Key Points
- A US medicines lobby is pushing the White House to place tariffs on Australian pharmaceutical imports
- Labor and the Opposition have pledged to bring down the cost of PBS-listed medicines.
- An economist says potential tariffs could undermine the government's plegde.
An election promise to ensure cheaper medicines for Australians could be under threat as the United States looks to impose a new round of tariffs.
The powerful US pharmaceutical lobby has written to the White House, taking aim at Australia's Pharmaceutical Benefits Scheme (PBS), as President Donald Trump mulls over new tariffs.
Trump was urged by lobby group Pharmaceutical Research and Manufacturers of America to impose tariffs on Australian pharmaceutical exports, saying the PBS is "egregious and discriminatory" towards the US pharma sector.
Meanwhile, by capping every script at $25 or less from January 2026.
The current maximum cost of filling a script for a PBS medicine is $31.60 for general patients and $7.70 for concession cardholders, with the federal government paying the remaining cost.
The Coalition has said it will match Labor’s pledge.
But if Trump listens to the lobbyists, could it derail these election promises made to the Australian public?
How could US tariffs affect prices and supply of medicines?
Worth hundreds of billions of dollars, the role of the US pharmaceutical industry goes beyond manufacturing medicines.
It also wields power and influence over US politics.
If the Trump administration places a tariff on Australian pharmaceutical imports, it could "shake up the PBS," according to Professor Tim Harcourt, chief economist at University of Technology Sydney.
Harcourt explained that pharmaceutical companies in the US hold disdain for the Australian health system, which subsidises costs for its people.
"The PBS is contentious. In fact, as Opposition leader, Mark Latham got the Howard government to get PBS an exemption from the Australia–US Free Trade Agreement," he told SBS News.
"The US drug companies don’t like Medicare — they want all countries to privatise medicine.
"It’s a main difference between Australia and the US — where we have Medicare and they have a private system."
He explained that tariffs could reduce demand for Australian products, leading to increased costs.
"Tariffs will divert supply from Australia to more profitable markets," Harcourt said.
"The PBS would absorb some of the cost but not all, so yes prices would rise."
Flavio Menezes, a professor of economics at the University of Queensland, said medicine availability could be impacted.
"The government could choose to increase co-payments for PBS-listed medicines, but this seems politically unlikely given the public opposition to higher healthcare costs and concerns about cost of living," he said.
"A more probable response might be tighter restrictions on which medicines are listed on the PBS, potentially delaying or limiting access to new drugs."
Government firm on PBS caps
Health Minister Mark Butler has stood firm over the $25 prescription cap, saying the PBS is non-negotiable.
"The clear message we want to send to everyone, whether it’s to the Americans or to patients here in Australia who might be worried about these reports, is that … we’re not going to negotiate over the PBS," he told Channel Nine's Today Show on Thursday.
"This is one of the cornerstones of, I think, one of the best healthcare systems in the world. We’re not interested in an American-style user pays healthcare system in the Labor Party. We’re determined to protect Medicare and to protect the PBS."
Strongly backing the PBS, Prime Minister Anthony Albanese said on Thursday morning it was "not up for sale", and argued that tariffs would be harmful to Australia's economy as well as the US. He added his government would advocate against them.
"The United States enjoys a two-to-one surplus, they sell twice as many goods in value to Australia as we sell to the United States, therefore the imposition of tariffs is certainly not in the interest of the United States and, obviously, is not in the interest of Australians either," he said.
Trump is expected to decide on a further round of tariffs next month.
How does the PBS work?
Under the PBS, the government negotiates prices directly with suppliers to make them cheaper for Australians.
The independent Pharmaceutical Benefits Advisory Committee (PBAC) recommends which medicines are to be listed on the PBS, with about 930 prescription medicines currently on the scheme, according to the Department of Health website.
The US pharmaceutical lobby takes issue with the long process of obtaining approval to be added to the PBS which it says delays the arrivals of its drugs on chemist shelves, as well as its "damaging pricing policies" which it says impacts manufacturers' freedom to decide prices and profits.
The government spends $17.7 billion for the supply of those medicines, which is 91.6 per cent of the cost. Australian patients contribute $1.6 billion, or the remaining 8.4 per cent — this is the co-payment they make for their medication needs.
The cost of Labor's new PBS proposal will amount to $689 million per year and is expected to be outlined in the upcoming federal budget on 25 March.
