Medicines industry turns to UK dealmakers but Canberra could set the price first

Medicines Australia has engaged international negotiation specialists to secure its next strategic agreement with the Federal Government. But almost three months into the process, the two sides have barely started negotiating and the clock is now running on a critical deadline.

The peak body engaged Negotient largely on the strength of its involvement in the UK pharmaceutical deal, which was negotiated against US Administration pressure, including the threat of tariffs, and held up as an example of securing greater investment in innovative medicines.

But there is a problem with that comparison.

The UK deal was not an agreement between the Association of the British Pharmaceutical Industry (ABPI) and the British Government. It was a US–UK government agreement as part of a much broader trade and economic relationship. That is a fundamentally different negotiating proposition from an Australian industry peak body negotiating directly with its own government.

This raises an obvious question for Negotient. If its UK expertise is the reason it was brought in to negotiate Australia’s F1 medicines deal, how does that model translate when the negotiating parties and the leverage are completely different?

The Funding Clock Is Ticking

That question becomes even more important because the government’s budget timetable is moving regardless of the negotiations.

Within the next six weeks, Federal Health Minister Mark Butler is expected to give the Expenditure Review Committee (ERC) an indication of the funding envelope he will require for the next strategic agreement with the medicines industry. The figure will be considered as part of the MYEFO (Mid-Year Economic and Fiscal Outlook) process, ahead of funding being formally announced in next year’s Budget alongside the new strategic agreement.

Potentially, that means the government could be establishing its funding envelope before Medicines Australia has formally begun negotiating the deal. If the industry does not establish its own funding requirements first, Canberra could effectively set the number and leave Medicines Australia to negotiate within it.

Current Status of the Strategic Agreement Negotiations

Negotiations appear to remain stalled over the terms under which they will take place, with confidentiality emerging as a major sticking point.

Medicines Australia is seeking greater transparency surrounding the strategic agreement around what it is putting forward to members and stakeholders. But governments do not conduct sensitive negotiations while allowing the other party to publicly detail what it is seeking or use external pressure to influence the talks.

And every week of delay makes the pharmaceutical industry’s position more precarious.

Then there is the $47 billion figure being cited for additional investment over 10 years. The challenge is that the figure does not simply represent the investment required for implementing the Health Technology Assessment (HTA) Review recommendations.

So what exactly is the $47 billion paying for? For a government preparing its forward estimates, that is a significant problem.

Canberra May Set The Number First

The government’s timetable is moving regardless of Medicines Australia’s negotiations. Other parts of the medicines sector, including the Generic and Biosimilar Medicines Association (GBMA), are progressing their own strategic agreement negotiations, while statutory price legislation is also moving through its respective process.

If Minister Butler enters MYEFO with a funding figure already established before Medicines Australia has settled its demands, Canberra will have the number and Medicines Australia will be negotiating within it. That would fundamentally change the balance of the negotiation. For an industry body that has appointed international negotiation specialists specifically because of their reputation for securing a major UK pharmaceutical deal, that would be an extraordinary position to find itself in.

But unless Medicines Australia gets to the negotiating table soon, the government may decide how big the table is first.

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