1. 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

2. AUSFTA & medicines in 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

3. AUSFTA & medicines in Australia 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”

4. AUSFTA & medicines in Australia 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

5. AUSFTA & medicines in Australia 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)

6. AUSFTA & medicines in Australia 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

7. AUSFTA & medicines in Australia 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

8. AUSFTA & medicines in Australia 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

9. AUSFTA & medicines in Australia Out of pocket monthly expenditure for prescription medicines by the elderly

10. AUSFTA & medicines in Australia Research question From the perspective of the Australian community, has AUSFTA impacted on the demand, supply and/or price of pharmaceuticals in Australia?

11. AUSFTA & medicines 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

12. AUSFTA & medicines in Australia How to measure the impact? Issues to consider –Trade and capital flows –Association and causation –Quantitative and qualitative data –Primary and secondary data

13. AUSFTA & medicines in Australia 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)

14. AUSFTA & medicines in Australia 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

15. AUSFTA & medicines in Australia 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

16. AUSFTA & medicines in Australia 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

17. AUSFTA & medicines in Australia Entities influenced by AUSFTA Consumers – patients and potential patients Pharmaceutical Benefits Scheme (PBS) Pharmaceutical Benefits Pricing Authority (PBPA) Hospitals Generic manufacturers

18. AUSFTA & medicines in Australia 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

19. AUSFTA & medicines in Australia 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

20. AUSFTA & medicines in Australia 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)

21. AUSFTA & medicines in Australia 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

22. AUSFTA & medicines in Australia 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?

23. AUSFTA & medicines in Australia Secondary data: Price and quantity PBS data publicly available –Price paid by PBS for medicines –Quantities purchased

24. AUSFTA & medicines in Australia Secondary data: Price index Pharmaceutical price index

25. AUSFTA & medicines in Australia 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

26. AUSFTA & medicines in Australia 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

27. AUSFTA & medicines in Australia Thank you Questions and / or suggestions?