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DANIEL:

From Schwartz Media, I’m Daniel James. This is 7am.

Medicines in Australia might be about to get more expensive, and harder to come by.

Australia’s Pharmaceutical Benefits Scheme – the safety net that keeps our prescriptions cheap – has become a target of Donald Trump’s trade war.

And after the US president signed an executive order stating the US shouldn't pay more for medicines than its peers … drug companies are pausing new PBS listings and warning some medicines might never reach our shelves.

Today, special correspondent for The Saturday Paper, Jason Koutsoukis, on how one decision in Washington could leave Australians paying more for vital drugs… and whether Australia has the leverage to do anything about it.

It’s Thursday, June 19.

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Audio excerpt – News:

“Well the G7 summit in Canada today will look a little more like a G6 with Donald Trump as we heard pulling the pin earlier to head back to Washington DC. It means Anthony Albanese now has a gaping hole in his diary where talks with the US President should have been.”

DANIEL:

Jason, Anthony Albanese was just ghosted by Donald Trump who left the G7 summit in Canada before the two leaders got a chance to meet. Was that expected?

JASON:

Well, it wasn't expected. Daniel, the Prime Minister's office, was very pleased to announce on the weekend that they had secured this long anticipated meeting with the US president.

Audio excerpt – Albanese:

“I look forward to tomorrow's meeting, and not just with President Trump.”

JASON:

But perhaps it's not unexpected that Donald Trump would want to change the script. And that's what he did. Letting us all know that he was going to leave the G7 early and get back to Washington to keep a closer eye on what's happening in the Persian Gulf, where of course Israel has launched a series of attacks on Iran's nuclear facilities.

Audio excerpt – Albanese:

“It's perfectly understandable the decision that he made. That meant that the meetings that were scheduled, not just with myself, but with India…”

JASON:

It must have blind-sided Anthony Albanese on the one hand, but on the other hand, It is understandable that Donald Trump would want to be in the situation room at the White House with all of that national security establishment of the U.S. Government.

DANIEL:

Do we have any idea of whether the two will have a chance to get to meet soon?

JASON:

We don't. The talk around Parliament House is that the earliest they could possibly get back together is on the sidelines of the UN General Assembly, which takes place in September. I personally don't think it really matters all too much if Anthony Albanese has a meeting with Donald Trump or not. We know that these meetings can be quite fraught. Donald Trump is, of course, a very capricious president. He's changing his mind all the time particularly on things like tariffs. The other big issue is, of course, AUKUS. It's an uncertain time. And I don't think a meeting with Donald Trump necessarily locks things down for the rest of Donald Trump's term in office.

DANIEL:

One of the main issues if the two are to meet for Australia is US tariffs, as the Prime Minister fights to get Australia an exemption on those. And one specific target of Trump's trade war has been Australia's pharmaceutical benefits scheme, the PBS. So why has this scheme become a target?

JASON:

The US pharmaceutical industry has long hated Australia's PBS. The PBS is a scheme that goes back to the 1940s in Australia.

Audio excerpt – Speaker:

“The Pharmaceutical Benefit Scheme covers over 2,500 different medicines. It helps to make PBS prescription medicines affordable. In addition, there's a safety net for people or families who need a lot of medicine.”

JASON:

It's a system that sees the Australian government buy vital medicines on behalf of Australian consumers. And the Australian Government negotiates a price directly with the pharmaceutical manufacturer for these individual medicines. The Australian consumer then buys the drugs but ultimately it's the Australian government that pays for them and the Australian consumer is then charged a flat fee which is very different to what US consumers pay.

That price is heavily discounted to what the same drugs are sold for in the United States.

Audio excerpt – Trump:

“Doesn't somebody fight the drug price situation, meaning equalisation? There's a term. It's called equalisation.“

JASON:

And on May the 12th Donald Trump signed an executive order to try to do something about this. He wants US consumers to pay the same that consumers in other countries pay. And so ultimately, what that means is that he wants US customers to pay less, but he wants Australian consumers to play more.

Audio excerpt – Trump:

“We're subsidising others' health care. Countries where they paid a small fraction of what for the same drug that what we pay many, many times more for. And we'll no longer tolerate profiteering and price gouging from Big Pharma.”

JASON:

What Trump's executive order is likely to do is take a group of countries, a basket of countries and the US is going to benchmark the prices paid by the countries that are in that basket. And then that's the benchmark price that US consumers will then pay. What that is likely to mean is that Australian consumers will pay more and US consumers we'll pay less. And I think this is. A pattern that we see with Donald Trump, not just with pharmaceuticals. The whole issue that is driving Donald Trump's tariff increases is this idea that the US is getting ripped off. You know, if there's one thing that Donald Trump hates, it's the suggestion that the US is paying more for something that other countries are getting at a discount.

Now, given that Prime Minister Anthony Albanese has drawn a line in the sand when it comes to the PBS, I think a very difficult conversation is likely when the two meet over what the US President wants to do when it comes to Australians getting drugs cheaper than US consumers get them.

DANIEL:

You've been speaking to some drug companies. What have they been saying to you about the impact of Trump's order?

JASON:

This order has created a lot of uncertainty about what prices drug companies will receive for the medicines they manufacture. From talking to drug companies and also the peak industry body, Medicines Australia, the main impact right now is that drug companies are pausing putting new drugs forward to be listed on the PBS.
And that pause could be for quite some time and ultimately it could lead to some vital medicines that Australian consumers want and need from overseas may not be listed as soon as they would like on the PBS.

DANIEL:

After the break - can the government halt the worst impacts of Trump’s executive order?

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DANIEL:

Jason, drug companies are delaying listing with the PBS because it could affect their pricing overseas. So can you tell me what kind of medications we may be missing out on?

JASON:

Well, Daniel, I think potentially it's a whole new generation of drugs that are coming onto market in countries overseas. Take one example, Daniel. Donanemab.

Audio excerpt – Speaker:

“A new drug has been hailed as a turning point in the fight against Alzheimer's.”

Audio excerpt – Speaker:

“U.S. Drug maker Eli Lilly says its experimental drug Donanemab can slow down the development of the disease.”

Audio excerpt – Speaker:

“Donanemab has a price tag of more than $40,000 a year because it's not yet subsidised by the government. It will be considered for inclusion on the Pharmaceutical Benefits Scheme mid-year but there are no guarantees.”

JASON:

Now, Health Minister Mark Butler revealed last month that the Pharmaceutical Benefits Advisory Committee will be considering Donanemab in July.

Audio excerpt – Butler:

“There is still a fair way to go though to determine whether or not this will be reimbursed by the Federal Government and if so for which patients.”

JASON:

But before that drug can be listed on the PBS, Eli Lilly's global head office will have to approve the price that is offered by the Australian government. And that's where we're seeing the impact of this pause The global head offices of these pharmaceutical manufacturers, that's where the holdup is coming, because they are saying, let's just hold off on approving this price, because we might get a better price once Donald Trump gets into the act and negotiates with Australia about the future of the PBS itself.

DANIEL:

The Prime Minister has said repeatedly that the PBS is not up for negotiation when it comes to negotiations on tariffs. In what way does Trump want Australia to alter the PBS? What regulations are under pressure here?

JASON:

Well, he wants the Australian government to pay more for the drugs that US companies are making. And he's saying that the prices that Australia negotiates are just way too low and don't compensate US companies fairly for the research and development, the investment that they put into developing these new drugs.
So US drug companies have long opposed the PBS and Australia's PBS does deliver some of the lowest medicine prices in the developed world. They argue that the PBS systematically drives down what they can charge Australians for the drugs that they make and that the low price in Australia ultimately undermines the global pricing power that they have and it limits their ability to recoup what they argue are the high costs of uh... Research and development.

DANIEL:

Will Trump's strategy, for want of a better term, actually work in driving US prices down, Jason?

JASON:

That's really difficult to assess. One thing that I didn't know about is that the prices that the Australian Government lists that it pays, the drug companies for the medicines that we consume, doesn't actually reflect the real price that is paid. So on the one hand, yes, there's a listed price and this money is paid to the drug companies but then the next month the drug company pays back what they call a rebate to the Australian Government, which is effectively means that the price that is actually paid is even lower than the listed price. And I think drug companies end up paying back around 30% of the total cost of the PBS, which is quite staggering when you think about it. And so perhaps the Australian government might be able to work out a way where they increase the listed prices, so perhaps keep Donald Trump happy by saving face that there's been a price increase, but the Australian government... Might then be seeking an increase in the rebate that is paid kind of under the table, if you like, by the drug companies back to the Australian Government.

DANIEL:

So is there anything else that the government can do about all of this?

JASON:

I think it's going to be really difficult because if Donald Trump does include Australia in this basket of countries against which US drug prices will be benchmarked, then I think it really does put the government in a difficult position because we have some of the lowest prices.

And I think that will lower the average of drug prices overall.

I think the Australian government is going to have a lot of difficulty pushing back against that.

Audio excerpt – Albanese:

“We'll only sign up to things that are in Australia's national interest. So on things like the Pharmaceutical Benefit Scheme, the Media Bargaining Code, our biosecurity in agriculture, they're not on the table as far as we're concerned.”

JASON:

And as the prime minister has so clearly stated that Australia won't be intimidated by the US. It does create a potentially big political problem for the Prime Minister and his government.

DANIEL:

Jason, always great to speak with you.

JASON:

Daniel, thank you so much, great to speak with you.

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DANIEL:

Also in the news today …

The United States military is reportedly sending additional fighter jets to the middle east and extending existing deployments to bolster its presence amid the Israel-Iran conflict.

In a social media post – US President Donald Trump stated that quote “we now have complete and total control of the skies over Iran.”

US officials have declined to provide specific numbers of jets that have been deployed – and insist that the US military has not taken any direct offensive action against Iran.

And

Restrictions around sexually active gay and bisexual men donating blood and plasma are being loosened under new, more inclusive rules.

From July 14, Australian Red Cross lifeblood will remove restrictions which state gay and bisexual men — as well as transgender women who have sex with men — cannot donate blood or plasma if they have been sexually active in the past three months.

7am will be back tomorrow. Thanks for listening.

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