A preliminary analysis of the pharmaceutical provisions in the Australia-United States Free Trade Agreement on prescription medicines in Australia

In January 2005 Australia implemented the Australia-United States Free Trade Agreement (AUSFTA). The AUSFTA was a historic document because it laid out a closer trading association between Australia and its close ally, the United States (US). The Agreement was generally welcomed in both countries but it contained provisions that were controversial, perhaps none more so than those covering pharmaceuticals. In Australia there was deep concern over the effects of these provisions on the Pharmaceutical Benefits Scheme (PBS). A Senate Committee investigating the likely impact of the AUSFTA was apprehensive that the provisions would result in the PBS paying higher prices for some medicines. The many outcomes from the research reported in this thesis are preliminary but amongst them, three stood out. First, the AUSFTA instituted a number of small but significant changes to Australian pharmaceutical policies and processes. Some changes, around transparency and listing times, were positive while others, such as sponsor hearings before the PBAC, will probably have limited negative impact. Second, there is now a need to consider the AUSFTA commitments when Australian health policy is reassessed in the future, which will now make Australia’s regulatory processes more complex. Third, it is argued that the AUSFTA may have had input into major reforms of the Australian PBS. These reforms delivered on an outcome that had been sought by the US: a weakening of reference pricing as used by the Australian PBS. The benefit from the change to reference pricing for Australia is unclear, but the PBS is now more vulnerable to higher prices for new medicines in the future.