Trade stand-off continues as US drug tariffs loom

AU Financial Review

19-07-2025

Australia's pharmaceutical benefits scheme is not up for negotiation, says the federal government in the face of ramped-up US threats to triple the price of foreign medicines.
In a continuation of his erratic approach to trade policy, President Donald Trump says taxes on drug imports could be announced as soon as the end of the month, with eventual tariff rates of up to 200 per cent.
'We're going to start off with a low tariff and give the pharmaceutical companies a year or so to build, and then we're going to make it a very high tariff,' Trump said.
Australia's Pharmaceutical Benefits Scheme, under which the government negotiates medicine prices with manufacturers before subsidising them for patients, is reportedly in the crosshairs of US pharmaceutical companies lobbying the White House.
The Albanese government has flatly refused any negotiation on the PBS.
'Obviously, they are being lobbied, as other US presidents have been for many years by the US big pharma industry, which wants not just Australia's scheme but other schemes like it around the world ... they want that freed up,' federal health minister Mark Butler said on Wednesday.
'They want to see their profits increased. That's been the case for decades and decades.'
The PBS is crucial to ensure equitable and affordable access to medicines, according to Royal Australian College of GPs president Michael Wright.
'We should be proud of the prime minister and treasurer's steadfast support for maintaining the PBS, regardless of external pressure.'
But complaints about such pricing schemes are common across the industry and include Australian medicine manufacturers, says Melbourne University research fellow Joe Carrello.
'They argue the increasing costs it takes to investigate and run trials and bring a new drug to market aren't keeping up with what the return is, given what the government is willing to pay,' Dr Carrello said.
Dr Carrello, who helps evaluate medicines proposed for the PBS after their approval by the Therapeutic Goods Administration, said there could be consequences to a relatively small market like Australia negotiating such lean prices.
'The fear is some US companies may decide against launching new drugs in Australia because comparatively, they're not going to get a good price,' he said.
In the US, where a relatively free-market approach has been favoured, drug prices are almost three times higher than in 33 comparable income countries, according to RAND research.
Australians have an average life expectancy of 83.2 years, compared to 77.4 years in the US, World Bank data shows.
'Without the PBS, we'd see people losing access to affordable medications and an increased spend per person on average but it wouldn't be evenly distributed,' Dr Carrello said.