The Medicine Lobby. Vested interests win again. John Menadue

Mar 21, 2013

Professor Stephen Duckett of the Grattan Institute has just reported that ‘Australians are paying too much for prescription drugs. The cost of this overpayment is at least $1.3 p.a.’

This is another example of the power of vested interests in the health sector and their ability to extract economic rents from the community. The other privileged players in the health sector include doctors, particularly specialists, and the private health insurance industry that extracts a $3.5 billion annual subsidy from the taxpayer.

The Minister for Health and her department spend much of their time placating and appeasing the vested interests in the health sector rather than developing policies and administering programs for the benefit of the community.

The Pricing Authority for pharmaceuticals makes recommendations to the Minister for Health. The authority is a non-statutory body established by the Minister. Of the six members of the committee, two are industry lobbyists from Medicines Australia and the Generic Medicines Industry Authority. It is not surprising with a headstart like that that the pharmaceutical sector is able to secure the sorts of privileges that Stephen Duckett has outlined.

The Australian Pharmacy Guild is also infamous in the privileges it extracts from Goverments. New pharmacies in urban areas must be at least 1.5 km from each other. One consequence of this restriction of competition agreed to by APG and Australian governments is that the number of community pharmacies has remained substantially unchanged at 5,000 since 1993, despite large increases in population and PBS prescriptions. The consumer organisation, Choice, in 2005 commissioned a study by the Allan Consulting Group on these location rules. Choice commented that ‘the location rules provide little consumer benefit and only advantage existing pharmacy operators’. The PGA has also successfully barred pharmacies from operating in supermarkets. Australians don’t have a great love for the Coles/Woolworths oligopoly but they would love to see more competition.

Canberra has over 900 full time lobbyists, many in the health field. They are seriously undermining good government Their power is exaggerated but politicians fall over themselves to oblige them.

The ministerial/departmental model in health is not serving us well. It provides a fertile hunting ground for vested interests – the health  providers- who hold all the important cards. They cling to the Department of Health like limpets. Even enquiries like the National Health and Hospital Reform Commission, are invariably timid and anxious to appease sectional interests. This Commission was chaired by a senior executive of BUPA.  After six years of the Rudd/Gillard Governments there is little to show in real health reform. The muddle continues.. But the sectional interests must be happy that their. position is secure.

Because of the failure of health governance to counter the lobbyists and sectional interests in health, I have proposed on many occasions that the Commonwealth Government should establish a permanent, independent, professional and community-based statutory authority, an Australian Health Commission, similar to the Reserve Bank in the monetary field. The Reserve Bank’s governance structure has made it almost impervious to lobbying. It is respected for its independence and professionalism. Just as the Reserve Bank is subject to guidelines determined by the Government, so an Australian Health Commission should operate within guidelines determined by the Government.

The power of vested interests in health must be tackled. The Grattan Report provides yet another example of why this must be done.

John Menadue

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