The aim is not to take politics out of policymaking but to build institutions that help governments act in the public interest, without needing courage each time they confront the loudest and best-connected lobbyists.
Our health system is under growing strain. Universal health insurance was created for a much younger Australia: when Medibank began in 1975, fewer than one in 10 Australians was 65 or older. Today, it is almost one in five.
Over successive decades, an older population, more people living with chronic disease and an expanding range of treatments have increased the demand for healthcare and the cost of providing it.
As a result, the share of the economy taken up by federal health spending is expected to rise by more than half in the next four decades.
Keeping up with rising demand will require more care, more spending and reforms to make care more efficient. Australia must do all that just to stand still. We should also do things we aren’t doing now, including getting care to everyone who needs it and doing much more to prevent disease in the first place.
That balancing act – doing more, doing it better and doing it differently – will take masterful statecraft. It will be impossible if vested interests dominate the political process, which determines what governments do, or the policy process, which determines how they do it. That’s why both need stronger safeguards.
There are few better examples of what happens when politics and policy are left exposed to vested interests than community pharmacy. Dispensing fees are not based on evidence. They include surcharges that are hard to justify and one that can be added to the bill for no reason at all.
The Pharmacy Guild of Australia, which represents pharmacy owners, has formidable resources and access to government. In the five years to 2024-25, it donated $2.5 million to political parties, making it the biggest donor from the health sector in that period and the 15th biggest donor overall. Over four years, it also spent $16.3 million on public campaigns.
During the battle over 60-day dispensing, federal health minister Mark Butler said he and his department had spent hours meeting the guild. It mobilised pharmacy owners for face-to-face lobbying at Parliament House. Its annual parliamentary dinners bring politicians and the industry together.
Stronger policies on lobbying and donations would help balance the scales. Where community pharmacy really stands out, though, is how policy is made.
Under Community Pharmacy Agreements, the guild negotiates directly with government over pharmacy regulation and billions of dollars in public funding.
The current agreement followed nine months of direct negotiations between the government and the guild. Patients, consumers, employed pharmacists and other health professionals were not equal parties to those negotiations.
This goes well beyond giving an industry a voice. The organisation representing businesses that get government funding has a privileged bargaining position in how those businesses are funded and regulated.
It wasn’t always this way.
Until 1990, pharmacy funding was set by the independent Pharmaceutical Benefits Remuneration Tribunal, which was established to insulate funding decisions from political pressure. In 1989, after assessing pharmacy costs, the tribunal decided pharmacies were being paid too much. It moved to cut fees sharply.
Pharmacy owners protested and some closed their doors. The health minister bypassed the tribunal and negotiated directly with the guild. The first Community Pharmacy Agreement followed in 1990.
A political compromise forged in crisis has calcified into business as usual. Despite billions of dollars being spent on pharmacy remuneration each year, there hasn’t been a comprehensive study of pharmacy dispensing costs since 1989.
It’s time to bring back impartial, evidence-based policy. The Independent Health and Aged Care Pricing Authority should collect pharmacy cost data and determine efficient pharmacy fees, applying the same principles of evidence, transparency and independent pricing that operate in other parts of the health system.
Grattan Institute’s recent report, Future pharmacy, showed that the Pharmacy Guild has too much influence over pharmacy policy, which benefits owners at the expense of patients and taxpayers.
The guild hasn’t put out a detailed public response, but it has been hard at work behind the scenes. It wrote to Grattan Institute supporters, urging them to reconsider their support.
We welcome criticism and debate about our work, but we’d prefer it was public. Sadly, private pressure and lobbying by vested interests have long been a problem in Australia. Melbourne Institute director Beth Webster recently wrote a useful reminder that many reforms Australians now take for granted were fiercely resisted.
Medicare is now so central to Australian life that it is easy to forget how hard it was to create. Efforts to establish universal health insurance repeatedly foundered in the face of intense opposition from medical and health insurance groups.
Generations of health department officials thought it couldn’t be done. Even after Labor won government in 1972, medical groups kept fighting the plan, including with a $2 million “fighting fund”.
Webster chronicles similar resistance to introducing child support and to winding back high tariffs.
Perhaps reform wasn’t meant to be easy. It takes evidence, political leadership and persistence. But with service systems and government budgets under growing pressure, we can’t afford to make it this hard.
Pharmacies are far from the only sector in which the public interest needs more protection.
Grattan Institute’s 2018 report, Who’s in the room?, found businesses with the most to gain or lose from government decisions lobbied harder and got more time with senior decision-makers. Highly regulated industries were dramatically over-represented in political donations, commercial lobbying and ministerial meetings.
The report showed the consequences in pharmaceutical pricing, gambling reform and toll roads. In each case, those with the biggest financial stake in a decision were organised, persistent and well connected. The people who would gain from reform, such as consumers and taxpayers, were numerous, dispersed and much less organised.
Lobbying is legitimate. Governments need to hear from industries they regulate, and those industries often have useful expertise. Political donations don’t prove a particular decision has been bought.
Money, access and influence go together, however. Well-resourced groups can employ lobbyists, run campaigns and build relationships with decision-makers. They get repeated opportunities to frame a problem, press their solution and argue against alternatives.
When the interests of the people in the room are skewed, that can skew government’s view of the world.
Grattan Institute called for stronger checks and balances: greater transparency about ministerial meetings and lobbying, better disclosure of donations, closing the revolving door between politics and lobbying, and reducing political parties’ reliance on major donors.
Those safeguards can help insulate politics, but a second layer of insulation is needed for policymaking. Technical decisions about billions of dollars of public money shouldn’t be bargained out between government and the organisations with the biggest financial stake in the result.
That lesson has been learnt and applied in many parts of health policy.
Related
Drug companies don’t decide whether their medicines represent value for money. The Pharmaceutical Benefits Advisory Committee independently assesses clinical effectiveness, safety and cost-effectiveness before recommending a medicine gets a public subsidy.
Medical services and technologies go through a similar independent assessment process. An independent body sets the price the federal government pays for public hospital care, using national data and making transparent calculations.
Governments are still accountable. They can change the rules for independent bodies or reject their advice. But these institutions establish an independent evidence base, bring expertise to bear and make clear trade-offs that can be scrutinised.
One area in which an independent body is most needed is chronic disease prevention. This cause needs a champion that can look beyond the electoral cycle and stand up to powerful food, alcohol and other commercial interests. The independent Australian Centre for Disease Control’s remit should be expanded to include chronic disease prevention. It should tell governments, and the public, the best ways to reduce disease, and the costs and benefits those measures involve.
An independent body should assess how many health workers Australia needs, and its analysis should flow through into training targets and funding. Professions often have an interest in limiting competition, while large employers can benefit from rapid workforce expansion. Neither should determine the answer.
With no independent umpire, governments arbitrate between competing pressures, often inconsistently. The result has been boom-and-bust workforce planning: shortages in some fields, oversupply in others, and uncertainty about where the system is headed.
The right institutional design will differ in each case. The principle is the same, however: groups that win or lose from government decisions should have a voice but should not dominate how decisions are made.
Independent institutions aren’t always the answer. A proliferation of narrowly focused bodies and objectives can fragment decision-making, obscure trade-offs and make government slower instead of better. Sometimes ministers should simply make a decision, or negotiate one.
Insulation is needed, however, when powerful vested interests can gain at the expense of consumers, taxpayers or future generations. It’s a principle that goes beyond good health policy.
One of the foundations of liberal democracy is separation between private power and public authority. Governments should hear competing interests but make decisions through institutions designed to serve the public as a whole.
The aim is not to take politics out of policymaking. It is to build institutions that help governments act in the public interest, without requiring exceptional courage every time they confront the loudest and best-connected interests in the room.
Peter Breadon is the Health Program Director at Grattan Institute. He has worked in a wide range of senior policy and operational roles in government, most recently as Deputy Secretary of Reform and Planning at the Victorian Department of Health.
This article was first published by The Saturday Paper. Read the original here.