cost and effectiveness of a new medicine with alternative therapies

– PBAC can also recommend listing in other special circumstances (e.g. rule of rescue)


Background - PBS

• Monopsony buying power– Single buyer

• Without a listing on the PBS, there is an extremely limited market in Australia

• Limited to those who are willing to pay the unsubsidised price


Concerns with AUSFTA

• Free trade agreement contains provisions that:– Directly impact on PBS processes– Entrenching existing Australian intellectual property (IP) law– Extending existing Australian IP law– Entrench Australian law on web based medicine information

(provided by pharmaceutical companies)– Contain dispute resolution procedures that allow damages

should a benefit, reasonably expected to accrue to party, not eventuate

• Published prior to signing• Prior to signing – strong feeling that medicines are such

an important component of society, they should not be included in trade agreements


Implications of AUSFTA

• Weaken Australian regulatory controls

• Increase manufacturers’ ability to exploit their market power

• Increase in medicines prices

• More R & D in Australia

• Potential for generic prices to fall

• If prices rise => burden directed to elderly


Out of pocket monthly expenditure for prescription medicines by the elderly

10%

24%16%

82%

20%

0% 4% 2% 0%

16%

0%

20%

40%

60%

80%

100%

AustCanada

NZ UKUSA Aust

Canada

NZ UKUSA

Nothing More than $100

Source: Commonwealth Health Fund


Research question

• From the perspective of the Australian community, has AUSFTA impacted on the demand, supply and/or price of pharmaceuticals in Australia?


Objectives

• Identify AUSFTA’s potential influences

• Identify variables that might measure these influences

• Measure the variables

• When an association is found, investigate likely causality

• Report the findings


How to measure the impact?

• Issues to consider– Trade and capital flows – Association and causation– Quantitative and qualitative data– Primary and secondary data


How could AUSFTA influence medicines in Australia?

• Based mainly on legal interpretation of the provisions and wording of AUSFTA

• Four basic areas that could generate influence:– Annex 2(c)– Side letter between negotiators– Chapter 17 (intellectual property)– Chapter 21 (dispute resolution)


Annex 2(c)

• Annex 2(c) states, for both parties, the aim of facilitating “high quality health care and continued improvements in public health for their nationals”

• Subsequent provisions state the underlying principals of:– Recognition for innovative medicines– Recognition of R & D– Expeditious, transparent and accountable process for

providing affordable medicines– Recognition of the value of innovation


Annex 2(c)

• 3 of the 4 principles focus on the rights of the manufacturers of ‘innovative’ medicines

• Generic manufacturers not mentioned– Generics have helped control PBS expenditures in

Australia

• Emphasises recognising the value of innovative medicines through competitive markets or other processes that values the medicine– Emphasis is on the manufacturers’ rights without

mentioning patients’ rights


Annex 2 (c)

• Transparency– PBS not directly mentioned, but the implication is that

the onus is on the PBS, as commercial in confidence still retained.

– PBS supports greater transparency but there is a feeling it should be on both sides

• Medicines Working Group (MWG)– Differences in opinion

• Australia: discussion group keeping Australian officials informed about international medicines issues.

• USA: A forum where, amongst other issues, Australia’s system of listing medicines will be discussed, including the role of the PBS in listing and the prices paid for medicines in Australia


Entities influenced by AUSFTA

• Consumers – patients and potential patients

• Pharmaceutical Benefits Scheme (PBS)

• Pharmaceutical Benefits Pricing Authority (PBPA)

• Hospitals

• Generic manufacturers


Selected outcomes

Consumers•Time series of the proportion of consumers who do not fill scripts •Time series on the proportion of personal income spent on pharmaceuticals •Time series of the proportion of consumers who have visited a pharmaceutical company’s web page (and the behaviours that followed this encounter)

PBS•A pharmaceutical price index that records indexed prices drugs. The index will allow pre and post AUSFTA comparisons•A time series of total PBS expenditure (allowing analysis by patent and off-patent drugs and by drugs that were previously listed on the PBS and have had a price review) •Time series of the perceived level of pressure applied to PBAC to reward innovation and R&D


Selected outcomes

Generic manufacturers• Time series of generic manufacturer’s perceptions about the

litigation risk of marketing new generic drugs in Australia• Time series in the level of ‘business confidence’ of Australian

generic manufacturers (include attitudes and perceptions toward investment, exports etc).

• Australian stock exchange time series information on publicly listed generic manufacturers

Hospitals• Time series of non-PBS expenditure on pharmaceuticals (i.e. by

private and public hospitals) • Time series of the number of people presenting at public

hospital emergency departments for medicine normally obtained on prescription


Examples of data collection

• Primary data– Consumer surveys (time series)– Interviews and surveys of PBAC members– Interviews with industry representatives

• Secondary data– Data sets of PBS expenditure– Prices paid for medicines (by PBS)– Quantities of medicines sold (subsidised by

PBS)


Primary data: Consumer survey

• Three years

• Cross sectional design

• Random sample (n=1500)

• Issues– Financial difficulty– Not filling prescriptions– Impact of pharmaceutical web sites / media


Consumer survey example

• Financial difficulty– Over the last three months, BECAUSE OF COST,

have you:• Put off seeing a doctor when you felt it was necessary? • Bought over the counter medicines rather than get a

prescription medicine from your doctor? • Asked your doctor or pharmacist for a cheaper generic

version of a prescribed medicine? • Used medicines you have had at home rather than obtain a

new script? • Used a medicine belonging to someone else rather than

obtain a new script?


Secondary data: Price and quantity

• PBS data publicly available– Price paid by PBS for medicines– Quantities purchased


Secondary data: Price index

90

95

100

105

110

115

120

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04

index numberLaspeyres chained indexLaspeyres direct indexPaasche chained indexPaasche direct indexBase = 100 (1998/99)

Source: Health Insurance Commission

Pharmaceutical price index


Other examples of anticipated analysis

• Using the price index, model scenarios of PBS expenditure– E.g. aim to estimate PBS expenditures in the

absence of decisions made under the influence of AUSFTA

– Compare with pre AUSFTA


What we aim to achieve

• Rigorous assessment of AUSFTA’s impacts• Use sound statistical and economic techniques

to isolate AUSFTA’s influences• Move beyond “association” to likely “causation”• Provide informed commentary and policy

recommendations• Look at ways to improve Australia’s medicines

policy – E.g tendering (as per NZ)

• Provide informed comment on the wisdom of including medicines in future trade agreements


Thank you

Questions and / or suggestions?

ausfta & medicines in australia a methodology for identifying and measuring the impact of the...

Documents

ausfta medicines

ausfta slide

medicines prices

australia limited

australia concerns

australia potential

australia collaboration

pbs slide