Optimism over Australia election

Lisette Oversteegen, lead analyst from Datamonitor , comments on the impact of Australia’ election.

Now that the Labor party has claimed a narrow victory, the pharmaceutical industry has reason to be optimistic about the Memorandum of Understanding (MoU).

The MoU, negotiated with the Labor government by Medicines Australia earlier in 2010, was meant to provide stability for Australia’s pharmaceutical industry. Although the election delayed its implementation, the Labor government is expected to move forward with the existing agreement.

More than two weeks after the Australian election resulted in a hung parliament, Julia Gillard’s Labor Party managed to form a minority government with the backing of a handful of rural independent members of parliament. Helping to sway the Independents’ support was a promise that the next round of health and hospitals funding will be dedicated to regional Australia, in addition to Labor’s previous commitments to investments in tele-health.

However, the pharmaceutical industry will be most interested in the future of the Memorandum of Understanding (MoU), a government agreement that was drawn up with Medicines Australia as part of Labor’s 2010–11 Budget in May. The debate regarding the sustainability of the Pharmaceutical Benefits Scheme (PBS) led the government to seek further savings, while Medicines Australia sought to protect its members from further unexpected price cuts.

From the innovator industry’s perspective, the most important outcome of the MoU was that it provided a stable pricing policy environment in which the government promised not to implement new policy to generate price-related savings from the PBS during the period of the agreement (until mid-2014). However, the progression of the MoU through the Senate hit a snag when the elections were called in August.

The MoU’s underlying legislation has now lapsed and the relevant bill has to pass through the House of Representatives to the Senate again before it can be voted into effect. This will most likely push back the first set of price cuts, which were originally scheduled for implementation on 1 October 2010.

Despite the delay, a Labor government is most likely to put the MoU into practice relatively unchanged, which will provide Australia’s pharmaceutical industry with the stability it so badly craves.