Australia's former most senior bureaucrat says 'reform' is the most overused word in Canberra, that the PBS has regrettably become a transactional area of policy, and that difficult decisions might be required as the country's fiscal position deteriorates.
Speaking at last week]'s BPD conference, Dr Ian Watt AC, who participated in and led multiple major reform processes over several decades, said he considers 'reform' to be changes that "bring sustainable and better outcomes for Australia".
Using climate and the drive to decarbonise the economy as an example, Dr Watt said the multiple policies and changes underway "fall under the rubric of that major reform", reflecting a broad government ambition.
He said political leadership is the primary ingredient because it forces the rest of the government to focus on the desired reform.
"It is harder today," he said. "Stakeholders are busier, consumers are more aware of your actions. There's less of a national consensus...At the end of the day, leaders can galvanise change if you have to make change."
Dr Watt said that health is and has become increasingly complex and is the second biggest function of the government.
"The department has to do health and age care. Both of them are extremely important to governments. Both of them are complex, and both of them are big. Both of them cost a lot of money. And by the way, doing two things is much, much, much harder than doing one.
"It means you have to be careful. Some portfolios are what I'd call demand-driven. Health is demand-driven, but there's a fair bit of doing more or doing less in health. Health has some discretion. So, if you're thinking about the portfolio, there is scope to do things in the portfolio, more or less."
On the PBS, Dr Watt said the industry is a business that engages in essential transactions with the government but has become very transactional.
"I looked at the Budget papers and thought people had forgotten about the pharmaceutical sector. There was plenty of money. However, when I looked at the health department's fact sheet, I found you buried in the right-hand bottom corner.
"I would have thought you would get more prominence than that for $3.4 billion over five years. Yes, it was mentioned, but there was no excitement about the sector. Going back to the 1980s and 1990s, there was much more government interest in the sector.
"You are seen as doing great scientific research. You are seen as being a manufacturer of things we want...So I just wondered, you put a value proposition to the government, and you put it every day. What value proposition do you put? What value proposition do you want to put?"
Dr Watt said, "I don't want to say you use the term widget. I don't want to say that the widget doesn't matter. It does matter enormously, but what else is there in the sector that you would want to say to the government? This is why we should be valued. This is why you need to think about us. Every other sector does. Well, no, most other sectors do, and it might only be 10 per cent of your story, but it's a valuable 10 per cent, and I'd certainly be thinking of that."
He said that Australia is entering a period when the government must choose between wider deficits and fiscal consolidation.
"Now, how does that affect you? Well, if I go back to my role as finance secretary when you look at the PBS program, it is the ninth largest expense program in the Australian government. It is illustrative to look at what's above and below. This is the most unscientific process I can think of, but don't think budgets are entirely scientific. What's above it? Financial support for people with disabilities. The disability support pension, right? That's not easy to do anything about, is it?
"Under it is number ten, which, believe it or not, is some financial support for non-government schools. Maybe if I was still finance secretary. I would spend more time thinking about number nine, just looking at that clutch of three.
"When you look at big expenses in a budget, they're all important. Every one of them is important. None of them are easy, some are harder than others. But I'd certainly be thinking of number nine. I'd be thinking of other things as well. I guess I would say if I was advising you and I'm not, this is free, and always be careful of free advice. I would be thinking seriously about what you want. If there were to be a period of change in the PBS that made it where the government tried to take a significant saving out of the PBS, what's best for us? Nothing may be best for you, but you might not have that choice. What system might work best for us? How will we deal with it?
"There might come a time when new government after the election, you've got to sit down with government and make a deal. What do we want?"
Dr Watt continued, "I think you've got to start thinking about that now. There are degrees of preparation that you as a sector must make decisions about."
Health Minister Mark Butler recently said the pharmaceutical sector will not be required to offset the Government's additional $3 billion investment in the new Community Pharmacy Agreement.
Dr Watt said, "So fine, he won't seek savings. But if you start to have budgetary problems in the period of fiscal consolidation, no health minister can guarantee that because he's got a Treasurer, a Finance Minister and possibly a Prime Minister who have to agree. When you're looking at the choices you have to make, what choice do you make?"
