Australian Pharma Industry Says PBS Wait Times Greater Threat Than US Tariff Hit
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Australia’s pharmaceutical industry warned Wednesday that delays in listing medicines on the Pharmaceutical Benefits Scheme pose a greater threat to patients than newly announced US tariffs, as Washington imposed a 100% levy on imported branded drugs effective immediately.
Medicines Australia CEO Liz de Somer told ABC News the country’s peak pharmaceutical body is urging the government to prioritize PBS reform over lobbying against the tariffs, arguing that Australia’s decades-old medicine subsidy system has failed to keep pace with modern innovation.
“I think what I would be urging the prime minister to be focusing on is some of those other more harmful proposals that may actually impact Australians and Australian patients’ access to medicines,” de Somer said, referring to Prime Minister Anthony Albanese’s scheduled meeting with US President Donald Trump next month.
The United States announced the tariff Wednesday targeting branded or patented pharmaceutical products, potentially affecting Australia’s $2.2 billion pharmaceutical export market to America. However, major Australian companies including CSL have indicated they expect no material impact from the measure.
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Exemptions Limit Impact
De Somer said the tariff includes key exemptions that will protect most Australian pharmaceutical exports, particularly for companies building or planning manufacturing facilities in the United States.
“The key exemption that seems to be implied is whether there is construction occurring or breaking ground on new manufacturing facilities in the US. And we have heard a lot of companies making such announcements over recent months,” she said.
CSL, Australia’s largest pharmaceutical company, confirmed Wednesday it anticipates no material impact from the tariff. The biotechnology giant operates significant manufacturing operations in the United States.
Industry estimates suggest 80% to 90% of Australia’s pharmaceutical exports to America are held by a small number of large manufacturers who already maintain substantial US footprints, potentially qualifying them for exemptions.
“That number has been reported before, and I would imagine that it’s reasonably accurate,” de Somer said. “That is certainly what has been reported, that 80 to 90% is held by a very small number of manufacturers who are probably already have large footprints in the US.”
Smaller Companies Face Uncertainty
While major exporters appear shielded, de Somer acknowledged smaller pharmaceutical operations may face difficult decisions about their Australian operations.
“I think I’ve said before there are many sort of smaller startup companies who may be starting manufacturing in Australia with an intention to break into the US market and they will be assessing the impact of this announcement on their operations in Australia, their perhaps ability to diversify to other markets or indeed whether they may need to shift to the US,” she said.
These smaller companies will need more information before determining whether to maintain Australian manufacturing, seek alternative export markets or relocate production to the United States.
“A lot more information needs to come down the pipeline before they can make those kind of decisions,” de Somer said.
The uncertainty facing smaller pharmaceutical manufacturers raises concerns about potential job losses and reduced investment in Australia’s biotechnology sector, which has grown significantly in recent years.
PBS Reform Urgency
Despite the tariff announcement, de Somer directed attention to what she described as more pressing threats to Australian patients: delays in accessing new medicines through the PBS.
“I think that we need to be really conscious that Australia has not invested sufficiently in several decades into the PBS, and we need to be investing in our PBS in order to protect it,” she said.
The industry leader said protection of the PBS requires “keeping innovative, patented, branded, transformational changes available to Australian patients.”
De Somer pointed to government-initiated reviews confirming excessive wait times for medicine listings.
“It’s taking too long. The government’s own initiated review shows that it takes too long,” she said.
Low Prices Deterring Companies
Australia’s success in negotiating low pharmaceutical prices through the PBS has created unintended consequences, according to de Somer, with some companies delaying or avoiding the Australian market entirely.
“Australia pays some of the lowest prices in the world. And so those measures that President Trump is trying to implement to reduce prices of pharmaceuticals in the US by benchmarking to Australian prices is actually unaffordable for companies to be able to operate at those low, low prices,” she said.
This pricing structure has led pharmaceutical companies to postpone launching new medicines in Australia, further extending patient wait times.
“Decisions will be taken and are already being taken to delay launching new medicines in Australia and that will further exacerbate delays for patients to get access to new medicines,” de Somer said.
The Trump administration has previously expressed interest in benchmarking US pharmaceutical prices to those paid by other developed nations, including Australia, as part of efforts to reduce American drug costs.
Government Commitment
The Australian government has stated its determination to protect and maintain the PBS, a cornerstone of the country’s Medicare system providing subsidized access to essential medicines.
De Somer expressed full support for preserving the PBS while emphasizing the need for modernization.
“Absolutely. The PBS is a cornerstone of our Medicare system and we support it 100%. However, it has not kept pace with science, innovation and discovery and needs to be able to keep pace,” she said.
The system has not undergone major reform in more than three decades, according to the industry body.
“It hasn’t been reformed in over 30 years. And we already have a very comprehensive review that shows that we need to update and create a fair and fit for purpose PBS,” de Somer said.
Recommended Reforms
A comprehensive review has produced 50 recommendations for PBS reform, with several key changes needed to recognize the value of medical innovation, according to de Somer.
“Some of the key reforms are about how do we recognize the value of innovation. At the moment, we have a system that compares brand new transformative changes to the very cheap older medicines and does not want to pay more than those very cheap old medicines,” she said.
The current valuation system fails to account for treatments that cure disease, reduce side effects or enable patients to remain productive and employed.
“Therefore, it completely undervalues some of those incremental and transformative changes that we find with new treatments that may cure disease or reduce side effects or enable you to stay productive and in the workplace and contributing to society,” de Somer said.
The industry is calling for updated valuation methods that reflect benefits society values beyond simple cost comparisons.
“Those valuations of innovation need to be updated to take account of things that we value in our society,” she said.
Implementation Urgency
De Somer urged the government to examine implementation measures and increase PBS investment to ensure the system remains fit for purpose.
“The government needs to look at those implementation measures that they can take and invest more in the PBS to ensure that it is fit for purpose and that we can get access to new innovations. And then Australia remains an attractive destination for those products to come here,” she said.
Without reforms, pharmaceutical companies may increasingly view Australia as an unattractive market for launching new medicines, potentially leaving patients without access to cutting-edge treatments available in other developed nations.
Tariff Concerns Remain
Despite prioritizing PBS reform, de Somer acknowledged concern about the magnitude of the US tariff announcement and its potential impact on Australian pharmaceutical exports.
“Obviously I’m concerned with such a, you know, the magnitude of such an announcement and its impact on Australian companies that export to the US, of course,” she said.
However, she maintained her focus on domestic patient access issues.
“I think I’m actually focusing attention on what will impact Australian patients here in Australia,” de Somer said.
Prime Minister’s Upcoming Meeting
Albanese is scheduled to meet with Trump next month, presenting an opportunity to discuss trade issues including the pharmaceutical tariff. However, Medicines Australia has indicated it prefers the Prime Minister prioritize other matters affecting Australian patient access to medicines.
The meeting comes amid broader trade tensions between the United States and trading partners, with the Trump administration employing tariffs as a tool to encourage domestic manufacturing and address what it views as unfair trade practices.
Industry Outlook
The pharmaceutical industry faces dual challenges: navigating potential tariff impacts while pushing for domestic policy reforms to improve patient access to new medicines.
For larger Australian pharmaceutical companies with established US operations, the tariff appears manageable through existing exemptions. Smaller companies face greater uncertainty as they await details on implementation and potential relief mechanisms.
The more significant long-term challenge, according to industry representatives, remains reforming the PBS to ensure Australian patients maintain access to innovative medicines while preserving the system’s affordability and universal coverage principles.
As pharmaceutical science advances rapidly, with new treatments for previously untreatable conditions emerging regularly, the tension between cost control and access to innovation has intensified pressure on the three-decade-old PBS framework.
The government has not yet announced a timeline for implementing recommendations from the PBS review or indicated the level of additional investment it will commit to modernizing the system.
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