The 2022 expiry of the current anniversary statutory price reductions was considered a key outcome for the industry.
Their legislated expiry in mid-2022 simply removes their impact from PBS pricing. The intention was to renegotiate the reductions and include them as a new Budget savings measure. They would be a relatively easy give for the industry in any negotiation with the government having to re-legislate the reductions before they expire.
The government may have already counted the financial impact of current statutory price reductions beyond their current expiry date. It would be hidden in the Budget's contingency reserve as as 'decision taken but not yet announced'.
They could have even included the impact of the new statutory price reduction framework in the contingency reserve.
In both scenarios, the government could have made a decision to adopt the related saving and rightly say they are not in a Budget measure - because they are hidden in the contingency reserve and not announced as a measure in Budget Paper 2 (the Budget paper that includes announced measures).
Yet in both scenarios, the government has made a decision to bank the saving - the decision is 'in the Budget' but not yet announced 'in a Budget measure'.
These are very different things but the impact is the same - the saving is in the Budget. It is a very common feature of government Budgets.
The language is very important.
A saving may not be announced or referred to in a measure but it can still be in the Budget.
The Department's clarification of this issue was as if it was responding to the question of whether there are any COVID-19 cases in Victoria with the answer there are none in Ballarat - there are still cases in Victoria.
The government's Budget process is very formal.
Any government department, including health, cannot just add measures and 'assumed' savings to the Budget.
They must secure Cabinet approval. This requires the Department of Health to develop and submit a 'new policy proposal'. In the case of a PBS saving like new statutory price reductions, this includes detailed modelling of the Budget impact on individual medicines.
Minister Hunt would then take the proposal through the Budget process.
It could be included in the Budget - hidden in the contingency reserve - but not included as an announced Budget measure.
Is it possible the industry's most senior leaders have been negotiating extensions to existing agreements, including a new PBS pricing framework, while the minister and his officials have developed and taken a related saving proposal through the Budget process?
The industry needs to contemplate this very probable reality.
In fact, arguably an even worse reality is that the industry would still be none the wiser had one official not let it slip at Senate Estimates on Monday.
Without that slip, the industry would be preparing to start a detailed negotiation for new agreements without knowing the government had already decided and budgeted the impact of new savings that in theory are still to be finalised - and decided to withhold that information.
The industry has every right to be very annoyed at what is a very disappointing breach of trust.
This is significant because the Department of Health is now 'on the hook' for this saving. This reality significantly frames its approach to the negotiation - it has already committed the saving.
The industry would be right to ask why the government did not tell the industry? When did it plan to tell the industry? How can the industry now negotiate with the government expecting it to act in good faith? And, most importantly, what else has the government decided in the Budget process and withheld from the industry?
