19.47 Government decisions about healthcare funding can indirectly influence patent holders’ decisions about licensing and the level of licence fees. Government funding and purchasing power may provide mechanisms to control the availability and cost of medical genetic testing and other aspects of healthcare, including those costs that may be attributable to patent rights. The ALRC has examined whether government funding and purchasing power should be used to influence the cost of medical genetic testing that is subject to gene patents and, if so, how this might be achieved.
19.48 Government funding decisions can help determine the availability of medical genetic testing. The HGSA has stated that the cost of genetic testing to individuals, including testing that is subject to gene patents, should be minimised ‘through a national funding program that is limited to tests of proven clinical utility and cost-effectiveness’, with the price to be negotiated by government. The AHMAC Working Group on Human Gene Patents recommended in 2001 that government funding for genetic testing should be restricted initially to genetic testing performed by publicly funded facilities, in part to assist in controlling healthcare costs.
19.49 The PBS has been cited as an example of how government purchasing power may assist in controlling the cost of healthcare. There is evidence that the PBS allows relatively low prices for drugs to be maintained because the government acts as a single buyer in a market with a number of sellers (a monopsony).
19.50 The MBS and PBS are already used to control the cost of medical procedures and pharmaceuticals. In DP 68, the ALRC proposed that AHMAC should examine options for using government funding and purchasing power to control the cost of goods and services that are subject to gene patents and used in the provision of healthcare.
19.51 This proposal received wide support. For example, the Department of Human Services Victoria stated that there should be ‘a national mechanism for using government funding and purchasing power to control a reasonable licence fee to those tests covered by gene patents’—through either the proposed HGCA or a body equipped to perform economic analysis. The HGSA stated that government funding and central purchasing might lead to ‘equitable provision’ of testing in both the public and private sectors.
19.52 Governments have considerable control over healthcare expenditure in Australia through budget appropriations, fixing health benefit levels, taxation arrangements, and setting the parameters for private health insurance arrangements. The MBS and PBS are relevant where funding is sought through federal funding programs. There are also funding and other mechanisms that may be used by state and territory health departments. AHMAC noted that ‘jurisdictions regularly make decisions in order to manage the costs resulting from new health technologies through the application of appropriate efficacy and cost effectiveness analysis, funding and targeting mechanisms’.
19.53 There may be other ways in which funding mechanisms might be used to address concerns about the impact of gene patents on healthcare provision, including by placing conditions on the public funding of new medical services. For example, Medicare funding of a medical genetic test might be made conditional on broad licensing of the test.
19.54 The ALRC recommends that options for using government funding and purchasing power to control the cost of genetic medical technologies subject to gene patents should be examined by Commonwealth, state and territory health departments (Recommendation 19–2). The ALRC recognises that this may have competition policy ramifications. Depending on the mechanism chosen, cooperation by Commonwealth, state and territory governments could be anti-competitive. However, this does not prevent the options being examined. Further, if the public interest warrants it, the application of national competition policy can be excluded by legislation or by seeking authorisation from the Australian Competition and Consumer Commission (ACCC) under the Trade Practices Act 1974 (Cth).
Recommendation 19–2 AHMAC should examine options for using government funding and purchasing power to control the cost of goods and services that are subject to gene patents and used in the provision of healthcare.
 Australian Law Reform Commission, Gene Patenting and Human Health, IP 27 (2003), Question 12–7.
 Human Genetics Society of Australasia, HGSA Position Paper on the Patenting of Genes (2001).
 The predecessor to the AHMAC Advisory Group.
 Australian Health Ministers’ Advisory Council Working Group on Human Gene Patents, Final Draft Report of the AHMAC Working Group on Human Gene Patents (2001), 27, rec 7.
 In 1999–2000 the Commonwealth Government contributed $3,522 million in benefits under the PBS and the Repatriation Pharmaceutical Benefits Scheme, out of a total expenditure on all pharmaceuticals of $7,563 million: Australian Institute of Health and Welfare, Australia’s Health 2002 (2002), 255.
 See M Rickard, The Pharmaceutical Benefits Scheme: Options for Cost Control: Current Issues Brief No 12 2001–02 (28 May 2002), Parliament of Australia, <www.aph.gov.au/library/pubs> at 16 June 2004; Productivity Commission, International Pharmaceutical Price Differences: Research Report (2001); Productivity Commission, Evaluation of the Pharmaceutical Industry Investment Program (2003), [3.12].
 See Australian Law Reform Commission, Gene Patenting and Human Health, DP 68 (2004), Proposal 20–2.
 Human Genetics Society of Australasia, Submission P76, 16 April 2004; Australian Centre for Intellectual Property in Agriculture, Submission P81, 16 April 2004; Royal College of Pathologists of Australasia, Submission P82, 16 April 2004; Department of Health Western Australia, Submission P89, 16 April 2004; Cancer Council Australia, Submission P96, 19 April 2004; Department of Industry Tourism and Resources, Submission P97, 19 April 2004; Cancer Council Victoria, Submission P101, 20 April 2004; Queensland Government, Submission P103, 22 April 2004; Department of Human Services Victoria, Submission P111, 30 April 2004; Genetic Support Council WA (Inc), Submission P119, 13 May 2004.
 Department of Human Services Victoria, Submission P111, 30 April 2004.
 Human Genetics Society of Australasia, Submission P76, 16 April 2004.
 In the case of the Australian Government, appropriations include grants to the States and Territories that are specifically targeted to healthcare purposes, payments of health benefits to individuals, subsidies paid to providers of healthcare services, and reimbursements to private health insurance funds.
 Australian Health Ministers’ Advisory Council, Submission P49, 23 October 2003.
 See, eg, Human Genetics Society of Australasia, Submission P76, 16 April 2004; Walter and Eliza Hall Institute of Medical Research, Submission P71, 13 April 2004.