Reference Pricing for Pharmaceuticals: Is the Australia - United States Free Trade Agreement Affecting Australia’s Pharmaceutical Benefits Scheme?

Abstract

Amendments to the National Health Act 1953 (Cwlth) were legislated by the Australian federal government in 2007 with minimal public debate. The National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 includes several changes that will limit reference pricing under the Australian Pharmaceutical Benefits Scheme (PBS). Here, I argue that these amendments were influenced by the Australia–United States Free Trade Agreement (AUSFTA) particularly the Medicines Working Group established under Annex 2C of that agreement. I make the case that such amendments could have adverse consequences, involving the erosion of scientific objectivity and equity in PBS processes.

One concern is that the amendments might lead to policy choice being delegated to technical experts in finance, or working groups with private interests, rather than being made part of a systematic public debate about the kind of health care system all Australians want to have, and the trade-offs they are prepared to make against strategic objectives of trade or international public policy.

Keywords: Reference pricing, Cost-effectiveness, Pharmaceutical regulation, AUSFTA, Free Trade Agreements, Trade Law

JEL Classification: I18, H41