An agreement is worth the price


The research-based sector might be frustrated at the thought of having to offer up a new round of savings but a strategic agreement is worth the price.

The failure to secure an agreement in 2015 left the sector horribly exposed to the risk of new savings - not every few years but every year, particularly given government's dire fiscal circumstances and the existing hole in its health budget.

The reality is the sector has this opportunity, just two years after the disaster of 2015, because it was facing the inevitable in this year's Budget. In the end, government can just take whatever it wants so why not secure some protection? The sector can probably rest knowing the final savings figure will probably be significantly less than 2015.

Medicines Australia and the Turnbull government have used that inevitability as the basis to negotiate towards a multi-year agreement that provides a level of certainty over the operating environment. In the end, the innate pragmatism of the sector, which has a record of being able to work constructively with government, regardless of who is in office, has won the day - no advice required from an advisory council to know this is a good idea.

Failure to secure this agreement would just make the prospect of new pricing assaults on the PBS an annual reality. An agreement would buy the sector some time, certainty and stability, and an opportunity to focus on its long-term strategic objectives. 

Some in the sector might be negative. Some might recall the experience of the 2010 Memorandum of Understanding (MoU) to suggest governments do not stick with these agreements. 

They are simply wrong.

The MoU delayed the introduction of simplified price disclosure, and who knows what else, saving the sector billions of dollars. Those who use post-market reviews as an example of the former government breaching the MoU forget Medicines Australia backed the Budget in which they were announced and funded, expressly congratulating the then government for adhering to its MoU commitments.

The real value of a strategic agreement is as an 'insurance policy'.

An agreement will not prevent further change but will greatly restrict government's capacity to act unilaterally. Anyone looking for evidence of this, and how an association can leverage this insurance, might want to keep a close watch on how the Generic and Biosimilar Medicines Association leverages its own strategic agreement in the coming weeks.