The 'Dispatched' Podcast - Special episode

Where did these industry agreements come from, and why? In the first episode of a two-part special, we discuss the genesis of the Australian government's agreements with the industry, based on personal experience, why they emerged as a solution to a decade-old challenge, and the problem they were aiming to solve. The opportunities, the risks, the vulnerabilities, and the importance of understanding how we arrived here.

Transcript

Paul 0:08

Hello and welcome to the Dispatched Podcast. It is Friday, 5th of June. My name's Paul Cross. And I'm delighted to be joined by my co-host, Felicity McNeil, ESM, which is going to be relevant for today's episode. Chair of Better Access Australia and all sorts of other things now. Hi, Felicity.

Felicity 0:30

Hi, Paul. How's your week been?

Paul 0:33

Uh yeah, it's been okay. It's been good, I think. It's been okay. Bit of Senate estimates.

Felicity 0:41

I was going to say, like, four days of Senate estimates. Can it get any better than this? Yes, it can.

Paul 0:46

Friday, NDIS Day. The NDIS minister led off this morning with a 20-minute pre-prepared statement. It's like the old days of Medicines Australia, which we're going to get to. We have had some feedback. Maybe we're a little too negative. Which to which I said, well, give us something positive to talk about. And we'll be we'll be right there. But we have had a specific request. And a specific request that the audience might benefit from understanding the history of industry agreements. The good, the bad, and the partially good, not so good, mostly good, bad, disastrous, catastrophic, all of those things. So we're going to go back in time and discuss what is obviously a really important issue.

Felicity 1:40

To let your readers chef know when you gave me the homework, I was like, ooh, better start reading up and open wounds.

Paul 1:48

We're going to be talking about some scarring. At least one, I suspect. Right, so let's let's go back go back to the start.

Felicity 2:02

And so when we mean the start, what are we talking about? 1993?

Paul 2:06

No, I think I think the first discussion about the possibility of formal agreement between the Commonwealth and the pharmaceutical industry took place in the early 2000s. I know this because I was part of the discuss conversation.

Felicity 2:20

So you're during whiskey tonight and I'm doing champagne.

Paul 2:22

Yeah, so it was a very informal initial engagement. Because remember the community pharmacy agreements were still pretty early at this point, I think.

Felicity 2:31

Yeah, nineteen ninety-one was the first.

Paul 2:33

Yeah, so we're we we'd just done the third. It was a it was a really important time to PBS because coming out of the nineteen nineties and in the early two thousands, this program was growing at a fair rate of knots. Double digit was pretty normal, and it had actually been close to twenty percent for a couple of years. So it had gone from not even one billion in the mid-1990s, it'd gone to four billion pretty quickly. Now it it was, I suppose I I would loosely describe it as being a little bit like the NDIS today. So it it was identified as a real problem, a fiscal problem, and so it was going to be the focus of uh some pretty close policy work, particularly around budget time, and that that had started in the mid-1990s. Uh obviously we had the first intergenerational report, which Mark Butler decided to refer to. So in the discussion with Medicines Australia, or the APMA as it was then called, we raised the idea that what about a formal agreement? Because the industry was getting pretty worried. And and I think it's important to point out that between the mid-1990s and around 2010, policy assaults on the PBS around savings to try and ameliorate the growth was pretty much an annual exercise. Major reform rounds occurred every couple of years, 2004, 2000, 2002, 2004, 2006. But in each budget, people people probably don't understand this, but individual products would be targeted in a budget. So whereas now there's much greater reliance on things like statutory price reductions. Back then, you would do a budget and you'd say, We're gonna target cholesterolone drugs, we're gonna target arthritis drugs, we're gonna target PPIs. There's a therapeutic group policy in in the mid-1990s. So the impacted companies would get a call generally from the minister's office, sort of five or six o'clock on budget night, and advised to tune in. So these these things were happening happening yearly. And we put the idea, well, maybe we should get you in some kind of formal agreement so we can just make this a little bit easier for everyone. We had no authority to do that, it was just a thought, it was just an idea. And actually the industry said no. And and the basis for saying no was that there'd be too many winners and losers, and that it would be really hard to negotiate that path. But then came this decade of annual assaults on the program. So people people need to understand in 2026 there's been no PBS savings measure really announced in a budget for like five or six years. This is historically very unusual. So it was a bit it was an interesting decade because m the APM mail, it renamed itself to Medicines Australia, was actually considered, I think, it it built itself reputationally as a pretty good policy partner around the F2, F1 split, price disclosure, so it developed good ideas, but also did it was a good partner for government in managing the PBS. The GMIA was then called, was not. So it refused to negotiate on a lot of these things and it was punished accordingly, it was excluded, and we'll probably get back to that a little bit later. But in the end, it all culminated in 2010 with the four-year memorandum of understanding, so it wasn't an agreement, it was an MOU. And I think it's really worth people going to have a look at that document because it's very strategic. Yes, it included pricing changes, but it also included high-level principles about policies where biosimilars was mentioned for the first time. And it really starts in strong stark contrast to what we see today, which are basically pricing agreements. So the MOU was really about certainty. The industry was a bit hurt, I suppose, and frustrated with these budget surprises and which were virtually annual. And so it was thought that a formal agreement would give the industry certainty, would give the government some certainty around pricing and policy. They could try some things and they would sort of come back to it at the end of these agreements. And then sort of we get into that the MOU. Medicines Australia appointed a new chair. Correct. And it was the former chair of the GMIA, which was a bit confusing for a lot of people because they had been highly critical of things like IP. The then coalition who was elected in 203rd, which was elected in 2013, went to that election not committing to abide by the MOU, but it did, and actually invited the industry to negotiate a new one on its expiry in 2014, which is where I think you should come in.

Felicity 7:50

If you're trying to extract how an agreement came together, it was a very different time. So I I would go back to 2007 when we have the global financial crisis and all the savings that are in the nation building funds and future funds, which was protected, so something I was actually in charge of, were being cracked open to spend to stop us from going into recession. And the greatest treasurer in the world stopped that by spending not only what we had saved, but borrowing more to continue to do so. It was an interesting time. Baby bath water, and in fact the entire house was thrown. But with that also came an issue of fiscal responsibility and how you do meet the costs. And what became very clear during that time is that there was a couple of programs that were in extraordinarily privileged positions, defense, and the pharmaceutical benefit scheme. And that it had the right to just simply list. List, and unless something uh exceeded a cabinet threshold, we list it every month, and once a year the government had to reconcile and find that money from the general government sector. You had also had failed measures uh in 2005-6. You were anticipating to save over a billion dollars from the introduction of price disclosure from the failing of the 12.5% statutory or non-statutory price reductions when something went into off-patent. You had a history of uh savings measures that had not achieved their savings over and over and over again.

Paul 9:37

So there was Can I just add something to that?

Felicity 9:41

Yes.

Paul 9:42

I believe that a lot of the time health went into the budget process proposing those savings measures knowing they w they had no prospect of hitting a target.

Felicity 9:51

I would, as a former finance official, 100% agree with you. Um I genuinely No, I think so, yeah. But also there's it there's a history in that space too. And I'm always going to take it one further step back because you've talked about the history, and I've almost got I've gone back to 1993, like when we first introduced uh the the wonderful world of HTA. And you're quite right that it was about individual groups of drugs or individual listings, let's get rid of um uh antihistamines and nasal sprays, let's target statins, let's target antibiotics, let's target things. But the biggest savings that we were taking as a government out of the PBS were attacking the cost of it for patients. So increases to co-pays and increases to safety nets. The biggest billion dollar savings that were proposed, like the 1.2 billion during 2002-3, was the increase in co-pays and safety nets.

Paul 10:56

35% increase.

Felicity 10:57

So patients were paying the price to list the new medicines at the prices that were being asked and at the prices that the government was listing. So I raised that because you can see where something is coming and moving towards, which is then so we hit 2009. We've got desperate needs to find money, we've got a very effective uh pharmacy sector and the importance of uh creating clinical spaces for access to medicines, and we've got uh a far Department of Finance that has spent years watching health not only overestimate savings but underestimate costs. And you and I have talked many a time about the 240 million on uh Celebrex and Viox and um buprin buprian, sorry, for um smoking cessation, just blew the budget. That's the context of when the the time came in. And a global financial crisis allowed an austerity area in health that had not previously been contemplated by a Labour government. And you also had the power in health, uh in finance to go, we are sick and tired of this program blowing our budget. That is the area that 2010 came into, and it was a partnership, and it was also a fear in the sector that if we don't, as Medicines Australia negotiate, stuff will keep happening to us. This is the chance to actually get something for it, and let's look at the future. And so that's what the 2010 agreement was, and you're very right, it was quite strategic in it it targeted medicines in F2, so those are off patent. Um, it targeted everybody. So anybody who had a medicine in F2 or would have a medicine in F2, it's like all bets are off. Yeah. It protected the the the great shibbilith of therapeutic groups, which was the greatest fear in the sector. Oh, a therapeutic group could ruin us because you know we can because of the way that process works, which I think also lacked an understanding about just how price disclosure actually saved medicines in therapeutic groups, uh, because he couldn't do things once uh something had gone into that space. But nevertheless, that was the fear, and of course the fear in the government was the new world of evergreening, venil vaccine, desvenil vaccine, etc. That's the context, and I and I I've spent a lot of time on this so you understand how things tip over the edge. And this was the moment. So it was quite a strategic agreement. We uh had the 23% average, which was the had to achieve the 2.5 billion,700,000 million, reinvested in pharmacy uh to support some of the work there, no new pricing policy, and all was good with the world.

Paul 13:43

Can I can I just emphasize a couple of things?

Felicity 13:46

Sure.

Paul 13:50

Uh the privileged position the PBS has and the tension that causes.

unknown 13:55

Yep.

Paul 13:55

And when you go back and look at the 20-year cabinet document release, finance raises that every single year.

Felicity 14:00

We do.

Paul 14:01

That is a privileged position. Why does this one program have a privileged position? Now there was a deferrals policy in 2010. I'm a bit to that. But uh everyone's got to remember that. That that privileged position remains in place, and people need to understand the massive tension that causes within government.

Felicity 14:19

It does, and that's why when you say we couldn't trust the estimates. So I I raised VIOX and Celebrax and um Bupropian because we would budget, let's say, two billion dollars for the year, and by August it's gonna we already can see it's $2.4 billion. Because the estimates that we are being given, and because the department has a right to list and the minister anything it wants that's under $10 million annually, magically everything's under $10 million. And so something that was apparently going to cost $36 million is already costing $200 million in one year alone. That's what breaks the trust in the system and builds the tension. So you get to this tipping point. So we negotiated the agreement in good faith, and we negotiated with the guild in good faith. But other things are happening when you can smell blood in the water. And I don't think people understand how much a Labour government can do more to a health system, as we see right now with the NGIS, than a coalition government. And the blood in the water was we have had enough of this program just being allowed to spend. It has to offset every single thing it comes forward with every time it comes forward. And by the way, we're taking your rights to list anything without first coming to cabinet. And that was something that was put in place and that was hidden from the sector during that time period because it was put in place at the same time as the agreement was being negotiated. It wasn't given effect. When that came into effect, that was still something that was not disclosed. And so we were these are the old days when you talk about the prioritization of listings, and my heart breaks that we lost this. We used to, if it was a basic amendment to a listing, list within six weeks of PBAC. If it was a complex adjustment to a listing under $10 million, it was 14 weeks from the PBAC meeting. And if it was a cabinet threshold, then it best endeavours for six months. But do you think about that? Most of the things on the PBS these days would have been done in six to fourteen weeks, and that was given away for the average now where we're comfortable that if a new molecule gets listed in six months from pricing agreement, which is several months after PBAC. Let's think about how we've given that access away for patients.

Paul 16:45

And and and that that that is such an important point. And and so what I want to do when you I just want to come back and emphasize a couple of points. That prior in that first decade when when all the trouble, when all the focus came to the PBS in the early 2000s, and I can remember the charter letter the minister got after the 2001 election, you are not to bring anything forward on the PBS to cabinet until you've sorted all this out. So nothing went to cabinet for 18 months. But in the first decade of this century, things could take two years to get to cabinet. So yes, I know people think they've got it really tough that tough now, but it was a brutal 10, it was a really tough ten years.

Felicity 17:33

It was. And but I oh I also counterfactualise that with we didn't have that many things that were over $10 million a year at that point in time. I mean, now that's pretty much stock standard and we have a $20 million threshold. But by the time we got to 2010, it was really starting to be a pressure point because simply the value of medicines and at that time so many of our listings were in chronic disease. So we were hitting that threshold quite frequently, although most of the things that we were talking about, the the Great Lycentis listing, uh the Great GliVec listing, the the really big uh areas of of funding during those times. But I guess what I'm getting to is that during the period of, and this is where the trust factor starts to come in with the sector and the government, and I know they like to blame small G government, and that's fine. But we did have the issue of the offsetting policy, so we were doing that. As we listed, we offset. Nobody knew, everything was still running six weeks. Glucose test strips worth $750 over four years were being offset so they could list in six weeks. We were we we had it all under control. But what was other also coming through the system was prioritization, a desire by the central agencies to say, you know what, there's life-saving, life enhancing, and lifestyle, or there's essential high cycle clinical need, clinical need, or many pro um pharmaceuticals already available. And that came into being. So the offsetting thing was happening, we're all good, no one can see that. But then deferrals happened, and that was something that as a department we argued vehemently against. Uh in particular way, saying this this could be the tip of tip of an iceberg. And the greatest thing that happened to us was the overreach of the central agencies to include a medicine for uh hyperhydrosis, which is they just thought was sweaty on pits, uh, that had no other listing on the PBS. So everything else had something you could already use, but they overreached. And that created a groundswell against the government.

Paul 19:40

Although the CHF did support it initially.

Felicity 19:42

Initially, yeah, because they un they understood the principle and they were fine with the first six, but not with the seventh. And that was that was important because I think it was a very important. I spent my more time in Senate inquiries those years than you know, everything from therapeutic groups and because the Reserve from Retorvostat and things were still going and all those other ones. The historical therapeutic groups were still progressing. It was just no new ones. And that was a really important message that the system and patients sent, which is you know what, we'll take a little bit of this. We're we're we were we're happy with not having the fourth DMARD for B D MARD for rheumatoid arthritis, but don't take the way something that's first. Again, reprioritizing the high clinical unmet need.

Paul 20:26

But but aga again, I I just want the listeners to understand what what's the conversation here? We're we're talking about a conversation within government that doesn't involve the industry.

Felicity 20:37

Correct.

Paul 20:38

And this is why history is really important. People think we talk too much about history, but the agreements are a product of the history. The negotiation that that you're about to go into is preceded by all of these events and everything happens for a reason.

Felicity 20:55

And to be clear to your listeners, the only reason I can actually talk about it is because we had to disclose it in a Senate inquiry. So if that Senate inquiry had not happened, and it it was a rare one, where the Community Affairs Committee called finance and health to the same table to be berated, if that had not happened, I would never be able to discuss anything that we're talking about because it would still be covered by things that are not in the public domain. So just to be really clear about that, which emphasizes too your point, which is things happen and things continue on. So that we created a construct of distrust. We had changes in the PBAC uh chair, we moved through things, we had a change of government where a coalition always has a high level of scepticism of the bureaucracy, which is good. And uh the industry then was saying we don't want an agreement. We don't want an agreement.

Paul 21:52

Peter Dutton invite the health minister invited them to negotiate a new agreement.

Felicity 21:56

He did. He did. Um They said we're not so sure. We don't see we're going to get much out of it. So again, what had also happened during that time was a coalition government had done that great audit.

Paul 22:13

The National Commission of Audit. Another document people should go and read. To find out what finance really think about the PBS.

Felicity 22:20

Medicine on, medicine off, yes, for example. But that also recommended increasing copays.

Paul 22:28

Yes.

Felicity 22:28

And in 2013 we increased well, we proposed to increase the MBS copays for uh senior GP and PBS medicines 50 cents for a concessional and five dollars for a general increase based on the current listings. So that was a high level of savings. Once again, what does the system do? We'd also been doing the evolutions of price disclosure. Wait, I still can't believe it's not price disclosure as we understood how the system worked and where new savings could be achieved. We had the statins come off patterns, a tolver and receiver, the biggest, you know. They were one in ten scripts on the PBS, they were one in eight dollars in the PBS. And that was a transformative point in time for a chronic disease, delivering savings. But then we had to go back in because we needed more money. And we needed to continue to offset, which the system knew and understood. We were public about that, that it was that we were offsetting listings, and we needed to bank more money to continue keep spending money, new money. And that was an interesting time because obviously we did it slightly differently. We brought everyone to the table. Um, that's on the public record if you read the ANAO reports. And we also had an ANAO review going on at the time of the Fifth Community Pharmacy Agreement, looking at what had been done there or not done there. Uh so it was a fairly extraordinary time. Can I ask you a couple of questions? Of course.

Paul 23:58

I'm sorry to interrupt, but I just want to capture this point because w w when you're talking about this, you you've talked a period of five years and there's been almost no conversation about the industry. Is that you're talking about all of the internal pressures that are on this program? And I think this is a really critical point for underst for people to understand. And we'll get we'll get to it a bit later once we get to sort of more contemporary times. But now my my recollection of 2015 is that you invited everyone, all the stakeholders.

Felicity 24:28

On Valentine's Day.

Paul 24:30

Yeah, so yeah, early into early in 2015. And it was around The Minister invited them. Yeah, this there was about and it was all and sundry. So it wasn't just the industry, it was the doctor groups, patient groups.

Felicity 24:44

28 invitees, yeah.

Paul 24:45

Yeah, 28 invitees, very clever. And so this was four and a half months, effectively, before the scheduled introduction of the new community pharmacy agreement. But what was that to the extent that you can talk about it and and the minister at the time got up at the famous parliamentary dinner and said I need your help? And she was treated appallingly. Yes. But but by the time you did that what was that? That was the start of a process involving external stakeholders. But what was that sort of the end of an internal government process? Because obviously ministers can't just start consulting. They have to get authority to do that.

Felicity 25:32

You do have authority. You have um we'd had a few changes in minister. We had changes in secretary. I think there was an expectation in the sector that with everything that had been going on within the government and the changes, that everything was just going to be a rollover. So we hadn't done anything. The MAU had expired and nothing had happened. The pharmacy agreement was due to expire, and I think people thought that look, with a few months to go, no one's talked about it, no one come near us. We've changed from, you know, uh Minister Dutton to Minister Lee. Just makes sense. It's everyone expected we would roll over the agreements, in particular that pharmacy agreement for a year and then take the time to negotiate.

Paul 26:20

Big misjudgment.

Felicity 26:23

I don't think anyone understood that in having a policy branch, the thing that when you are constantly I mean, it was a we were constantly reforming, uh tweaking with what we were allowed to under our commitments. You are constantly looking at what's next, you're constantly looking at 20 years, 10 years, five years, so you don't stop up the next two that might get in the way of the vision that you need to have for stewardship of a system. So you have a book and you have people who think about these things all the time. We were ready, we had thought about it. And I think also because we had the ANAO auditing us at the same time, people just genuinely thought, let's they'll they'll just roll it over us. But we didn't. And um I think the upside of having done years of preparation and learning, some of our reforms had worked, some of them didn't. You know, for every time we did something legally, the system would adapt, you know, and that's fair. So no, we did it. And that was, I think, the thing that so places like the Guild, who are always ready, um, and like I said, we we can disagree vehemently on things a lot of the time, and we did in a negotiation, of course.

Paul 27:32

And they they had some big problems at the time because the they'd had simplified price disclosure, which they'd opposed unsuccessfully. But the big stat and pattern reduction, and for the listeners, we're talking about one and a half billion dollars that went down to 700 million, basically. That's that was a big impact on pharmacy.

Felicity 27:50

It was, and they'd done the um the big the as they take great pride in the the biggest petition that has it was ever tabled.

Paul 27:58

Bigger than the tax on beer.

Felicity 27:59

I just still want to say thank you to my um they delivered it in the back of a Ute.

Paul 28:03

Yep.

Felicity 28:04

Yeah, no. That was a pretty good one. Um to to to save the PBS from price disclosure. And that was fine. Like it it actually didn't touch the sides of the jar. Um because people finally after we understood what we were doing, the fact that every six months we were putting out how many medicines were going below the copay for general patients, we were saving general patients money, and that really impacted, really impacted. And people could see the savings and people could see the new listings.

Paul 28:34

And we were starting to get the stories of the fantastic deals the Staten companies.

Felicity 28:40

The generics were offering. We'd had the um court cases, I'm not gonna go into name the pharmaceutical companies with um the ACCC, etcetera. So we we were really seeing in it, although those the ACCC wasn't successful.

Paul 28:52

They changed the law because of that case.

Felicity 28:54

They it was shining a light on what was going on.

Paul 28:57

The judgment was the comp the relevant company, you you were baped in the woods. You'd pretty much lost your market six months before patent expiry, because the deals that were being offered.

Felicity 29:07

Yeah. So so you had that environment, and I guess you do when when you are negotiating an agreement, a commitment to spend new money, I know things are slightly different these days with the the the um freedom that the health minister's being given to reallocate funds that he saves within the portfolio. But to go and actually attack a demand-driven programme and new listings and new savings, these kind of agreements, because also if the government is going to potentially enter into any form of agreement, which always makes the lawyers stressed because you can you can't bind another agreement, uh another government.

Paul 29:42

But it's generally considered bad practice.

Felicity 29:45

It is. And so you'll always get legal advice from the lawyer saying, you shouldn't be doing this. We're like, yeah, but we're doing it, and it's entirely up to a government that comes in that says no. Um but we started the negotiations, you are doing it quite clearly, you have you are given a remit of scope and things that you might be allowed to consider. Um, you are as the department constantly putting forward what you think you could put forward as initiatives, both savings and spends, um, and what you're trying to achieve from from the process. When you are going into a budget process, what you can also be caught in is that you are part of a general government sector. You have to remember that you're not just the PBS, you're also the NDSS, you're also the MBS, you are everything. You are health, you are disability now, you are aging, and you are general government sector. So just because I save something doesn't mean it exclusively goes exclusively goes back into my program, but also it doesn't mean that there aren't other areas of the department that need funding for programs, which is actually what we're seeing now. That that money that is in the portfolio budget statement for health today, which says we've done some rounding on future savings that we think won't meet the expenditure. So we're banking that and we're using it to put it in other places as we go.

Paul 31:05

Unbelievable.

Felicity 31:06

It is.

Paul 31:06

I mean, you know, in some respects, full credit for getting it.

Felicity 31:10

Um it it's great.

Paul 31:12

But that's let me let me let me uh ask you a couple of questions. 2015, that that negotiation was febrile. I mean, the guild sort of got to work, the GMIA for the first time in their history, because the GMIA has only been around since sort of 02-03. They sort of negotiated, they decided to come to the table for the first time in their history, and who knew who knew that would actually go well for them? Uh Medicines Australia didn't. But what you're describing, and I want to constantly come back to this, is that you're describing I mean, in a sense that that the the the Industry Association made itself irrelevant in that first six months because by the time they were given an opportunity to participate, you already had what you needed to deliver, and it only increased over time, obviously, but you'd already gone through the processes and brought to the table, well, this is what I need to do, and these are the way this is the way we're going to do it.

Felicity 32:14

Two things on that. First of all, you're right, I haven't spoken much about the industry. In those five years, we spent a lot of time with the industry. So whether it was individually with companies, uh, individually with uh industry groups, trying to understand work with them. Because the positional power, traditionally, it's the Guild and Medicines Australia who had the greatest opportunity to walk in my door, walk into my teams at all times. They were entrenched in meetings that give them continual access to tell us what's happening and for us to tell them and to be talking about things, as well as the crises that come up for their individual members, you know, someone not selling a PBS medicine through a PBS pharmacy and a drug company having a problem with a risk share arrangement. We spent a lot of time trying to understand everybody else who worked in the sector that weren't the top tier, the GMYAs of the world, who spent a lot of time and full credit to their CEO at the time and others who really and then their board members trying to understand what mistake they had made in 2010 and how to be ready. How to actually something would come again, and they wanted a seat at a table.

Paul 33:29

They'd learnt the lesson.

Felicity 33:30

You had the Pharmaceutical Society of Australia who equally spent a lot of time with us, um, a lot of time and investment from us to put in them, and then when a negotiation started, they just walked away. Um I were at, well, that's that's helpful. We spent time with uh the wholesalers who again spent years listening, understanding, and walked away during a negotiation. And that that was interesting. So how you play does tend to to bring about some ramifications for you. But getting back to what you're saying is that yes, I'm coming to a table. The second point, do I have a very firm view on everything I think I can achieve and that I need to do to actually make the PBS accessible and sustainable? Let it grow, but let it uh, you know, stop paying too much for things that I think I'm overpaying for. Yes, I do have ideas on these things about what I think I might do. But I'm also they they aren't just my ideas. They are ideas that I have heard from the sector from those previous five years. When people talk about things to me, when they talk about what they see happening in the sector, what they talk about is of a concern to them. So I'm not just looking at how can I save money, I'm also listening to, well, where where do I think I need to invest money? So, you know, the guild knew that I was going to walk into the room and want to discuss residential medication management reviews because I said, I keep paying for these things, safety and quality commission, what's going on, how do we do it better? Those kind of things. So that's what you're going into, and you change. You may have ideas, but you do change based on the feedback that you get. And you do understand when you are negotiating what is of benefit to one party over another. So the package was with opportunity comes responsibility. If you want me to invest in your space, how are you going to help me achieve something else to do that?

Paul 35:22

Yeah, I think that's another important point. And I and I and I want to keep reflecting on the on the key messages here, which is that these agreements are the product of something. They didn't come out of nowhere.

Felicity 35:34

No.

Paul 35:35

They they were the product of a series of events in the early part of the century, which isn't that long ago really. And that they've become an institutionalized part of the framework. And that there's a lot of internal discussions within government. There's a lot of there's a lot of things that are not transparent to the relevant organisations. A lot of stuff going on inside government that they don't see and they they can't recognise. And they're not privy to, and you've got to assume that's going on today. But also that uh with opportunity comes responsibility. Is that if you don't come to the table with a willingness to help the government on its priorities, why would you expect the government to assist with yours?

Felicity 36:23

Yeah, and and how do you expect me to fund it? Because one of the things that was really important at this time was we still had the the copies sitting over our heads.

Paul 36:31

Yeah, so you were still on the hook for that.

Felicity 36:33

Not only we're still on the hook for it, I mean it's one of the things where you're told that that's the outcome that you didn't even put up as a measure. And you know, this this is not going to work, these medicines are already too expensive. Yes.

Paul 36:47

Um Well, it reflected a view which has prevailed for most of the history of this program, where the government believes it's too easy for people to get scripts, so you've got to make them expensive.

Felicity 36:59

Partially. I I I actually I I agree with you that that's how it all started. I don't see that as how it was during my time. It was we have to find the money from somewhere. So if we put this little bit in, people are still getting great value for money. If you're paying back then $6.50 for a $400 medicine and I ask you to pay seven, you're still getting great value for money. Likewise, if you're paying $35 and I ask you to pay $40 for a $700 medicine, you're still getting great value for money. As opposed to what the broader issue was, and this is where you see the change, it is but are we paying too much for medicines? Are we, once things sit there and that the television? So the first time there's a plasma TV and it costs $5,000. But by the time I've got the fifth plasma TV, they're down to $1,000. And now we don't even have plasma TVs, really. But by the time I get the different sizes and variations, that price is blummeting down. And the system was looking for if it's off patent, if it's been on for a while, if it's the fifth biological DMA for the same indication, why am I not getting things cheaper as opposed to charging a patient more?

Paul 38:14

Yeah, so there was, and I just want to keep bringing it back. So, in in a sense, that the agreements were tacit recognition by government, even though they are bad practice, because no current government likes to bind a future government, but but they do they do do it at times. And let's let's face it, no future government is bound by these what are informal agreements between a health minister and a pharmaceutical industry association. But but what they are is tacit recognition from government that yes, we accept that you need some certainty. You want to that that's important for your investment, for your operation and Australia viability, we accept that. However, you need to pay a premium for that. And that's kind of what they are strategically, and that came out of what had happened prior to that. And I think it's hard to argue intellectually, but it was a very important strategic tool for the government, and in return the industry we're offered will give you five years of peace.

Felicity 39:23

Yeah, I I actually find that one that was the most extraordinary for me, which is that in the end the research sector walked away not because of price cuts in a fun, but because of biosiminers.

Paul 39:37

Well, and we've talked about that, and it was just it was just it was just a crazy, a crazy time. But again, the the dynamic here is is is really important. The government is we're gonna give you it's the opportunity but responsibility point that you made. We're gonna give you this this piece. And this is what the current government has done. They've given the industry some peace. And now the government is saying, right, if you want outcomes on the HTA review, then you have to come to the table on on what matters to us. And Mark Butler made that point in this year's post-budget address at the Medicines Australia breakfast. You haven't been offsetting yourself for years. And and so that that I think is an important dynamic. But we didn't they walked away from that agreement in 2015.

Felicity 40:24

The GMIA had an agreement, but then 18 months later some people in the sector encourages them to go back to the table.

Paul 40:32

Well, it it may have been the case that the government had a problem. It needed to find some money, and it was partially related to the rebates, the rapid emergence of rebates. And someone may have advised someone that they really regret not signing that agreement in 2015, and they'll pretty much do anything to sign an agreement. So sure enough, they negotiated a new five year agreement in 2017.