Conversations about a trade conflict between the United States and Australia about the costs of medicines have undoubtedly let many Australians scratch their heads.
With all this talk about attacks on the pharmaceutical benefits regulation (PBS) and the prospect of a rate for Australian medicines that enter the US, many will wonder about two important issues.
Does this mean that the price of medicines will rise? And can a fall-out of the trade conflict lead to drug deficits?
Let's see how this could play in our own country.
What is the pharmaceutical benefit schedule?
The PBS offers Australians subsidized medicines, making the costs for consumers low.
To receive the subsidy from the Australian taxpayers, all pharmaceutical companies (not only American) must submit evidence to the Pharmaceutical Benefits Advisory Committee (PBAC) that assesses whether the drug is cost -effective compared to existing alternatives.
This process ensures that Australian taxpayers get money for drugs and that the government does not waste any money on drugs that are too expensive for the benefits they offer.
With limited resources, the federal government must decide which drugs to subsidize.
Donald Trump imposes a series of rates and non-tariff barriers at the entry into the US with Australian steel and aluminum hit and agriculture and medicines then
The prospect of a rate on Australian medicines that enter the US raises two questions: Does this mean that the price of medicines will rise? And can this dispute lead to drug deficits?
Our center has a contract with the federal government to revise submissions at the PBAC. As soon as the PBAC makes its recommendations to state a medicine on the PBS, the federal government then starts bilateral (one in one) negotiations with each pharmaceutical companies about the price they charge in Australia.
These price negotiations often include confidential discounts and discounts, which can cause delays in the list on the PBS and for people they have at the subsidized rate.
Patients pay a fixed CO payment under the PBS, regardless of the negotiated price. That is currently $ 31.60 for most PBS medicines, or $ 7.70 with a concession card. The Australian government takes up the rest of the costs.
Can the US influence the price for consumers?
The US has long argued that the PBS does not adequately recognize the value of developing innovative pharmaceutical products, because it focuses on demonstrating medicines where value offers money.
American pharmaceutical companies recently called the PBS 'coarse and discriminatory'.
When they negotiate with the Australian government, they want to reach higher prices that they say they reflect the costs of developing these medicines in the first place. They know that higher prices increase their profit.
The PBS acts to keep the prices low and therefore benefits the consumer. Price negotiations are carried out between the federal government and each pharmaceutical company individually for each medicine.
It is therefore difficult to see how the US government could influence these specific negotiations between a private and often worldwide pharmaceutical company and a sovereign government.
In any case, the price of the price of the price is determined by the amount of the subsidy from the federal government. Whether the costs of a medicine for the Australian government are $ 50 or $ 5,000, consumers still pay $ 31.60 (or $ 7.70 with a concession card).
The Pharmaceutical Benefits Advisory Committee (PBAC) assesses whether the medicines are cost effective compared to existing alternatives
It is also difficult to see how imposing rates for Australian export of medicines to the US, as is marked, could influence the process. That is unless these issues are entangled in a larger trade or political deal.
Both Labor and the Coalition have come out to defend the PBS and to say that it would not be a negotiating ship in a trade war.
What about drug rates?
Then there is the potential for rates for Australian pharmaceutical products that are exported to the US. In 2023, Australia exported US $ 1.06 billion to the US, which represents 40 percent of its total pharmaceutical exports of approximately US $ 2.6 billion.
If Trump imposes the rates, this increases the prices of Australian medicines that are sold in the US compared to drugs manufactured by the US.
Anthony Albanese has tried to secure exemptions for Australia, but has not been successful
For Australian patented medicines where there are no alternatives, this would harm us consumers whose only option would be to pay higher prices and to consume less.
For other medicines, the demand for medicines that have been made in the US would increase in support of local production.
The demand for medicines produced in Australia would fall (how much uncertain), which means that the Australian manufacturers create stimulans to become more efficient.
This may mean that production is moved to countries with lower rates in the long term in the long term or to increase marketing efforts in other countries.
But this would not necessarily create new shortages of medicines in Australia.
This is because about 90 percent of the pharmaceutical products that we use in Australia are manufactured abroad instead of being manufactured in our own country.
What if Australia took revenge at his own rates for imported medicines in the US? About 21 percent of our imported medicines come from the US.
Only then can rates influence the price negotiations for the list on the PBS.
This would be a bad idea for the access of Australians to innovative patented drugs.
This is because there would be no other alternatives and prices in negotiations would rise, so limitations should be used in use and access.
It is difficult to know how these trade negotiations will take place and we will probably hear more about them in the coming weeks.
In general, however, it is difficult to see how the US can influence the prices that Australians pay for medicines, especially with the recent announcement before the elections of further reductions of drug costs for patients up to $ 25.
