Australia defends Pharmaceutical Benefits Scheme as US companies urge Trump to impose reciprocal tariffs

American medical giants have labelled the federal government’s Pharmaceutical Benefits Scheme (PBS) “egregious and discriminatory” and have pressed US President Donald Trump to target Australia when he imposes sweeping “reciprocal tariffs” on trading partners next month.

A lengthy letter sent from a US pharmaceutical industry representative body to US trade representative Jamieson Greer said the PBS amounted to “damaging pricing policies” that undervalued American innovation and threatened billions of dollars in lost sales.

Under the PBS, the government negotiates prices directly with suppliers to make them cheaper for Australians.

It also seeks to list the most cost-effective version of medicines where multiple are available, led by the independent Pharmaceutical Benefits Advisory Committee (PBAC). About 900 prescription medicines are currently on the scheme.

The letter argues this process “systematically devalues US medicines” and fails to “appropriately recognise innovation” by preferencing cheaper “generic” versions of medicines rather than the higher-priced originals in some circumstances.

“[Australia] penalises legitimate efforts by innovators to protect their intellectual property rights,” the letter read.

The Trump administration intends to impose fresh tariffs in April on countries it believes employ “unfair” trade practices, a term that has been applied extremely broadly, including to sales taxes such as Australia’s GST.

The purpose of the letter is to encourage the Trump administration to regard the PBS, and several other medicine schemes around the world, as an unfair practice and impose tariffs in response, for instance on Australia’s own pharmaceutical exports into the US.

‘No way’ PBS will change, say Labor ministers

Labor has already categorically ruled out touching the PBS in any trade negotiations, and ministers have been quick to emphasise the Trump administration could not exert any direct influence on the scheme.

“There’s no way we’re going to change the PBS because of advocacy of any other country,” Health Minister Mark Butler said on Sunday.

“This is a cherished part of the Australian healthcare system, one that Labor has fought for 75 years.”

Trade Minister Don Farrell on Sunday dismissed discussion about the PBS as “speculation” and said he had “not heard one comment from any person in the United States” on the subject.

“There will be absolutely nothing that the Americans can do to impact on our health system or the PBS system,” he said.

“And we certainly would not contemplate doing anything at any stage that makes our health system more expensive.”

Instead, the government fears that frustrations over the PBS could see the Trump administration retaliate by hitting Australian pharmaceutical exports — which were worth $US1.2 billion ($1.89 billion) in 2023 — with punitive tariffs.

One government source stressed that the situation in the US was still “very uncertain” and that it simply was not clear whether Mr Trump would run with the grievances raised by US pharma giants.

“We simply don’t know what the administration is, or is not, going to do at this stage, so we need to approach this carefully and calmly,” they said.

They also said that while Australia’s much-touted trade deficit with the US did not protect it from steel and aluminium tariffs, it might still push Australia “down the list” when Mr Trump picked his priority trade targets in April.

The Coalition’s health spokesperson Anne Ruston said the opposition “does not support President Trump’s tariffs and would not support any proposals that would increase health costs for consumers and/or the Australian taxpayer”.

She said the PM should “travel to the United States as a matter of urgency for a face-to-face meeting with Donald Trump”.

US cattle industry also lobbies for tariffs

The US cattle industry is also using the Trump administration’s trade review to target Australian beef exports to the US.

The National Cattlemen’s Beef Association told the administration that the free trade deal between the US and Australia was “by far the most lopsided and unfair trade deal for US cattle producers”.

The association said while Australia enjoyed “unfettered access to the US market”, the Australian government used “myriad of sanitary concerns and endless bureaucratic red tape to delay the approval of US beef”.

“This is a slap in the face to US cattle producers and enough is enough,” it wrote.

“If the Australians will not accept our beef products, then it is only fair that we reciprocate.”

Mr Trump has said little about the pharmaceutical industry since returning to office, although he recently accused Ireland of unfairly luring US medicine companies away from America.

And when he was last in office Mr Trump repeatedly blamed foreign countries for the high price of medicines in the United States, saying they were taking advantage of US investment in medical research without paying a fair price for the drugs they developed.

Senior fellow at the United States Studies Centre Bruce Wolpe said the price controls on pharmaceuticals in Australia could easily attract Mr Trump’s attention.

“Australia’s market are significant to the industry, but it’s a big global industry. In just raw political terms in Washington, the pharmaceutical industry has more political clout in the United States than it has in Australia,” he told the ABC.

“This is an easy one for the president to give to big pharma and their agenda, which they will deeply appreciate, which goes into other calculations in other health policy decisions in the United States and in Congress.”