Big pharma’s plea to Trump to punish Australia for cheaper medicines

American medical giants have slammed the $18 billion pharmaceutical benefits scheme in a plea to US President Donald Trump to impose punitive tariffs on Australia because it subsidises medicines for millions of patients.

The US industry has named Australia’s Pharmaceutical Benefits Scheme as one of the “egregious and discriminatory” programs to be targeted in Trump’s imminent decision on reciprocal tariffs, blaming the Australian policy for cutting prices and blocking American exporters.

The powerful US pharmaceutical lobby wants Donald Trump to impose punitive tariffs on Australia for subsidising medicines. Credit: AP

The formal complaint, lodged with the president’s trade chief on March 11, calls for tough action to end the “damaging pricing policies” in Australia and other countries in order to add billions of dollars to exports and fix America’s trade deficits.

Health Minister Mark Butler and Coalition health spokeswoman Anne Ruston have vowed to keep the PBS off the table in any trade discussions with the Trump administration before the president’s decisions next month on another round of US tariffs on other countries.

But the formal US industry position heightens the prospect of reciprocal tariffs on Australian medical companies as a way to force change to the federal government policy and extract better terms for American drugmakers.

“Egregious and discriminatory pricing policies in several markets including Australia, Canada, the European Union, Japan and Korea undervalue American innovation, threaten billions of dollars in lost sales and undermine American competitiveness, jobs and exports,” says the formal submission from the Pharmaceutical Research and Manufacturers of America, known as PhRMA.

The peak industry group donated $US1 million ($1.57 million) to Trump’s inauguration in January, and its chief executive, Stephen Ubl, dined with the president at Mar-a-Lago in December alongside Pfizer chief Albert Bourla and Eli Lilly chief David Ricks, both of whom are PhRMA board members. Other PhRMA member companies include Johnson & Johnson, Merck & Co, Bristol Myers Squibb, Novo Nordisk, CSL and Amgen.

Albert Bourla, chief executive officer of Pfizer Inc and board member of PhRMA, has long-standing links with US President Donald Trump. Credit: Bloomberg

The PhRMA submission dedicates a section to Australia alone and blames the Pharmaceutical Benefits Advisory Committee, the expert group that advises the government, for putting barriers in the way of American exports.

“PBAC conducts biased health technology assessments that compare innovative medicines to the lowest-cost comparator,” the submission says, adding that this punishes the US companies.

It also blames the PBS for “unreasonable patient access delays” because the government takes time to consider new medicines and decide whether they should receive a public subsidy to lower the cost for consumers.

Illustration by Matt Golding

“Australia creates unnecessary data requirements and other administrative hurdles to secure PBS listing, causing significant delays,” the submission says.

The PBS cost taxpayers $17.7 billion last financial year and helped reduce the cost of 930 different medicines. It means Australians can buy life-saving drugs worth thousands of dollars for as little as $31.60 per script, often after the government has negotiated with the drug company to secure the best deal for taxpayers.

Medicines Australia, the peak group for the pharmaceutical companies including several PhRMA members, said the PBS was a “world-class universal healthcare program” but should be improved.

“There is, for instance, widespread recognition it takes too long for a new medicine to be listed on the PBS due to measures that undervalue the benefits of new medicines compared to existing treatments,” the industry group said.

Their message has significant cost implications for the government, which would have to increase funding to approve medicines more quickly and address concerns raised in the PhRMA submission. While Butler commissioned a review of the medicine assessment process, he is yet to act on it.

Pharmaceutical products are the third-biggest category in Australia’s exports to the US, after beef and gold. US tariffs on Australian health exports would pose a risk for medical giant CSL, which is a PhRMA member but also exports plasma from Australia to the US.

Friction over the PBS could also influence Trump’s broader agenda on trade sanctions across multiple industries.

Trade expert Joseph Damond, the chair of global life sciences at Crowell Global Advisors in Washington DC, said the impact on Australia would depend on whether the Trump administration prioritised trade disputes with other countries.

“I don’t think there’s any reason to be imminently concerned about these issues because it does seem the administration will be focused on countries with whom the US has large trade deficits, and Australia is not one of those,” he said.

While reciprocal tariffs could hurt American consumers, Damond said there was no evidence, so far, that the administration was paying much attention to this potential impact in the US.

Australian National University law professor Peter Drahos said the US companies would push strongly for the Trump administration to act against Australian subsidies because of their longstanding dislike of the PBS.

“The US pharmaceutical lobby is one of the world’s oldest, most highly organised lobbies – they have a track record of success when it comes to influencing domestic law via trade agreements,” he said.

Drahos, who warned against including the PBS in talks on the free trade agreement with the US two decades ago, said the scheme was always a target for the US companies because it set up an Australian monopsony – a market with one buyer – to counter global monopoly pricing.

Both major political parties are insisting the PBS will remain off the agenda in trade tensions with the US, but Trump’s decision to proceed with 25 per cent tariffs on Australian steel and aluminium showed Australian lobbying could not stop the US president from imposing trade barriers.

Butler and Trade Minister Don Farrell both said Labor would never trade off the PBS. “We will just fight to the end to support the PBS. No one will fight harder than the Labor Party,” Butler said last Sunday, after this masthead reported the concerns about the scheme.

Ruston, the opposition spokeswoman on health, said the Coalition had a proud track record in supporting the PBS. “The Coalition does not support President Trump’s tariffs and would not support any proposals that would increase health costs for consumers and/or the Australian taxpayer,” she said.

A key issue for the US industry is the longstanding belief that the PBS is a non-tariff barrier because it can delay the introduction of new American medicines until they gain PBAC approval, and this amounts to “denial of market access” and therefore a restriction on trade. It can also set prices for the producers, limiting their profits.

Trump has included non-tariff barriers as potential triggers for US reciprocal tariffs, and his officials have confirmed plans to impose the penalties on other countries on April 2 after considering the formal submissions to US Trade Representative Jamieson Greer.

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