Australian Broadcasting Corporation
FOUR CORNERS
Investigative journalism at its very best

TV PROGRAM TRANSCRIPT
LOCATION: abc.net.au > Four Corners > Archives
URL: http://www.abc.net.au/4corners/stories/s248583.htm

Broadcast: 19/02/01
Paying the Price
Has the pharmaceutical industry broken the scheme which delivers Australians cheap medicines? Did the Federal Government succumb to industry pressure in dumping its own expert advisers?

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Reporter: Liz Jackson
Producer: Peter McEvoy

LIZ JACKSON: The pharmaceutical industry is the most profitable legal industry on the planet.

But the industry says it's misunderstood -- it's not about making money.

ALAN EVANS, AUSTRALIAN PHARMACEUTICAL MANUFACTURERS ASSOCIATION: Other industries are focused on taking money off people or doing something else.

This is an industry which is about making you and I and our children and our relatives better -- getting rid of diseases which they have, and making sure that they have a longer life and a better life.

LIZ JACKSON: But in the last three weeks, serious allegations have been made that international pharmaceutical companies have used their clout to remove the very people who have kept down the prices of Australian drugs.

Do you feel that you took them on and lost?

PROFESSOR DON BIRKETT, CHAIRMAN, PBAC 1993-2000: We did pretty well for, er, seven or eight years, actually.

Maybe, in retrospect, it's amazing we did, er, as well as we did for so long -- before we got the strong reaction that's occurred.

Um -- but, yes.

We've lost.

PROFESSOR DAVID HENRY, PBAC 1991-2000: I think an undertaking has been made, at a very high level, to provide the industry with what they want here.

ALAN EVANS: I mean I find that an amazing statement.

You've got to avoid being a legend in your own mind, and you've got to avoid being paranoid.

LIZ JACKSON: Tonight on Four Corners, new evidence supporting the charge that the Australian Government has done the drug companies' bidding and we will end up paying the price.

Professor David Henry lives within view of Lake Macquarie, about a 20-minute drive from the centre of Newcastle, central New South Wales.

He's the professor of clinical pharmacology at the University of Newcastle, and a consultant physician at the nearby Mater Hospital.

He's also public enemy number one in the eyes of the pharmaceutical industry.

It's a story that began 10 years ago, when David Henry pioneered a new system for evaluating the cost-effectiveness of drugs.

It brought him international recognition, and his system has been copied around the world.

PROFESSOR AUBREY PITT, CARDIOLOGIST, ALFRED HOSPITAL: David Henry is seen as a world leader in the economic evaluation of drugs.

He's certainly been Australia's leader, and he's been invited widely round the world to contribute to economic discussions on drug delivery.

DR JONATHON QUICK, DIRECTOR OF ESSENTIAL DRUGS, WHO: Dr Henry -- his work has been known to WHO for a long time.

He's one of the pioneers in this area.

One of, if not the leader, one of a half a dozen leading experts in this field.

LIZ JACKSON: The cost of pharmaceutical drugs is a major concern in every country in the world.

The price of new drugs is commonly double or triple the ones they replace, and they're eating up our healthcare budget.

We're now spending more than $4 billion a year on prescription drugs, and in world terms that's not doing too badly.

Professor John Deeble is best known as the architect of Medicare.

PROFESSOR JOHN DEEBLE: In most countries, it's about 15-20 per cent of the health expenditure.

Here, it's about 12 per cent.

But in poorer countries, it's 25 per cent of their health expenditure.

And they can't do anything else.

They can't pay to build hospitals.

They can't employ doctors, because the drug prices just gobble up all the money that they have.

Either that, or they can't give the people the drugs.

LIZ JACKSON: Since 1948, Australians have been largely protected from the high cost of drugs, and uniquely so.

In a flush of national pride at Australian Howard Florey's role in discovering penicillin, the then-Labor government decided that this new wonder drug should be made available to all Australians, rich or poor, free of charge.

They introduced the Pharmaceutical Benefits Scheme whereby the Government picks up the tab for the drugs it accepts we need.

PROFESSOR STEPHEN DUCKETT, SECRETARY, DEPARTMENT OF HEALTH, 1994-96: The Pharmaceutical Benefits Scheme It's one of the --

It's a universal scheme.

It means that people are protected against high-cost drugs.

Practically no other country in the world has got a scheme as good as this.

And we got it in 1948.

PROFESSOR DAVID HENRY: The best example of a country that doesn't have universal coverage of drug benefits is the United States.

At least, the best example of a rich country that doesn't.

And in the United States, older people with chronic diseases that can afford houses, can afford cars, can afford television sets -- many of them can't afford drugs if they don't have private health insurance.

And what happens is that some of them have to go without, or they go to Canada or they go to Mexico to buy their drugs because they can't get them at an affordable price in the United States.

LIZ JACKSON: But Australia's system of universally subsidising drugs costs a lot of money.

In the early 1990s, Professor David Henry was the driving force behind a radical new approach to contain these costs.

He'd just joined the Pharmaceutical Benefits Advisory Committee, which advises the Minister for Health which drugs should be subsidised.

Each drug now undergoes a rigorous cost-effective analysis to see if it should be listed.

The committee's decision can cost industry hundreds of millions of dollars.

PROFESSOR DAVID HENRY: It's very, very important in Australia to get listed on the Pharmaceutical Benefits schedule.

The drug might potentially be $50 million or $100 million a year, and it will sell very little unless it gets on the schedule.

So, for many drugs, over 90 per cent of their use is subsidised.

Some of them, it's almost completely subsidised through the PBS.

If they don't get on, they're not going to sell it in Australia to any degree.

LIZ JACKSON: So, it's worth hundreds of millions of dollars?

PROFESSOR DAVID HENRY: Oh, yes.

Yes.

LIZ JACKSON: To get listing?

PROFESSOR DAVID HENRY: Absolutely.

LIZ JACKSON: Amongst their medical colleagues, the Pharmaceutical Benefits Advisory Committee has a reputation for being tough negotiators.

Most of the committee, like Professor Henry, have patients they treat as well.

They know the benefits that drugs can bring, but if a new drug is not cost-effective, then they won't recommend it gets listed unless the drug company drops its price.

PROFESSOR DAVID HENRY: This is a situation where there's a natural conflict of interests.

The committee is trying to get the best prices for the Australian public.

The industry is trying to get the highest price for itself.

PROFESSOR STEPHEN DUCKETT: And, of course, the industry doesn't like it.

It's much more difficult to demonstrate in a rigorous and systematic way that a drug is cost-effective than it is to sell it on the open market or to GPs who may be influenced by the colour of pen or the glossy ad and so on.

So, it's much -- it makes it a much easier marketing effort if there's not a cost-effectiveness barrier as well.

LIZ JACKSON: For the first six years or so, the committee's cost-effective system seemed to be going well.

It was keeping the price we pay for pharmaceutical drugs down, and there were plenty of plaudits from all around the world.

DR JONATHON QUICK: Effective, safe, good value for money.

That's where the Australian system excels.

It makes those judgments, and it makes them on the basis of good evidence.

Having that information then makes the Pharmaceutical Benefits Scheme a good negotiator on behalf of the Australian public.

That kind of approach can be a model for other countries.

LIZ JACKSON: The first sign that international drug companies were also taking an interest in Professor Henry's work came in 1997.

The medical director from Pfizer's head office, over on a visit from the United States, called by to see Professor David Henry at the Mater Hospital in Newcastle.

PROFESSOR DAVID HENRY: I was visited by the medical director of Pfizer US, who made it clear to me at that time -- and this would be back in 1997 -- that they were unhappy with the way their products were being dealt with by the Pharmaceutical Benefits Scheme in Australia.

And we had an amicable but quite robust exchange of views.

Their view was that they made superior products and they should get higher prices.

Our view was that whether they got higher prices depended on the evidence that their products were better, not simply their strongly expressed views.

LIZ JACKSON: Professor Don Birkett was the Chairman of the PBAC.

PROFESSOR DON BIRKETT: I think it was probably a result of that visit that a fairly tough managing director arrived in Australia.

LIZ JACKSON: And what was he like?

PROFESSOR DON BIRKETT: Er, abrasive.

Um, aggressive.

I think that sums it up, yeah.

ALAN EVANS: He was a bit more extrovert than some of the other executives in the industry, but nevertheless a very committed person, and very committed to the Australian industry.

LIZ JACKSON: The new MD of Pfizer, Dudley Schleier, actually arrived in 1996.

This is a video news release put out by Pfizer in 1997.

DUDLEY SCHLEIER (FROM PFIZER VIDEO): We opened the beautiful $22 million expansion of our facilities here, which, I think, shows our dedication to increasing our investment here in Australia.

I think it was great to have the Prime Minister along, and have the opportunity to speak with John Howard about some of the issues that face us here in this country.

LIZ JACKSON: Dudley Schleier made good and early links with the Government.

He became one of the founding members of a new, high-powered industry working group which first met in June 1998.

The working group comprises six CEOs of drug companies, and two Cabinet ministers, the Minister for Health, Dr Michael Wooldridge, and the Minister for Industry, Senator Nick Minchin.

They have regular scheduled meetings face to face.

The last one was held in November last year.

PROFESSOR DAVID HENRY: I would really like to know what the nature of the discussions between the senior industry executives and the Government are.

I believe that the Government has been getting its information about how the PBS operates from senior executives in industry rather than from the committees and the committee chairs.

LIZ JACKSON: Ministerial briefing notes obtained by Four Corners make it abundantly clear that the bulk of the discussion was centred on the Pharmaceutical Benefits Scheme and the drug companies' dissatisfaction with the prices they were getting.

In fact, the briefing notes proposed that after two years months of meetings, that maybe they could talk about something else -- "move away from being primarily concerned with prices."

PROFESSOR DON BIRKETT: It worried us because it was acting at a political level, and the committee, which was intimately affected by what it was doing, had no way of having any input into it.

ALAN EVANS: Well, I would never have thought it was the role of an advisory committee who gives advice to the Minister about a listing of a pharmaceutical be involved in a discussion with Ministers about industry development.

That's what the discussions were about.

It would not be the appropriate forum for them to be involved.

LIZ JACKSON: But you would have discussed the price of drugs --

ALAN EVANS: No.

LIZ JACKSON: ..that companies were obtaining here?

ALAN EVANS: No.

LIZ JACKSON: Never discussed the price?

ALAN EVANS: No!

I mean, it would have been entirely inappropriate to have that sort of discussion.

LIZ JACKSON: The Pharmaceutical Industry Work Group never discussed --

ALAN EVANS: The price of --

LIZ JACKSON: ..what's referred to as the suppression of price in Australia?

ALAN EVANS: Oh, look, in broad terms, in broad terms, we always raised the fact that, you know, compared to Europe or the United States, the price of pharmaceuticals in Australia was still substantially lower.

LIZ JACKSON: A year after the industry group started to meet the ministers, Professor Don Birkett and Professor David Henry decided it was time to have a meeting themselves.

On 25 August 1999, they met with the Federal Health Minister, Dr Michael Wooldridge.

PROFESSOR DON BIRKETT: We'd sent a letter saying that we were concerned about the pressure coming from industry, and that we would like to talk to him about it.

PROFESSOR DAVID HENRY: My strong impression was that the Minister was under pressure, and I can't remember the exact form of words, but he clearly indicated to us that, as a health minister in a centre-right government -- that was the way it was portrayed anyway -- he was under pressure to be --

to have his door open to industry, and I guess that was a concern to us.

PROFESSOR DON BIRKETT: The impression was, really, of a minister under some pressure himself at that point.

But he expressed support for the committee and the process at that stage.

LIZ JACKSON: Sometime later, the professors discovered that one of the Minister's advisers who was present at their meeting had gone to work for the drug company Pfizer.

PROFESSOR DAVID HENRY: That was a matter for concern, because we'd been at the meeting with the Minister to express our concerns about the pressure that the committees were under from the industry.

We were aware that there was a likelihood of legal action against the committee in the Federal Court, and the Minister's principal adviser then left and joined the company which subsequently took the committee to court.

And we didn't know that at the time, but it certainly was a concern to us.

LIZ JACKSON: What was your reaction when you found out?

PROFESSOR DAVID HENRY: Just surprise.

I just didn't think that sort of thing happened.

PROFESSOR DON BIRKETT: I think angry that we'd been through a meeting under those circumstances without knowing about it.

LIZ JACKSON: Two months later, there was another meeting in Canberra, but this time the tone was different.

The meeting was with senior advisers from the office of the Minister for Health and his undersecretary Senator Grant Tambling.

PROFESSOR DON BIRKETT: The tenor of that meeting was that both Tambling and Wooldridge were under pressure from the industry.

They were being continually lobbied and continually told that there were problems with the process and with the committee.

And were worried about that and thought that if these complaints were continually coming in there must be a problem.

PROFESSOR DAVID HENRY: Clearly, it had reached some sort of crescendo -- the level of complaints, and this fact was being passed on to us.

We were unsure of what we were being expected to do.

Were we meant to just say yes to every drug that came along?

Were we expected to say yes, even though the drug appeared to be too expensive?

PROFESSOR DON BIRKETT: We were told, really, that the ministers and Tambling wished to keep themselves remote from the committee.

I think the word 'firewall' was used at one stage, which seemed quite extraordinary to us that the political level should keep itself remote from its advisory committee but that industry were in the office every day.

LIZ JACKSON: By late 1999, the committee felt that things were going from bad to worse.

It appeared that the whole of the Pharmaceutical Benefits Scheme was going to be reviewed.

Professor David Henry spoke to the press.

Were you aware that talking to the press might be a touchy issue, a problem?

PROFESSOR DAVID HENRY: Well, it's always a -- it's always going to be a touchy issue.

I knew nothing about the detail of the review.

The fact that there'd been --

a review was being contemplated was already out in the public domain.

The industry had actually provided this information, that they were seeking it, so there was no news in that.

At least there was --

it wasn't confidential information and I had no detail anyway.

LIZ JACKSON: A subsequent series of articles in the 'Sydney Morning Herald' canvassed far more than just the possible review.

They included revelations that two of the Minister's advisers had gone to work, directly or indirectly, for Pfizer, and charged that Minister Wooldridge appeared to be increasingly listening to industry's concerns.

Dr Michael Wooldridge hit the roof.

He sent his chief of staff, Ken Smith, to put the fear of God about talking to the press into his expert committee.

But this was a group of medical specialists, not public servants.

DR MARY COHN, PBAC 1995-2000: Ken Smith's exact words were, "My minister doesn't like his name in the paper."

Now, we did feel that that was a warning.

DR SIAN HUGHES, PBAC 1997-2000: We could not be told ourselves that we weren't allowed to talk to the press because we're not actually public servants.

DR MARY COHN: He was abrupt.

He was rude.

And he threatened us with reporting to the Federal Police.

PROFESSOR AUBREY PITT, PBAC 1987-2000: I didn't know why I was being told off like I was a little schoolboy.

And I thought it was all rather good fun.

But it was a very serious attack and for most members of the committee, they were outraged.

That's the right word.

DR MARY COHN: I think that we're members of the public.

And we're also members of a very important --

or were members of a very important committee.

If we have concerns about that committee, then I think it's reasonable for us to express those concerns.

LIZ JACKSON: Christmas came and went, and early in the year 2000, Alan Evans left his job as a first assistant secretary at the Department of Industry.

He'd been recruited to work as a lobbyist for the pharmaceutical companies.

In his former government job, he played what he describes as a pivotal role in encouraging the pharmaceutical industry in Australia.

Alan Evans is not coy about what he felt his past could deliver.

ALAN EVANS: It's a particular skill in presenting your arguments to government, and it helps if you understand how a government thinks and acts and behaves.

And I had had quite a deal of experience in doing that, so I thought I could bring something to it.

And they obviously thought I could bring something as well when they offered me the job.

LIZ JACKSON: Tell us what difference do you think Alan Evans has made to relations between industry and the committee.

PROFESSOR DON BIRKETT: Well, there haven't been any relations since then -- essentially, since he took over the job.

ALAN EVANS: I thought relations could be improved and certainly tried to do that, but I have to say that it didn't meet with the success I've met in other quarters in improving relationships.

And that's been one of my particular skills is to build up relationships.

So I'd have hoped for a better response but I was working away at it.

LIZ JACKSON: And what was the problem?

ALAN EVANS: I don't know.

PROFESSOR DON BIRKETT: He put out a series of columns in the APMA newsletter called 'Alan's Antidotes', which really contained quite vigorous attacks on the PBAC and the process.

LIZ JACKSON: A selection from 'Alan's Antidotes' shows where he's coming from, starting with issue number one.

"The pressure to suppress prices is overriding all other factors.

It can be and will be redressed."

"..having been at the centre of policy making in Canberra for quite some time, I can recognise policy paralysis when I see it -- " "But in some ways this might not be a bad thing as it will allow us to set the agenda and develop policy options which best suit us."

"We might have to break a few eggs to make the omelette, but it will be worth it in the end."

ALAN EVANS: I don't think that all of the PBAC fully understand what was happening in the world, what was happening in the global markets, what was happening in the US, for example, where the consumer was putting the pressure back, saying, "Yes, it's very nice that you in Australia pay a much lower price but, hang on a minute, we as a consumer in the US want to make sure that we pay less as well.

So if we're going to pay less, you can pay a bit more."

And that's what was happening.

So I don't think they fully appreciated that and that was a concern.

PROFESSOR DAVID HENRY: It's condescending claptrap, if you don't mind me saying so.

The reasons that they're paying such high prices in the United States is that the industry's profiteering over there.

And many people in the United States are getting fed up with it.

It's because the industry's promotional budgets are too high and because they're maintaining profit levels which are way above what other industries are able to sustain and it's because of the lack of true competition.

LIZ JACKSON: Meanwhile, the industry continued to press for change.

The Government set up the so-called 'Tambling Review' and the drug companies placed a wish list on its agenda.

The Tambling Review was never publicly released but Four Corners has a copy.

It reveals that the pharmaceutical industry had been directly lobbying the Government to get themselves a representative on the Pharmaceutical Benefits Advisory Committee.

The Tambling Review concluded, however, that this "could result in an untenable conflict of interest" and such a representative "would not appear to have any expertise that could not be covered by other sources."

PROFESSOR DON BIRKETT: That was the outcome of the Tambling Review, the Government's own review.

So it really never occurred to me that that would change.

LIZ JACKSON: The review team also recommended that a time limit should be placed on how long the members of the PBAC should serve on the committee -- 8 years for regular members, 12 for the chairman.

Dr David Henry had been ten years on the committee with two years left of his current contract to serve.

His chairman, Professor Don Birkett, has been there for 17 years.

The Tambling Review, however, stated that all current members should serve out their terms to preserve their expertise and, indeed, pass it on.

So, no-one was worried.

The committee members continued their work, unaware that a bombshell was about to drop.

When they turned up for their regular meeting in December last year they were told that legislation would be pushed through the Senate which meant all members who'd served more than eight years would be shown the door at the end of the year.

No notice, not a thank you, no explanation.

DR SIAN HUGHES: I was amazed that our government would act so precipitously, but I was also extremely angry.

PROFESSOR AUBREY PITT: Several members of the committee, indeed, a majority of members of the committee, wished to resign on the spot.

DR MARY COHN: There was common feeling amongst a lot of members of the committee that several members were being targeted.

LIZ JACKSON: And who were they?

DR MARY COHN: I would say that particularly Professor Henry and Professor Birkett were being targeted.

PROFESSOR DAVID HENRY: Because we were the most prominent representatives -- the chairs -- of two committees that stand out internationally as taking on the might of the pharmaceutical industry, forcing them successfully to provide evidence about the true benefits of their new drugs, forcing them to accept prices that really reflected cost-effective use and cost-effective pricing of their products.

The industry hates being challenged like that.

It doesn't happen in most countries -- they just get their way.

LIZ JACKSON: Your view then was that the industry had heavied the minister?

PROFESSOR DON BIRKETT: Yes, yes -- absolutely.

I don't think any of us had any doubt about that.

ALAN EVANS: All I can say is it becomes a real worry when you become a legend in your own mind.

I can absolutely guarantee that Dr Henry has never been targeted by the industry here or overseas.

In fact, most people overseas wouldn't even know the name Dr Henry.

And in Australia, he's only known because he's a member of the PBAC.

But there's been absolutely no targeting -- none whatsoever.

LIZ JACKSON: No targeting of him and no targeting of Professor Don Birkett?

ALAN EVANS: No!

No!

Absolutely none at all.

LIZ JACKSON: But Alan Evans is not telling the whole truth about whether industry had targeted committee members.

Two weeks ago, the Prime Minister confirmed that he had met with the CEOs of the pharmaceutical companies located in his electorate -- the so-called Bennelong Group.

The meeting was on 10 November last year, just four weeks before the PBAC committee members were suddenly and effectively sacked.

ALAN EVANS: They were planning for the future.

LIZ JACKSON: Were you at the meeting?

ALAN EVANS: No.

The APMA was not at the meeting.

LIZ JACKSON: Was the issue of the Pharmaceutical Benefits Advisory Committee raised?

ALAN EVANS: Well, not being at the meeting, but having discussed what went on there with both the Prime Minister's staff and the ten companies, it was not raised and I would hope it would never have been raised.

LIZ JACKSON: Can you give an assurance to that effect?

Because, clearly, people are now raising questions about the fact that that meeting happened in November and, come December, the committee's spilled.

ALAN EVANS: Look, I can give you an absolute guarantee, because to do otherwise would be an insult to the CEOs of the ten companies and also senior staff of the Prime Minister, because it would be basically accusing them of being liars.

The matter was not raised and nor should it have been raised and nor would it have been raised.

If anyone had even suggested raising it, I would've been saying, "Do not do that, it would be entirely improper."

LIZ JACKSON: But Four Corners has obtained a copy of the confidential background paper that was prepared for the meeting of the Bennelong Group with the Prime Minister.

It tells a different story.

It shows that the chairman of the APMA was down to attend the meeting.

It specifically lists the membership of the PBAC as an issue and reveals that, "Industry is greatly concerned about membership of the PBAC, particularly the public hostile attitude of some members and staff to industry."

The background paper says industry supports the proposed legislation that would enable the membership of the PBAC to be spilled but were concerned that changes to legislation will be held over until 2001.

Within weeks, the Department of Health had the legislation ready to go.

This paper is the first documentary evidence that supports Professor Henry's view about what was going on.

PROFESSOR DAVID HENRY: The Government was trying to respond to pressure from the industry to get rid of some of the members of the committee -- the members that the industry saw as being most resistant to their interests.

LIZ JACKSON: By the time the legislation reached the Senate, the Health Minister, Michael Wooldridge, faced opposition from both Labor and the Democrats.

To get the legislation through, and quell the committee's outrage, he stitched up a compromise with the old members of the PBAC that would allow at least Professor Don Birkett to stay on as chairman for a six-month handover period.

The minister gave 'Don', as he called him, a personal assurance, followed up later in writing, that to be effective, "the PBAC must be able to operate free from undue influence from industry."

On New Year's Eve, all 12 positions on the committee were spilled.

Speculation began about who would be invited back.

You gave an interview to the journal 'Australian Doctor'.

Do you think that's connected to the fact that you weren't invited back onto the committee?

DR SIAN HUGHES: Oh, I'm sure that's the reason I wasn't invited back to the committee.

LIZ JACKSON: In late January, Professor Birkett was told that the new committee would meet the following Wednesday at the Country Comfort Motel in Canberra.

As he'd been invited to be chairman, he asked who the other members would be.

PROFESSOR DON BIRKETT: They gave me the names of 11 members of the new committee that were to be put to Cabinet, but not 12.

And they said they couldn't tell me the twelfth.

LIZ JACKSON: Did alarm bells ring at that stage?

PROFESSOR DON BIRKETT: Yes, absolutely.

LIZ JACKSON: The name they were concealing was Mr Pat Clear, a 40-year veteran of the pharmaceutical industry -- 20 years as a senior executive with both Bayer and Glaxo Wellcome, five years as the CEO of the industry's lobby group, and currently a director of a biotech company which boasts on its website that it is seeking alliances with pharmaceutical companies in product development.

PROFESSOR DON BIRKETT: I was so angry about it, I think I was virtually shaking.

And certainly after that meeting I felt very distressed about it all.

It really was at a stage when we thought we had a way forward and suddenly it all fell apart and you realised that there'd never been any intention to try to salvage the system in a way that was reasonable.

So it was, uh -- all that work over the years gone -- system destroyed, and I think a sense of betrayal, as well, about it.

LIZ JACKSON: Did you feel you'd been tricked?

PROFESSOR DON BIRKETT: Yes.

LIZ JACKSON: The meeting at the Country Comfort Motel never happened.

Professor Birkett refused appointment on the spot, followed swiftly by five other medical and economic experts approached by the Department.

All cited the presence of the industry representative.

The Minister was facing the prospect of a half-empty room.

DR MARY COHN: I did feel that the process is a terribly important process and that some continuity of membership was essential.

It takes a long time to get up to speed with PBAC work.

It's a very hard job.

LIZ JACKSON: But with the announcement of the industry representative --

DR MARY COHN: My position was no longer tenable.

Everybody has somewhere where they have to draw the line and that was my line.

PROFESSOR AUBREY PITT: I don't believe it's appropriate.

I am concerned about it.

I've given a lot of thought to it over the last 24 hours and believe that it seems to represent the plaintiff in a court case being a member of the jury.

And that, to my mind, is not appropriate.

LIZ JACKSON: Internationally, the Government's decision has been noticed and is seen as perverse.

DR JONATHON QUICK: It's fine to get information from the pharmaceutical sector.

But the decision really should be made on the scientific basis by people who have no commercial interest or other sort of potential conflict of interest in the decision.

PROFESSOR DAVID HENRY: Higher prices and higher costs for the Australian community is going to be the effect of that.

LIZ JACKSON: So you believe a deal was done?

PROFESSOR DAVID HENRY: I don't know whether it's a deal as such but I think an undertaking has been made at a very high level to provide the industry with what they want here.

LIZ JACKSON: You wanted an industry representative or someone with an industry background on the committee and you've got it.

Clearly, the Government have listened to you.

ALAN EVANS: Well, no, we put our case in the proper forum and that was during the course of the Tambling Review.

When that Tambling Review did not have that as a specific recommendation, that's where we left the matter.

But clearly, you know, the Minister, who has got responsibility for pharmaceuticals, has thought long and deep about the matter.

I mean, I think it's a very wise decision.

LIZ JACKSON: And has accepted your arguments.

ALAN EVANS: No, no.

No, he hasn't accepted our arguments because he's got an ex-industry person.

This is not an industry person.

It's an ex-industry person.

LIZ JACKSON: So he hasn't delivered what you want?

ALAN EVANS: Look, we put our case.

We accepted the umpire's decision.

LIZ JACKSON: And you haven't got what you want?

ALAN EVANS: We accepted the umpire's decision in the Tambling Review.

LIZ JACKSON: Are you pleased with the outcome?

ALAN EVANS: I think the Minister has made a very wise decision.

He's achieved the best of all worlds.

LIZ JACKSON: But the wisdom of that decision needs to be considered in the light of what has happened in the last six months with two new anti-inflammatory drugs, Celebrex and Vioxx.

Sales of these very expensive and much-hyped drugs have skyrocketed overseas and many experts believe they're being over-prescribed when much cheaper drugs would work just as well.

To prevent the same thing happening here, the PBAC recommended a ceiling price and tough conditions that would force the company to accept a lower price if they sold too many drugs.

But the committee's recommendations were ignored.

Though the PBAC evaluates the cost-effective price, the final price of a new drug is negotiated by another body, the Pharmaceutical Benefits Pricing Authority.

PROFESSOR DAVID HENRY: The committee made some fairly tough recommendations for listing it, to make it available.

But the conditions that were set by the committee as reported in the newspapers were ignored by the Pricing Authority and subsequently by the Minister.

And that has led to a loss of a considerable sum of money that just won't be available for other programs.

LIZ JACKSON: And do you believe that's down to industry lobbying on the Pricing Authority?

PROFESSOR DAVID HENRY: Unquestionably, it is.

The industry has a representative, Mr Alan Evans, on the Pricing Authority.

LIZ JACKSON: Alan Evans denies David Henry's account.

ALAN EVANS: Can I say that I'm bound by the confidentiality.

I'd love to be able to give you the details but I can't.

You can only get that from the Government or the companies concerned.

But the fact is that is entirely incorrect.

LIZ JACKSON: Until Alan Evans joined last year, the Pricing Authority had been a largely administrative committee which stuck to the cost-effective limits set by the PBAC.

But with Celebrex and Vioxx, the Authority gave the companies a higher price.

The Minister, Michael Wooldridge, followed their lead.

For the first time, the pharmaceutical industry had succeeded in getting two major drugs a huge public subsidy at a price the Minister's own expert committee had said was not cost-effective.

The result is a $150 million blow-out in the PBS budget and a windfall profit for the companies, Pfizer, Merck and Pharmacia.

Do you think it is a forerunner of things to come?

PROFESSOR DON BIRKETT: I would think so, yeah.

Certainly, it's an example of how industry pressure can have adverse outcomes for the public interest.

LIZ JACKSON: Professor David Henry was not invited to rejoin the committee.

This came as no surprise.

The interesting question is why.

There's no doubt that the pharmaceutical industry wanted him gone.

They have told us that directly.

There's no doubt that Minister Wooldridge had come to regard him as a thorn in his side.

Did the Minister feel he could kill two birds with one stone -- satisfy industry and rid himself of this turbulent priest?

Professor Henry is not the loser.

He'll be advising other countries how to lessen the burden on their healthcare budgets imposed by the high cost of pharmaceutical drugs.

The real damage that's been done is not to these individuals, but to the reputation of the system they have established.

This is a photo of the Pharmaceutical Benefits Advisory Committee taken last year in happier times.

Only two remain.

Both of them have been on the committee for less than 12 months.

A new committee has been appointed but the accumulated expertise that these people gained over the past 10 years, their corporate memory and their skills in how best to spend nearly $4 billion of taxpayers' money has just been obliterated.

How do you think what's happened here will be read internationally?

PROFESSOR AUBREY PITT: I think some people will see it as a warning that if they try to introduce too rapidly a similar process in their country, that they also might have government or industry come down upon them.

LIZ JACKSON: And close them down?

PROFESSOR AUBREY PITT: Close the process down, yes.

Or try to close the process down.

PROFESSOR DON BIRKETT: I really didn't have much illusions about the way the world works.

There are so many examples of just this type of event happening in other countries that I knew it was a tough world.

I didn't think it would happen in Australia, I must admit.

I thought the political will and the quality of the people in Australia were able to resist this sort of event.

But I had no illusions about the power that the industry can wield when it wishes to do so.

LIZ JACKSON: The Health Minister, Dr Wooldridge, would only appear in an interview to be played at the end of the program.

He was only available last week before we had all of the new evidence included tonight.

Dr Wooldridge, it's a serious charge that's been levelled in the past couple of weeks that this government has been subject to undue pressure in relation to recent decisions that have been made in relation to the PBAC.

I mean, how do you respond to those charges?

DR MICHAEL WOOLDRIDGE, MINISTER FOR HEALTH: Oh, it's completely ridiculous.

LIZ JACKSON: Well, industry did want an industry representative on the PBAC and you have delivered that.

DR MICHAEL WOOLDRIDGE: No, they don't have a representative at all.

LIZ JACKSON: They have someone with 40 years experience in industry, someone who's been five years head of the industry peak body.

They wanted a representative.

Haven't you delivered?

DR MICHAEL WOOLDRIDGE: No, I haven't.

I haven't tried to deliver anything for industry.

What I've tried to do is get a committee that's got a range of expertise and I think I've got a better committee now than we had before.

LIZ JACKSON: They wanted it.

You've given it to them.

Is that just a coincidence?

I mean, they're on record as wanting it.

DR MICHAEL WOOLDRIDGE: Well, I'm not clear what they want.

All I've done is try to put a committee together with broad experience.

And I think the public would think it's crazy on a committee like this not to have a range of experience.

It would be terrible to have all academics.

They only have one way of looking at things.

LIZ JACKSON: Well, five people from the previous committee, five people that you've approached to be on the new committee, have clearly found that unacceptable.

DR MICHAEL WOOLDRIDGE: And 11 other people coming onto the new committee have found no problem with it.

LIZ JACKSON: I wouldn't say, "found no problem".

I mean, I've actually contacted a number of those people.

All of them have expressed reservations about having an industry representative on it but have decided, because of the importance of the committee, that they will serve anyway.

So I wouldn't say they've got no problem with it.

DR MICHAEL WOOLDRIDGE: Well, you keep saying he's an industry representative.

He's not representative of anybody.

He is a person who has expertise.

And just as I have a consumer on the committee, I have someone who has a background in industry.

I think that makes for a better committee.

LIZ JACKSON: Industry also wanted to see the back of Professor David Henry, the man who pioneered this cost-effective system that is regarded all round the world as a model, indeed, for other countries to copy.

Industry wanted to see the back of him.

You've delivered that.

Is that a coincidence as well?

DR MICHAEL WOOLDRIDGE: Industry had nothing to do with that.

LIZ JACKSON: They wanted to see the back of him.

You've delivered it.

That's just another coincidence?

DR MICHAEL WOOLDRIDGE: Well, I came to a view about Professor Henry.

I think it's unfair to talk too much about individuals.

But he was one of four people who had been there for 68 years between them.

LIZ JACKSON: Well, he hadn't been there for 68 years.

He joined in 1991.

DR MICHAEL WOOLDRIDGE: Yes, he'd been there for 10.

LIZ JACKSON: And he pioneered the system that is now the cost-effective system that's used by that committee.

DR MICHAEL WOOLDRIDGE: And he'd done a very good job at that.

He is internationally regarded.

But I felt it was time to move on.

I felt it was time to change some people.

There was an overly antagonistic relationship developing with industry.

That's not the way I like to do things.

I'd like to work together to try and get good outcomes.

And I thought the committee needed a few changes.

LIZ JACKSON: Is Professor Henry right and Professor Don Birkett right to say that over the past two years, your department has been subject to intense pressure from industry about the fact that the PBAC delivers what they regard as low prices?

DR MICHAEL WOOLDRIDGE: Well, I agree.

As Health Minister, I want low prices.

As Health Minister, in 1997, we introduced a change that actually took prices down by even $500 million extra.

So I can see that we have some of the lowest prices in the world.

That's good for government.

It's good for consumers.

LIZ JACKSON: You've put on the committee somebody who's on record -- Mr Pat Clear -- on record as saying that the industry prices, the prices they're getting, are too low.

DR MICHAEL WOOLDRIDGE: He's just one of 12 people.

LIZ JACKSON: Two months ago, we had 12 experts on a committee.

We now have two left.

Neither of them have more than 12 months experience on that committee.

Neither of them.

So you've managed to destroy the skill base that's been accumulated over the years.

Any experience they have --

DR MICHAEL WOOLDRIDGE: No, couldn't be further from the truth.

LIZ JACKSON: Couldn't be further from the truth?

Well, there's two out of ten left.

DR MICHAEL WOOLDRIDGE: Hang on.

They're not the only 10 people in the world.

I know a committee that's been there a long time tends to think they're irreplaceable.

But I have a better-qualified committee now, person for person, than I had previously.

And yes, unfortunately, a bit of the committee's corporate memory has gone.

But that's not just the committee.

The Department has a lot of corporate memory.

There's corporate memory elsewhere.

LIZ JACKSON: Minister, we are running short of time.

I just need to finally ask for your response -- both Professor Birkett and David Henry have raised with us a concern about a meeting that happened in August 1999, a meeting that I'm sure you'll remember.

They came to see you to raise concerns about the amount of industry pressure that there was on the committee, concerns that industry was --

Particularly the drug company Pfizer.

Now, at that meeting, one of your senior advisers was present at the meeting.

She subsequently took a job with the drug company Pfizer.

Can you just confirm that that's the case?

DR MICHAEL WOOLDRIDGE: I did ask her about this.

At the time, she did have a number of offers.

She had not chosen any.

LIZ JACKSON: But she was at that time considering a job with Pfizer?

DR MICHAEL WOOLDRIDGE: Well, it was one of the offers.

But I know her very well.

I trust her.

Some allegations have been made.

I think it's very cowardly to make allegations against staff members.

She's an honourable person.

LIZ JACKSON: Do you think it's appropriate?

Do you think it's appropriate that two people should come to a meeting in your office and have somebody present that is contemplating a job offer with the very company that they say is unduly pressuring their work?

DR MICHAEL WOOLDRIDGE: She passed nothing on from that meeting.

It's quite wrong and defamatory to suggest that could be the case.

LIZ JACKSON: I don't think anyone's suggesting that.

They're just saying did you know about it and was it appropriate that she should be there.

DR MICHAEL WOOLDRIDGE: I didn't know about it.

LIZ JACKSON: You didn't know she was leaving?

DR MICHAEL WOOLDRIDGE: Oh, I knew she was leaving.

LIZ JACKSON: You didn't know that one of the job offers was Pfizer?

DR MICHAEL WOOLDRIDGE: No.

I have a large staff.

I don't organise individual jobs for people.

But I think that's really just a bit paranoid.

I remember that meeting.

It was an enormously strange meeting.

I couldn't really understand what they were on about.

They were talking about international conspiracies and drug companies wanting to bust the PBS.

Government makes policy about the PBS.

We're strongly supportive of it.

We have a track record of making it sustainable so it can exist into the future.

I couldn't see the point of what they were saying.

LIZ JACKSON: Dr Wooldridge, we're going to have to finish there.

Thank you very much indeed for your time.

DR MICHAEL WOOLDRIDGE: Thank you very much, Liz.