SPEAKER_03: 0:08

Hello and welcome to the Dispatched Podcast Week in Review. My name is Paul Cross. I'm delighted to be joined by Felicity McNeil, PSM.

SPEAKER_01: 0:17

Hi Felicity. Hi, Paul.

SPEAKER_03: 0:19

How are you?

SPEAKER_00: 0:20

Well, it's a lovely warm day in Canberra and Yeah, it's about all I got, really.

SPEAKER_03: 0:30

Long week. You've had a busy week. And it's Health Department and your report dropped this week. A little bit late. A little bit late. So they must have had an extension because the law is pretty clear about the end of October.

SPEAKER_01: 0:46

Yes, but you know, you can apply for an extension to your homework.

SPEAKER_03: 0:50

Yes. Well the graphics are you know, they the health department is putting a lot of effort into the graphic design.

SPEAKER_00: 0:56

When you can't say anything nice, put an infographic in.

SPEAKER_03: 0:59

So so what we got.

SPEAKER_00: 1:01

Uh the vibe of the Constitution that's the problem?

SPEAKER_03: 1:05

It's the vibe. Well. We got 6.8 billion in rebates, PBS rebates. Uh up from 5.4 last year, although there were some accruals, very high accruals last year, reduction in accruals this year. So that's obviously going to have had an impact. But this number is it's grown up tenfold in ten years. It's gone from six hundred million in your final year in the pharmaceutical benefits division to six point eight billion. But the revelation that there have been unconstitutional PBS claims made over the last twenty years accounting for 1.8 billion sort of just plays into that whole mess narrative around rebates because I'm guessing the Auditor General picked it up last year because it was identified in May 2024. But we also had coming out of the AO review performance audit, sorry, the fact that there were unreconciled claims of 1.2 billion, which the health department has has sought to uh claw back this year by just issuing these gargantuan invoices to companies. And some companies uh I understand have paid, but many are disputing it, and it's lawyers are are involved. So it's a it's a pretty messy situation. And this is in the context of the the Auditor General picking up on these payments as one component in a wider issue around the administration of these programs for several years now.

SPEAKER_01: 2:53

Yeah, well I think you know we ended up with the um surprise. You know, can we just get you to issue fake tax invoices so that we don't have to do rebates in 2018 as a r as a solution to the fact that um a qualified audit on the financials because the department was struggling with its invoicing arrangements for rebates. I think we've had, you know, then we've had the history of the weight-based dosing and the known claiming by the um hospital system of being paid for a full dose, even though it's not in collecting the the little extras out of each vial to then put together another dose. And, you know, companies saying we haven't physically sold that many vials. And the the Commonwealth saying, Yeah, but just pay up. Just, you know, it's all too hard for us. And I always find it amusing. It's a bit like when a Department of Health recommends can you issue fake invoices and continues on that way until someone brings in the tax officer and says, You do realize there's this law that makes that fraud and significantly illegal. And then we had that same issue with the those uh weight-based dosing issues, which is you were asking companies to actually set aside their obligations under the Corporations Act and with their auditors, which is I can't pay something that I know is wrong. I can't just sign my life away and and and you know turn a blind eye to these things, and yet the strong arming that continues within the system, even the arrogance to be going, well we'll just issue this invoice, you know, seven years later. I mean, even tax records don't have to be held for more than five years. So how is a company supposed to verify, and yet is it a reasonable expectation that they should? I think we we do have to question what is going on in that area of the department and the way they administer some of these really big spending programs and the basic administration. And we pr we pretend it's really complex, but it's not. We're talking about the fact that we have a purchaser providing arrangement, we have claims coming through, and we can reconcile these issues. It isn't actually rocket science. I appreciate that there is a long history of the tensions between the states and the feds on what the states will have to try and claim to get away with, and and that's an issue. But that used to be something that the the federal government and the state government argued about to try and reconcile that sort of grey area, but increasingly because so much of the PBS is actually delivered within the hospital system and the state-based system, companies have been caught in the middle of that because of the inability of two bureaucracies to actually solve a problem and to deal with something ethically and legally.

SPEAKER_03: 5:57

Yeah, there's a lot in what you've said. I I I wonder whether it was ever envisaged envisaged that rebates would become such a massive feature of the programme. I mean, they're basically a third of PPS benefit outlays rising. Right. I don't remember when they were first reported. I think they were fifty million dollars 15 years ago.

SPEAKER_01: 6:22

Well, yeah, when I when I started in 2010 it was$52 million.

SPEAKER_03: 6:27

So it's a trade-off that greatly advantages the government because they get access to medicines at the price they want to the extent that they wouldn't otherwise be able to secure because companies are willing to accept lower real prices as long as the published price remains in the ballpark of what is acceptable. Now, now we now have this wildcard situation of what the Trump administration are doing, and that's either going to make rebates even more important, so 6.8 might become 8.8 and 10.8, who knows, because the the published price might have to become higher. Will the Trump administration accept that? I don't I don't I don't know. And we will have a chat about MFN, but it's been put to me this week by two companies that they raised this issue of improper claim improper benefit claims in recent years and it was just blown off. Now, because it's it's an unconstitutional issue, the Commonwealth has to get this money back. It's not they can't just write it off, I don't think, because it's unconstitutional. They had no power to pay this money, to appropriate this money. So it's not like they can just go, oh, Soz, and move on. This is a this is a serious legal issue, and somehow it is going to have to be reconciled with presumably the states.

SPEAKER_01: 8:02

Yeah, and thankfully we have the national health reform agreements being negotiated, so it should be fine, peeps. I I want to go back a little bit. You've talked about, you know, obviously no one ever envisaged that re rebates would be such a huge proportion of the PBS. Sure. In 2000, 2005, 2010. But this is a bureaucracy that's been trying to deal with this and knowing that rebates were increasingly a significant issue in the PBS and not just because of special pricing arrangements. And as a bureaucracy, we like to frame it about, you know, giving you that fake deal and that it's all your burden and responsibility. But this is also about the risk share arrangements, which, you know, I love that many companies now go, what share? It's just risk, all risk for us. But the department has known since 2018 that the way they the increasing value of rebates in the system was a serious issue and a serious component of how they made the PBS sustainable. And so to be now seven years, eight years down the track of like, oh my gosh, we just didn't realise this again, it really doesn't cut the mustard for me.

SPEAKER_03: 9:17

Well they had to go at it, didn't they, with the supply chain reform which collapsed.

SPEAKER_01: 9:22

Of course, because that was the solution was fake tax invoices. Like if we all just fake everything, and I I get it. I mean, the states fake what they claim, and the Commonwealth pays on that, and that's how we've got into a constitutional dearth of problem problems. But I'm not really willing to let them off the hook on this one, because this is nothing new. It's just one more iteration of something that is so fundamental to the administration of the PBS, and yet no one's taken it seriously to tackle it. And so now we're at this death knell point of what's going on. And yes, the the way the constitution operates and the way that medicines are funded, and it's very important because constitutionally the benefit has to go to a patient. So it has to be claimed for the patient. But you're quite right, the only way they can come after the money is because they don't know how to go after the the states. So they're going to the person, the organization that was the end recipient of those funds, which was the pharmaceutical company. But there is a a a legal obligation on the system to administer appropriately to not actually it's not a supplier's problem that you allowed someone to order something ultra virus.

SPEAKER_03: 10:40

Well, yes. And this is where I suspect the industry needs to give some consideration because there is going to have to be some fix. Will officials use it as an opportunity for a broader fix of this of this issue. Obviously, it's very challenging with MFN at the moment that you have to assume that the minister has told the department don't mess around in this debate, let's not rock the boat. I think it is going to be hard for the government over the next one to two years to try and reconcile this issue against that against that backdrop. But I do I do I do alert the industry is that everything happens for a reason in government. And this is in the annual report. If$1.8 billion has been paid over the last 20 years unconstitutionally, on top of the unc unreconciled rebates we had identified last year. Don't think it's not been broadly discussed within government about how to fix it, as happened seven years ago when the supply chain reform which my my take on that, my description of that is that it sounded ostensibly really easy, and they got all these accounting firms, which are now persona non grata in government, to you know, do the nice charts. But it was the equivalent of picking up a rock, looking at what is a very complex supply chain, all the rats and mice and bugs and insects ran out, and after a couple of years they just put it back down again. We did get some insight, and we wrote this this morning that we got insight into the magnitude of these rebates because of a budget, which was instantly probably a mistake and probably I don't know, but it happened once. But we we got the idea that a$200 million annual spend was actually around 70. So because of the rebates. I think I I I believe it's going to be complicated, but for the industry, I don't think it's wise to think we can just pretend this isn't our problem. And I'm not saying that's the royal we in that sense. It's it is something that there'll be pressure on the health department again to try and fix this more generally. It's a massive pot of money. And it creates cash flow. Remember that was the excuse seven years ago, it's a cash flow problem, and that was when rebos were like two billion dollars, and now they're seven. Now, MFN is a wild card, but more broadly on this on this subject, what it reveals to us is the pressure, the pressures that are building inside the PBS. So what we had was a net spend of around 12.5 billion, very minor net growth below inflation on the prior year, the previous year. Now, that's not new, that's not the effect of new listings. That's sort of the massive spike in PBS prescription volume last year, it's like an extra 20 million scripts, and increased pharmacy and wholesaler remuneration. So the one guaranteed growth is around service in the PBS. So my my observation is that the actual F1 spend on innovative medicines is somewhere around five, somewhere between five and six billion. And I think I'm being very generous. Now, in the incoming government brief, the health department claimed that they it was 14 billion or something in new listings over the last three years. Now we know with reboats, so that's obviously a lot less than that. And against against the reality of statutory price reduction, there's kind of one in one out, would be my view. I suspect the budget, the bucket for F1 is pretty much fixed these days. And so this is this is a tension building within the system. And it's important to look at these programs, all public health programs, like you do your defense capability. It's a strategic investment. And we saw we saw with the removal of indexation on Medicare GP rebates that was in place for about eight, nine years, the how that built pressure on general practice. And when you sort of remove it for that period of time, you almost can't fix it. We've seen it in Farmac, where there's been such a lack of investment over such a long period of time. The$600 million additional spend they put into Farmac last year was important and made a good contribution, but it doesn't scratch the surface. If we aren't investing in new medicines with new money, not recycling money within the program, which is pretty much what they're doing, then it's going to get harder and harder and harder, and the program is going to continue to deteriorate. And we're going to wake up in five or ten years, and it's just going to be too hard. It's going to be way too hard. And now, if government are saying to the industry there's no more, there's no money, there's no money, there's no money, this is it. This is what my instruction is, there's no money. That that is an example, as we talked about last week, of framing. They're setting you up. They're setting you up because the second part of that, the unsaid part of that, is there's no money. And if you want to maintain the current policy of implementing all PBAC recommendations or progressing them, you are going to have to give us a raft of new statutory price reductions, which has worked over a long period of time, so I completely understand it. But in the context of MFN, they are batshit crazy to think they should start a conversation with the industry that way in 2025.

SPEAKER_01: 16:33

Well, yeah, they I I think you answered it by saying they're batshit crazy. I think you're right, I think you know the Minister's obviously being a bit more circumspect because he obviously has to take a whole of government view on everything he's doing and with his cabinet colleagues and broader issues on trade. I think that the bureaucracy within health is not so circumspect, and I think there's a lot of game playing going on. They're pop they're political on those issues. Yeah. But I think they are very much um trying to dissuade, and I think actually, you know, you you gave me feedback on some of the wonderful commentaries at uh some of the conferences and things last week about the attitude of the department to anything that's related to HTA. So it is incumbent on there there are still opportunities with the trade environment to break new ground and to have some very difficult conversations and to make the system move. But I mean, look, industry, maybe you should say that you know, every 100,000 medicines comes with a like a battery to store solar power and you can get extra funding for it. Um because we have we've we've got plenty of money to do that. Um we we had a productivity commission that looked at every part of um our area of domestic product productivity in Australia except for health and disability. Interesting. So it it is an interesting time. I guess I just I I get concerned that these little individual issues are going off. You've got so many other things going off in respect to the HTA review implementation, the budget processes, and everyone's actually starting to wind down. I mean, we've had Halloween and Melbourne Cup Day, and you can see people already starting to reach for the end. And whilst the rest of Australia starts to get ready to shut up shop, that is the time that in the bureaucracy you ramp up because it's related to the budget process.

SPEAKER_03: 18:52

November.

SPEAKER_01: 18:52

The budget's well underway. It is, but this this is the really big time. This is really when it's starting to the the rubber's hitting the road of preparation. Everyone thinks it's the March to May, and certainly that's a very busy time for getting into the details of things. But the hard yards and the thinking and the approvals are all happening now. And if you're not maintaining that energy and that concern and you're not pushing back on these issues and bringing them to the forefront of what's going on, uh you you risk it.

SPEAKER_03: 19:23

Well, I go I go back to New Zealand, you know, i uh when I spoke at the that event and I said MFN is either going to be an enabler or another excuse. What a perfect situation to play into really broadly held views about the Trump administration in Australia. I don't I don't know. Uh that well it's Trump's fault that we can't get access to medicines, it's his fault. Now, will MFN do that? I don't know, but you can you could see it you could see it becoming becoming the excuse. I I I I I I don't know, but I'm not very optimistic because you know what we can we can say a lot of things about the bureaucracy. They have some pretty standard plays. The playbook is pretty limited, it's only a couple of pages. There are not a lot of plays in there. And the frame the framing play is the first thing. There's no money. And what did they say in the incoming government brief? We have to maintain our focus on statutory price reductions so we can continue to list these medicines. And of course, the current regime of statutory price reductions expires in 30th of June 2027. So 20 months. So they're going to be focused on that already because of the budget. So the next three three out of the next four Ford estimates here doesn't have any PBS savings in it, or very limited. So that's that's an issue for them. But I I I think that's a that's a that's an important one. We saw another uh MFN announcement overnight with Lily and Novo Nordis signing agreements. Their share prices went up. I checked, so they went up about 2% in a market that otherwise went down. Because they got guaranteed they got 80 million new patients. So now the state-based Medicaid programs are going to fund the obesity drugs at a reasonable reasonable price to me. Maybe it is the MFN price, which is now disclosed, so we know what we're gonna have to pay in Australia, at a$50 copay. So the market's actually expanded as a in the US as a result of this agreement, but it's very pricing focused and it's for the future as well. And Lily are investing in big manufacturing, Novo uh Nordice are investing in big manufacturing agreements. So it's almost like the Trump administration is saying, what's real really interests me is addressing the issue in the US. You can sort it out. You sort it out in the other country. That's nothing to do with me. Now, because they talk a good game on trade, but trade is very difficult. So it's it's it's really interesting. I I just I just think that we need to be clear in our heads here about the environment that we're working in. And are we really working in an environment where the bucket for innovative medicines is a f essentially the fiscal bucket is fixed and that's what we've got to work with. And if it is, we're far that's farmake. That's farmake, but at least farmake are honest about it. So are they is it one one in, one out? That's that's you know, and people might describe that as the offset policy, but it but if that's the rule, it's far worse than that. It's far it's far worse than that. So it may well be that it's just a negotiating tactic by by officials, and if if it is, then I hope the industry is tweaked to it.

SPEAKER_01: 22:51

We can but hope.

SPEAKER_03: 22:54

Um It was interesting thinking about New Zealand because we had a we the pharmacy guild annual parliamentary dinner was on in Canberra this week, and to say it was very different to the one two years ago would be an understatement. So the one two years ago was in the middle of the Battle of Agencorp over 60-day dispensing. And now we have the Supreme Leader, one of his own compadres was calling him that, not us. We didn't we didn't say that, but uh now he's the El Presidente of World Pharmacy, but and congratulations to him because he he is a force of he is an absolute force. Uh two years ago, do you remember? It's like it was half empty, there were no labor politicians there.

SPEAKER_01: 23:39

They were there begrudgingly playing on their phones, and this year it's like the Mardi Gras.

SPEAKER_03: 23:44

It was it was it was a festival, it was the the mood, and I I it's it it is remarkable the turnaround. When two years ago, people were saying it's the end of pharmacy, it's the end of pharmacy, and now the the government's busily nationalizing general practices or threatening to nationalise them in some cases.

SPEAKER_01: 24:01

Yeah, I think as you said last week, Trent, you need to talk to these guys about how to fix them.

SPEAKER_03: 24:06

The minister didn't just turn up and give an address, he actually stayed so it's it's a remark it's a remarkable turnaround. But we were having a chat with someone about what's happening in New Zealand and the talk of deregulation or pharmacy, and it made me contemplate the policy environments in each country. See, New Zealand is very different to Australia, not culturally, but certainly from an administrative and governmental perspective. They have no written constitution, key point of difference, they have no states and territories, so no shared responsibilities, and they only have one chamber. They actually, I think it was in the 1980s, they voted the people in the upper house, politicians, voted to put themselves out of office, out of work, which is probably the only time this ever happened in the world. But that means that when a government changes in New Zealand, it's really easy for them to get things done. You know, they've got a majority, they don't have to worry about a federation and split responsibilities and parliamentary inquiries and things like that. And you saw that with the current government when the first hundred days they passed 100 bills or something. In Australia, because of the complexity, and we talk about it with rebates and section 83 of the Constitution and the effectively the unlawful payment of PBS claims, it's a status quo bias. It's a it's a sort of small c it's conservative, it's a conservative environment, partly because it biases towards the status quo because it is very hard to achieve change. Only two governments have had a majority in the Senate in the past 50 years, and they didn't last very long. They lasted, they sort of had these majorities for one term, and the last one was the Howard government between 2004 and 2007, and they didn't manage it very well, be fair to say. There's really no prospect anymore, I would say, of a government having a Senate majority or even close to it. You might have an effective majority where you've got Labour and the Greens now pretty closely aligned on a lot of issues, but even that doesn't always work, and you see that with some of the laws they're trying to pass now. We have the split responsibility between the states, territories, and the commonwealth, and you see that with the National Health Reform Agreement where the federal government has had to hand over$2 billion just to get them to come to the negotiating table. Very round number. Not 1.9, not 2.1, 2 billion. They've had to do it. So that that adds great, great complexity against the backdrop of a constitution that is very vague on health responsibility. It splits it, but certainly in service delivery, it's heavily weighted towards the states.

SPEAKER_01: 27:01

Yeah.

SPEAKER_03: 27:02

And so the Commonwealth is basically the funder and the states do all the work. But that means that we biased towards status quo, and that can work for you and it can work against you. So in the case of pharmacy, works for them in Australia. So even if they, you know, there's been all the regulation reviews about pharmacy ownership laws. When I worked in government 25 years ago, we did a review. This is a really funny story. We did the Wilkinson review. Yeah. Led by someone who was a consultant for pharmacy at once. So no guessing what that recommended. But it would be very hard to really change pharmacy. Well, pharmacy location rules would be almost impossible to change now because Greg can't legislated them.

SPEAKER_01: 27:53

Yeah, thanks, Minister.

SPEAKER_03: 27:54

Pharmacy, the government lost a huge point of leverage. Pharmacy ownership is determined by the states and territories. And so that's that's really hard. That's really hard. You'll never get national agreement on a change there. And so that protects in a lot of ways. That protects pharmacy. It protects pharmacy. Because it means that governments are not inclined to take issues on. It's too hard. It's too hard. And that flows into other parts of the health system. The point being that even in something like health technology assessment, change, and we've seen it, this HDA review has been going for four years, change is really hard because it biases towards the status quo. But it also makes something like Pharmac very difficult in Australia. Very difficult. So if they wanted to go down the path, if a government wanted to go down the path in Australia of, and you know, you faced this 12, 13 years ago when finance were pushing this, as we know from the National Commission of Audit. It's really hard to do because you'd have to get it through the Parliament. And I I think that would be very hard. Even the the CDC, which one stakeholder group decided is the most important health reform in Australia for generations, like, what are you what are you talking about? Like, what? Because it's an independent statutory agency. Like, yeah, good luck with that. Anthony Fauci was independent as well. So you have all the you have this complexity, but the status quo bias can work against you, but can also work very strongly in your favour because it limits the desire of companies to take on really radical reform. And that that's that's a that's a big difference between us and us in New Zealand.

SPEAKER_00: 29:44

Yeah, look.

SPEAKER_03: 29:45

That's a long way, very long winded. I'm I'm sorry.

SPEAKER_01: 29:48

No, no, you're not. It I think the the issue that you've rightly articulated is that the inability to, you know, it's evolution, not revolution, suits in. pharmacy really well and they've leveraged it beautifully and so when they did have a risk area they've gradually you know waited for a week they know when to actually push on the weak point of the system to get the change such as getting the location rules removed sorry the sunset clause on the location rules removed whereas the pharmaceutical sector actually having come previously from an area of great strength has allowed a system that realized where the balance of power was which used to actually be I would argue more with industry than the administration of the PBS and they have incrementally chipped away at it so slowly on the evolution that no one in the industry did enough to actually put a halt on the brake. Now I think the industry worked up a little bit when the overreach when Grey Hunt introduced legislation to remove the secrecy provisions and thank heavens you published that to let people know that. There was full consultation for the apparently a phone call on the way home for dinner on the way home to fine.

SPEAKER_03: 31:06

Well by the way we're tabling this legislation.

SPEAKER_01: 31:08

Nothing much don't worry about it. There's nothing nothing to see here.

SPEAKER_03: 31:11

That must have been in development for 12 to 18 months.

SPEAKER_01: 31:14

Of course you can you can't just do it. Yeah but I guess it shows the differing parts of the system and and I think when we talked about all the crises that went on with 60 day dispensing that was when the department tried to approach the guild the way they approach the pharmaceutical sector at your peril. So when you are a small business and you're all individually owned you know where your strengths and weaknesses are in the system and you reassert that balance of power and you pull it back slightly maintain the equilibrium they tried to treat them like the pharmaceutical sector lesson learned they got more money and now everyone's just happy and you know you've only got a couple more years till the next agreement the conversation starts again. When you come to the pharmaceutical sector they are in the equilibrium of not having the the even ability to pull back on the balance. So it is so weighted towards the administrators of the system now they have so much incrementally just pulled it little bit by little bit by little bit. It's like the movement of the tectonic plates and suddenly you don't live in Australia anymore you're probably in North America that's how slowly we moved it but no one noticed and now you're at this point. And the thing like you've said quite rightly is each time it's moved it's now so far from where you started when you thought you had a balance of power between the two organizational areas it requires something extraordinary to recalibrate and to bring that back. Now the guild did that when they tried to pull that back a too quickly like you never do that quickly to to the guild you you should have slowly slowly pulled away when the and the policy's a complete failure and the guild's done everything slowly slowly it's why we have vaccinations in in pharmacy because they started slowly slowly and moved a it was a big long term policy initiative to actually get somewhere out 10 year plan and they made it happen. But this has just happened so quickly the guild just did turn around if you if you push too far they turned around on the government said I don't think so this is not how it works. This is not how pharmacy works the problem you've got here as an industry for the medicines and the vaccines and even the the diagnostics and the technologies is this is an industry that still sits there going but yeah I don't want to open I've got a I've got a a product coming next or I've got this or oh we shouldn't you know no one wants to well we should try and work together. How's working together gone for the last 15 years?

SPEAKER_02: 33:48

Yes.

SPEAKER_01: 33:50

You can work together and actually have a an idea and an alternative strategy but you MFN is that opportunity but it's also your huge risk right now because we all know what's going to happen. The solution to MFN is I'll give you higher published prices except lower cost effective prices and then I'll say to them all you know now you're going to have to pay me back even more on the rebates and you're going to have to pay the interest in advance and that's the price of doing business for you to keep something quiet in the US and us to still keep having access. It will become a self-fulfilling prophecy of then demanding even more from you as a sector as opposed to when you look at what is going on with what just happened with this administration this should be a I should have been reading this all over the front pages of every newspaper in the country I should have been seeing it on the television we should be understanding it but individual companies will try and do their certain thing but the industry has to stand up. You do need to understand that unless you actually push back and push back on an issue like you said last week that is about the weak point in the system not its own strengths you're not going to get the change and we are very close to Farmac anyway so I don't actually need to legislate Farmac to actually deliver Farmac here in Australia and I think many patients in particular and I said this in New Zealand I'm an Australian patient and I work with Australian patients and I'm sorry my system of access is nowhere near as good as you think it is. We still make you think they are framing it as in yeah I get I'm not quite missing out the way you are but I spend my time with patients who I'm missing out every single day and it's getting worse. So yeah like I said there is no way that the government needs to legislate Farmac because over the last 10 years they have delivered Farmac by stealth and we are only two or three steps away from it.

SPEAKER_03: 35:44

The difference is if you legislate it's hard to come back from that. It's the status quo problem. So that that's that's where at least when it's not legislated you have the capacity but you've got to advocate for it. And I and I really don't hear the fear Sab you've got to bring some energy to it and look people hate it when I when we compare say well you've got to follow some of what the guild does what pharmacy does and yes people always say yeah but they're in every suburb I said that's not the source of their power that is not the source of their power. The fact is that they are a part of the health system that functions incredibly well they are a great partner for government a fantastic partner for government. If you ask the pharmacy to do something they'll deliver it very quickly and the current national president of the pharmacy guild Trentumi has been in le senior leadership positions in that organization for at least 10 years. He negotiated 2015 and you go to that dinner on Wednesday night and who do you see? You see John Bronger who negotiated the second and third agreements you see Kos Sklavos who negotiated a couple of agreements they have tenure they have tenure and that that enables them to think strategically that it that is a vulnerability for for the industry and that there is a lot of churn and we've seen that again in the the last couple of weeks the people who are making decisions about the industry and this is not a personal reflection on them it's a reflection on the institutional framework that allows it that you have to change the conversation and that might might involve some institutional changes in how you engage government the problem the concern I have around MFN having worked in the US pharma are not going to join you in a fight on any issue as in PHRMA pharma unless they have confidence that you're going to be in the trenches with them. So so yes there is an extent to which the Australian and New Zealand industries can outsource the MFN argument to Washington but that to me would be a horrible lost opportunity. And the opportunity here is to bring significant energy to this to get the US involved in this discussion and fundamentally change it. Change it to the point that the health officials get kicked out of the room and it does become a trade discussion. But that's going to require some energy and it's going to require the industry in countries like Australia and New Zealand to take some risks so they can elevate themselves in this debate. At the moment it's all focused on the UK and we saw that again this week where the US ambassador in the UK came out and said you've got to pay high prices well what well okay well there's a is there a US I don't think there is a US ambassador in in at the moment in Australia. But but I'm not I'm not sure maybe one has been a point I don't I don't know but if we want to be part of that conversation then we have to be willing to have the conversation publicly. And the fact is more money in the system is going to make it better.

SPEAKER_01: 38:53

Yeah so I'm going to go left of fear on you there because you started that um opinion on a basis of three things. First of all you said that the reason the guild you know that medicines Australia etc that that sector doesn't feel like they can be like the guild because there are some differences between them and that being that it's you know a reliable part of the system it delivers um you know they can be a great partner with government I actually see the pharmaceutical sector the exact same way. I I don't actually see any difference between it access to medicines in this country is incredibly reliable. The work that this industry does to get medicines from ship to shore the way they worked during COVID the way they deal with medicine shortages the way every time the department or a minister's office picks up a phone and wants to talk to them about something about handing over money they're there. I actually think they have the same reputation for delivery that they should be incredibly proud of we take the PBS for granted that's half of the problem you've got right now is that people take the medicine's access for granted and that you make things happen. The problem you are not able to articulate and I know stronger PBS doesn't explain it to people that their problem is that people don't understand what actually is not coming to Australia. What is the engagement that and you're right the cycle through and that's not anyone's problem the fact that you're here for a short time and then you move on again allows the perpetuation of when I meet with the pharmacy guild like you said I'm meeting with 15 20 25 years of experience passed down from generation to generation within that organization by small business owners who eat, sleep and breathe every aspect of their businesses the weak point the vulnerability in the pharmaceutical sector is that lack of longevity experience understanding the history building having a repository of you know if you're if you're on the board or you're a member having a repository of something that is a 15 year plan. So vaccination in this country was a 15 year plan between the pharmacy guild and the pharmaceutical society of Australia and they've built it and it's the normalization now and we're just trying to get now to that final bit which is the gap of children between five and sixteen and whether they're allowed to be done vaccinated in a in a pharmacy setting. If you think about now how the Pharmacy Guild and the pharmacy board have all come out about prescribing and how it needs to be standardized and how it needs to move to subsidy because without subsidy it's only timely not affordable. They have been starting that again at the state level for over seven years and they have built and built and built. They are in the seventh year of a 15 year plan and Trent said that to you at one of your conferences we're not just planning for the next agreement we're two agreements ahead before we even start that sense of policy and stewardship is even better than you will find a lot of the time in the departments who actually have cycled through as much as sometimes the industry and lose sight of the bigger picture.

SPEAKER_03: 42:21

So Yeah that's a fair point.

SPEAKER_01: 42:23

I guess all I'm saying is that I get it when it comes to the trade negotiations, I get it when it comes to the strategic negotiations that I know that you have this reliable place in the system but you have not managed to convey the importance of that and you've not been able to con convey and deliver a sense of when you turn around and say this is a problem because you've been strategically engaged for 15 years that it's not suddenly the boy crying wolf.

SPEAKER_03: 42:56

Yeah I I think that's that's that's a a point well well made the boy who cried wolf dynamic is a really serious one because I get I've got it again in recent weeks oh Paul no no no we're definitely going to miss out. And there's two points to that well you've been saying it for a long time and it's never really happened. You said it as recently as 2023 it didn't happen at all. And so that that's that's a challenge. The other thing is that the extent to which the government cares so politically is it is it a problem? I think in some cases it will be a problem for some products and the the system will show remarkable flexibility with those products. It's a strategic challenge for the industry but the industry I would say a big difference between the industry in 2025 and 1995 which I hate to say is when I first started engaging with it from the other side from government is that in 1995 the relationship between government and industry was not purely transacted through reimbursement. Correct we had we're coming to the end of factor F, we had other industry investment programs so we had PIP program, we had the pharmaceutical industry working group we had strat the strategist strategic planning around the industry and that involved trials it even involved manufacturing which people would be shocked by but there was a much wider conversation yes the PBS was very important and it was a very different program back then. It was growing much more quickly than it is now was a much bigger concern for government too back in the 1990s because it was growing so quickly but the relationship had a much greater depth to it. So we would get MDs sitting around the table developing industry strategic plans where the PBS and reimbursement would be part of the conversation we'd be talking about clinical trials and industry investment and employment we'd be talking about all these other things does that happen now I I I don't know it seems to me that the industry has become far more tactical and this is a point that former your former boss Ian Watt former finance and prime minister's department secretary and all these other departments he was secretary of yeah defense columns he said that his his view it seems that the in the that the relationship has become really transactional. Yes and that it's all about products now and so if you define if you define your relationship with government through the reimbursement process which I you have to say the industry does then that's where it's going to focus and it's really hard to get out of that when I say to people you need to have a couple you need to bring in manufacturing no manufacturers but you've got to take a broader you've got to take a broader view. If you go in and talk to anyone in the in parliament and say why aren't you reimbursing our technology why don't you we need our medicine reimbursed we need our impassion here I've got a patient now reimburse our medicine you instantly put them on the on the defensive if however that a conversation is framed as we've been in Australia for 70 years. We have a 500 employees in our business we've got another 500 in manufacturing around Australia what is really what really matters to us is to keep that viable and what keeps that viable well obviously workforce it's a very competitive environment for skills so we've got to be a really good employer but we also need to be able to access the skill set so we're big supporters of university training and vocational training the business environment taxation things like that that's really that's really important for us. Obviously we're a manufacturer but we also do clinical trials so all of the infrastructure arrangements around those clinical trial approvals getting that streamlined the single point of contact that's really so so you have all of these conversations so we want to really good business well right well what what well and our operating of course we've got to be able to make a profit. Well what what drives your profit well in pharmaceuticals it's the government through the PBS. That's how you've got to get get round to that conversation but it requires patience and it takes a long time to do it and industry generally doesn't have the patience these days. So you need to frame your relationship in different terms and that's what pharmacy does so every every two years ago it was the end of pharmacy because of 60 day dispensing but because they have a much broader relationship with government and it's obviously easier for a service provider but they also think about it very strategically we've got a primary care problem I can't get it takes me two weeks to get into CGP and then when I see a GP it costs me$120. So that's a problem. Well what are the solutions? We can bring more doctors in from overseas okay yep we can do that hard to get we can train more doctors. Well that's not easy because we've got to create these training spaces and it's not like they're just readily available and then we've got to take the time and that's a 10 or 15 year proposition. Or we can shift services from the GP practice into pharmacy. Pharmacists can you come yes well of course we've been saying this for years and as you say it's vaccination it's prescribing it's service delivery and that's the genius and I know people sick get sick of us praising pharmacy but you've got to look at it and say they spend a lot of time they've spent years talking about service delivery and vaccination years talking about it. Dispensary is obviously still very important to them but they're broadening they become part of the solution so you have these tactical flare ups as they head on 60 days but the long-term strategic direction it just quickly morphs back and on they go and I think it's a little bit opposite for the industry where during COVID you had this tactical flare up of we need some manufacturing but then it goes back to the strategic longer term discussion of transacting this relationship via products and reimbursement. And I I think it's got a it's got a flip that people have to accept that how you get to a really good conversation about reimbursement whether it's through MF is but by actually positioning the industry strategically. Industry employs what 2000 people in Australia it's the biggest private sector investor in clinical trials and RD. It does a lot it employs it's highly skilled jobs highly paid jobs it's integrated into the global economy. As you say it plays a critical role in public health obviously this is a good deal which is why and no one would realize this it's one of the strategic pillars of the governments and it has been for industry policy and it has been for for decades and I know it's frustrating because everyone's sort of down into the weeds in the HCA review and the government's already sending the signal on that there's no money so it's it's it's a it's a real challenge and I know I've I've rabbited on a lot in this episode but it's it's just trying to think about these issues taking a step back and understanding that asking for more money is not gonna it's not it's not that simple. You know it's not that simple. Making the case has some complexity and arguing about comparators or discount rates, as we always say it's the easiest thing in the world to dismiss Yeah look all you say is is completely right.

SPEAKER_01: 50:28

Not often I'm sympathetic to the industry. But right now they are being pulled into the traditional let's talk about what the PBS costs let's talk about your listings they're getting PBSE recommendations they can't implement they're being asked to sign risk shares that they can't contribute to so the system itself is actually using that to draw them in to make it this and this is the challenge for them which is why like you said building those relationships are long term and yet right now they have a supposed cliff of challenges coming and the inevitability of new price cuts coming and so they have to turn their mind immediately to this. Again the strength of other organisations is because they're always working on longer term policy, they can adapt and take on board structural, critical, tactical, strategic and something coming out of left field they can do it. They can pivot they have got so much going on and they're so ready and they've so thought about things for so long they can they can react to do that. Yeah and they can do both. Yes and I think what we see you know the system as the PBS is very good at going at the underbelly of the industry and making it only engage with it tactically. It you know I know they have the that future forum each year and it it's kind of so far out there that it allows this esoteric conversation. It's like a token let's look to the future for a minute now meanwhile we'll all go back this afternoon and I'll have five meetings with companies about their risk shares, their PBS E submissions and and the thing and we'll all go back to to the moment and that's where I do have a lot of sympathy because if you haven't got that capacity to sorry lift up and you're being pulled into these individual conversations you're gonna have to do both. You actually have to invest to do both and that's not something that um normally sits easily in an area when you want to start again because you you get into the reactive it's like when you're in the business and you've lost three staff and you say to someone I can help you but you've got to recruit I don't have time to recruit well I can't fix this problem unless you recruit. It's that basic a principle I can't fix this problem for you as you're being dragged into the individual discussions right now unless you also at the same time invest in that longer term thinking and planning and you're gonna have to run both.

SPEAKER_03: 53:06

Yes yeah be and be be strategic about it. My one regret about the pharmacy guild dinner this week and the mood was it was almost euphoric was I was I was I didn't get any glucogel jelly bones.

SPEAKER_01: 53:20

They had they they had them on the table and I was so I'm too polite they're just sitting there and I didn't grab them and I'm so I'm so frustrated Oh no no see see I was sitting on the on the table with um patients we'd just go nah there's a definitely taking them home for the kids we've I've been to too many guild dinners to know that that is when I used to show up saying sorry I've been out but I brought the gluca gels.

SPEAKER_03: 53:43

The mood was extraordinary though wasn't it was just frustrated they don't have gluten for a bit anyway. I know it was when you think where they've come but it's the strategy the managing the flare and then just carrying on as part of the solution. Meanwhile general practice is getting nationalised like like it's post-war Britain. It's absolutely it's absolute madness what's going on and the fact that or you've got you know Medibank private buying in other 151 GP clinics throughout Australia and as far as I could tell the doctor groups are just silent on it. Now I don't necessarily object to it but there I I'm not quite I'm not quite it's not quite clear to me where they're going with that. Because that's that's Medibank who now have hundreds and hundreds of GP clinics but they operate under Amplar Health which is effectively a separate business. I assume it doesn't come under all the actuarial and regulatory limitations of the actual health insurer but it's an amazing amazing thing.

SPEAKER_01: 54:50

Now it's very important next week World Diabetes day world diabetes day you only get a day for diabetes. Well no there's di You get a whole week for biosimilars well no you get a week for Australian diabetes but if you've got world diabetes it's just one day it's a bit like I've been looking at the forthcoming materials which I'm sure we can talk about for um world antimicrobial resistance week which we always run in summer. So because we want to finish with the Northern Hemisphere it's like okay it's just easier with the brochures but yeah it's world diabetes um and it's given that um Auntie Violet was uh lamenting uh the Minister Butler's refusal to CGM she wasn't very I think she was very subtle was she's her second year in a row she's complained to him that as a type two insulin diabetic she doesn't have access to CGM bless her.

SPEAKER_03: 55:38

It was it was very impressive piece of advocacy.

SPEAKER_01: 55:42

She's um she's a a big fan big fan of that and well done to her pharmacist who knows how to give her the right eye drops.

SPEAKER_03: 55:48

But yeah no well diabetes next week so um that'll be interesting to see what comes out we still don't have a response to the inquiry from 2024 doubt we will but hey if you can't say nice no I wouldn't have thought so support in principle Paul not until not until they've got a plan to fund those GLP ones for like six people yeah but um all right well that's went a bit longer than I thought but I kept rabbit on I apologise for that but uh there's a an extra lap walk in the dog for some people my dogs uh but thank you for listening thanks everyone we've got an AI AI summit on Monday which is going to be really really interesting got some very good speakers hopefully people will learn a little bit I certainly will as it's quite a new thing for me but I'm I'm really looking forward to it thanks Paul thanks for listening