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Drug companies pressure Govt to review FTA

Australian Broadcasting Corporation
Broadcast: 03/01/2006

Drug companies pressure Govt to review FTA

Reporter: Jeremy Thompson

MAXINE McKEW: Well, the debate over the cost of medicines in Australia took a new twist today, with Acting Prime Minister Mark Vaile declaring the Government will have a second look at provisions within the Free Trade Agreement with the United States. They’re provisions that were specifically designed to keep the cost of pharmaceuticals down. At present, large fines can be imposed on drug companies that seek to extend the life of patents by making small changes in the drug and applying for a new patent. Now, this practice is referred to as ’evergreening’ and it means the patent never expires. It also means that cheaper generic drugs never make it to market. Critics argue that if evergreening is not embargoed, consumers will be paying much, much more for their medicines, but the Government says there’s no risk of that. Jeremy Thompson reports.

JEREMY THOMPSON: It was mid-2004 and the political landscape was so much different then. The Government did not control the Senate and to get the free trade agreement with the United States through it had to dance with the devil on prescription drugs.

MARK LATHAM, FORMER OPPOSITION LEADER (AUGUST 2004): Labor’s amendments will ensure that where a court determines that part or all of a patent claim is invalid and legal action has been used to unreasonably delay a generic drug coming onto the market, that is, to the disadvantage of Australian consumers, then heavy penalties and damages will apply.

JEREMY THOMPSON: The amendments, perhaps the most significant legacy of Mark Latham’s fleeting leadership, were passed with Government support. They had the effect of banning so-called ’evergreening’, subtle changes made to medicines by drug companies to ensure their 20-year patents never expire.

DR TOM FAUNCE, LAW FACULTY, ANU: They stick two drugs together in the same capsule, they cook up a new use for a drug, they change the colour of the drug, the delivery system. There’s thousands of different ways. Each drug now comes encrusted with about 50 or 60 or sometimes 100 different patents, all designed to prolong its capacity to earn that company money.

JEREMY THOMPSON: Dr Tom Faunce of the Australian National University’s law faculty is researching the impact of the free trade agreement on Australia’s medicine policy. The Pharmaceutical Benefit’s Scheme delivers some of the cheapest drugs in the world to Australians. Dr Faunce says that now could be under threat.

DR TOM FAUNCE: The anti-evergreening amendments send a very important signal about what Australia’s signals were in relation to the trade deal and the PBS, that these technical changes wouldn’t lead to high medicines prices.

JEREMY THOMPSON: In the other corner are the drug companies they’ve long been leery of the Latham amendments, but insist that evergreening is a foreign problem, that it doesn’t happen in Australia.

KEIRAN SCHNEEMAN, MEDICINES AUSTRALIA: It’s around the issue of uncertainty. It’s the message that’s being sent by the legislation. It’s the fact that our industry is being picked on and that if it were able to evergreen, that it could potentially face multimillion-dollar fines. That level of uncertainty will discourage new investment in biotech and in pharmaceuticals and that’s undesirable and that’s something that we want to ensure we protect.

DR TOM FAUNCE: We’ve found absolutely no evidence that these anti-evergreening amendments are having any detrimental effect on the pharmaceutical industry.

JEREMY THOMPSON: Pharmaceutical companies have argued hard that they want the Latham amendments dropped not because they want to introduce evergreening in Australia but that the fear of the fines imposed for doing so discourages investment. It appears to be an argument the Government has heeded. It has asked a committee of officials, the FTA Medicines Working Group, to see what effect dropping the amendments would have.

MARK VAILE, ACTING PRIME MINISTER: As we are coming up to the 12-month anniversary of the start of the US FTA and there’s an agreed review mechanism, we will go through that review process. Nothing should be excluded from that review, nothing should be excluded from discussion.

JEREMY THOMPSON: Critics, though, dismiss the working group as a gaggle of inexpert bureaucrats.

DR TOM FAUNCE: If these sorts of changes need to be made, they need to be looked at by scientific experts. These are representatives from health departments and so forth who have their riding instructions from governments.

JEREMY THOMPSON: Acting Prime Minister Mark Vaile denies this and says it will be up to the drug companies to prove they’ve been financially damaged by the Latham amendments before they will be removed. Even the pharmaceutical companies admit this will be quite difficult.

KEIRAN SCHNEEMAN: It is going to be a challenge for us to demonstrate unequivocally that it does impact on the industry. But the point we will make to the Australian Government and the point that we have already made to the Australian Government is if you have an uncertain investment environment and you have other environments around the world that are more certain and more attractive, then how can we ensure that investments come to Australia?

JEREMY THOMPSON: And the drug companies have some powerful allies. To say these generous political donors have the ear of the United States Government would be an understatement and Mr Vaile admits to coming under some pressure from US trade representative Rob Portman.

MARK VAILE: I’ve had one or two discussions with Rob Portman, the US Trade Ambassador, of a general nature in the bilateral relationship around the FTA. Pharmaceuticals have been raised in the context of that discussion but not in any specific way.

JENNY MACKLIN, DEPUTY OPPOSITION LEADER: Well, Mark Vaile is basically opening this debate up now. What Labor did was move amendments to the Free Trade Agreement to make sure that medicines here in Australia are available at the cheapest price. We’ll be making sure that we continue to put pressure on the Government so that we don’t have the Howard Government buckling to the pressure coming from the US drug companies.

JEREMY THOMPSON: But the mantra from the Government has not changed since the FTA was debated so vigorously two years ago and it’s a message the ageing electorate would want to hear. The PBS is sacrosanct and cheap drugs well always be available.

MARK VAILE: We are not going to undermine nor weaken the Pharmaceutical Benefits Scheme in Australia. In fact, we’ve done everything we can to strengthen it to make sure that it is sustainable into the future to ensure that all Australians can get access to medicines at an affordable price.

DR TOM FAUNCE: The Government has been holding the line against the pharmaceutical companies and you only start to see this sort of pressure when it’s actually getting to them. The pharmaceutical companies don’t like what the Government has been doing. Are they going to withdraw from Australia? Of course not. There is no way that they would pull out of Australia and let competitors come in.

JEREMY THOMPSON: This is the first shot in what is likely to be a long war. Powerful drug companies think Australia regulates their prices harshly and downwards. The electorate pushes hard the other way for cheap medicines. The Government finds itself, as they say, between a rock and a hard place.

MAXINE McKEW: Jeremy Thompson reporting there.

 source: ABC