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Free trade: PBS undermined « Previous | |Next »
May 20, 2004

The Free Trade Agreement with the United States is back on the agenda. Well, it had never gone away, just slipped into the background. With the FTA having been signed in Washington with all that fanfare, it needs to be ratified by the US Congress and the Australian Senate. The House of Representatives Joint Parliamentary Committee on Treaties is due to report on June 23, whilst the Senate Select Committee is due to issue an interim report on June 21.

In Australia the free traders have trimmed their sails somewhat. They have become more far more realistic. An editorial in today's Australian Financial Review (subscription required, p. 70) says that:

"The pact is far from being a perfect deal. But in the real world the least-worst outcome is often the best available. On balance, the AUSFTA, as it is known, will provide better access for Australian exporters of goods and serivces boost two-way investment and raise Australia's profile in the world's largest economy. This is not to be sneezed at. "

The AFR's argument is that with multilateralism trade deals stuck, Australia should pursue any meaningful offer. That is what the Howard Government is doing. Resisting the FTA is political opportunism. THE AFR is silent about the Howard Government buying off the sugar farmers.

And Australian consumers? Will they benefit from the greater access to Australian markets for US firms? Or is it an deal for US industry?

This warning, which says that the free trade agreement with the United States would lead to Australians paying 30 per cent more for prescription drugs, keeps on surfacing. This time round the warning is sounded in the US. Kevin Outterson, a law professor at the University of West Virginia and an expert on international drug pricing, says Americans currently pay about one-third to 50 per cent more for leading prescription drugs than Australians.

Prof Outterson says that for a 30 day supply of the cholesterol-reducing drug Lipitor (30mg), Australians pay about $US42.92. Americans, for the same quantity, are charged about $US94.57. For 30 200mg capsules of the pain reliever Celebrex, Australians pay $US24.97, while in the US it costs $US76.09.

Prof Outterson then said that:

"Australia has lower prices and a more functional and complete system than anyone else and that's exactly why the drug companies want to shut it down, because it is such an outstanding model. The FTA is designed to gum up the works on a very efficient, thoughtful system, that many of us wish we could import into the US."

This scenario of higher prices for Australian medicines keeps on being denied by the Howard Government. It says that the FTA will not have the effect of increasing drug prices and it will not contribute to the long-term financial sustainability pressures on the Pharmaceutical Benefits Scheme.

Kenneth Davidson asks the right question:

"Who to believe? Have the US drug companies who have driven this aspect of the free trade agreement been wasting their time, or does the Howard Government have an agenda that is aimed at looking after the interests of US drug companies rather than the interests of Australian citizens?"

The issues is whether the intellectual property rights of the US drug companies are given priority over the protection of public health. Will the PBS be undermined?

The ALP says that this is a key issue; a deal breaking issue. Stephen Conroy, the Shadow Minister for Trade, says that the ALP's position is that it will vote the FTA down if it undermines the PBS.

Australian academics confirm the warning of Prof Outterson. They say that the full effect of the FTA on the pharmaceutical market is unlikely to be felt for about five years. The effect? They say:

"We estimate, very conservatively, that Australia’s PBS will have to pay at least one third more for its drugs with the FTA than without it. If the likely FTA effects are applied to 2003 figures, the extra cost to of the PBS to the government last year would have been around $1.5 billion for the same drugs at the same levels of use and with no increase in the health benefit to Australian patients. Similar pressures would be felt by other buyers of prescription pharmaceuticals, particularly hospitals."

Seems pretty clear doesn't it. Australian consumers will pay more for new drugs under the PBS in order to enable the US drug companies to make more profits.

| Posted by Gary Sauer-Thompson at 11:49 PM | | Comments (1)



The actual text of the treaty as so far as it pertains to pharmacuticals is here.

It is in very opaque lawyers language. What to make of it all?