FEDERAL COURT OF AUSTRALIA

PFIZER PTY LTD v BIRKETT

[2000] FCA 303

N1120 of 1999

Mathews J

20 March 2000

SUMMARY OF REASONS FOR JUDGMENT GIVEN ON 20 MARCH 2000

In accordance with the practice of the Federal Court in certain cases of public interest, I have prepared a brief summary to accompany the reasons for judgment which are to be delivered today. But the only authoritative pronouncement of my reasons is that contained in the full reasons for judgment. This summary is necessarily incomplete and deals only with certain aspects of the judgment.

I should commence by emphasising the limited role of this Court in reviewing the decisions of administrative decision-makers. It is not the function of the Court to review the merits of these decisions. Its role is to ensure that administrative decisions are reached according to law, that proper procedures are followed and that appropriate considerations are taken into account. Unless a decision is so manifestly unreasonable that no reasonable decision-maker could have made it, the Court will not intervene in the fact-finding process or otherwise explore the merits of the case.

In this case Pfizer Pty Limited, the importer of the drug Viagra, is challenging the decision of the Pharmaceutical Benefits Advisory Committee not to recommend to the Minister for Health and Aged Care that Viagra be included in the Pharmaceutical Benefits Scheme. This decision meant that Viagra (which I refer to in the judgment by its scientific name, sildenafil) cannot be made available to the public under Commonwealth subsidy. It remains available upon prescription, but on payment of the full price. Under the National Health Act 1953 (Cth), a drug attracts Commonwealth subsidy only if the Minister has declared it to be a pharmaceutical benefit under the Scheme. The Minister cannot make this declaration unless the Pharmaceutical Benefits Advisory Committee has recommended that he do so. Accordingly, the Committee's decision not to recommend that Viagra be included in the Scheme meant that it did not reach the stage of Ministerial consideration.

There were a number of challenges to the manner in which the Committee reached its decision in this case. The most significant of these was that the Committee based its decision on irrelevant considerations. This directly raised an issue as to the role of the Committee and the type of matters which it is entitled to take into account when deciding whether to recommend to the Minister that a drug be included in the Pharmaceutical Benefits Scheme.

The Committee's decision not to recommend that Viagra be included in the Pharmaceutical Benefits Scheme was essentially based upon three considerations:

· First, that the cost to Government of subsidising Viagra under the Scheme was likely to be unacceptably high, particularly as there was a risk that the usage of the drug could not effectively be limited to people for whom it was medically indicated, namely to people suffering from "organic impotence of neurogenic or vasculogenic origin".

· Secondly, that an alternative preparation, alprostadil (commonly known as Caverject) was already available under the Pharmaceutical Benefits Scheme for treatment of the same condition. Caverject is a substance which promotes erection when injected at the base of the penis. The Committee considered that Caverject remained effective and available and appeared to be meeting the needs of patients for whom it was clinically indicated.

· Thirdly, that in the absence of material enabling direct comparisons to be drawn between Viagra and Caverject, it had not been established that Viagra was as effective as Caverject.

All these findings were challenged by Pfizer. The most far-reaching of its challenges was that the Committee improperly exercised its powers when it took into account the cost to Government of including Viagra in the Pharmaceutical Benefits Scheme. This was a matter for consideration by the Minister, not the Committee, it was urged.

Pfizer's submission, put simply, is that a division of functions is to be implied between the Committee on the one hand and the Minister on the other. The Committee consists almost entirely of medical and pharmaceutical experts, and Pfizer submits that its considerations should therefore be confined to medical and pharmacological issues. The Committee is bound to consider and compare the effectiveness and cost of individual items of therapy. But other 'political' considerations, including the overall cost to Government of including a drug in the Pharmaceutical Benefits Scheme are, according to this submission, for the Minister, not the Committee, to take into account.

In my finding, the Committee's considerations cannot be restricted in the manner suggested. The Committee will often need to consider overall costs issues when assessing and comparing the effectiveness and cost of individual items of therapy, a task it is obliged to undertake. More importantly, the Committee, in spite of its name, is a recommendatory rather than an advisory body. Its function is to recommend to the Minister that a particular drug or medicinal preparation should be declared to be part of the Pharmaceutical Benefits Scheme. Subject to one matter, which is immaterial here, the Committee has no power to qualify its recommendations. If the Committee is to make unqualified recommendations that drugs or medicinal preparations be subsidised under the Pharmaceutical Benefits Scheme, it must have regard to all considerations which are relevant to the taking of that course. Its considerations cannot be limited to medical or associated matters. The financial consequences to the Commonwealth of including a drug in the Scheme is clearly a relevant consideration, and the Pharmaceutical Benefits Advisory Committee was entitled to have regard to it in this case.

A number of other challenges were made to the Committee's findings. In general, they do not raise issues of any great significance. Rather they criticise the manner in which the Committee reached its decision in this particular case. I think it unnecessary to enumerate these grounds here. Suffice it to say that in my view none of the grounds of complaint has been substantiated. No basis has been shown for setting aside the Committee's decision.

The full text of this judgment and this summary is available at www.fedcourt.gov.au

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1120 of 1999

BETWEEN:

PFIZER PTY LIMITED

APPLICANT

AND:

DONALD JOHN BIRKETT

FIRST RESPONDENT

MERVYN JOHN EADIE

SECOND RESPONDENT

TERESA RITA O'ROURKE CRAMOND

THIRD RESPONDENT

GORDON JOHNSON

FOURTH RESPONDENT

ROSEMARY MUNRO

FIFTH RESPONDENT

SIAN MARY HUGHES

SIXTH RESPONDENT

DAVID ALEXANDER HENRY

SEVENTH RESPONDENT

EDWARD KEITH GRAVER

EIGHTH RESPONDENT

JOHN FARQUHAR MACDONALD

NINTH RESPONDENT

AUBREY PITT

TENTH RESPONDENT

ERICA MARY COHN

ELEVENTH RESPONDENT

EACH IN THEIR CAPACITY AS MEMBERS OF THE PHARMACEUTICAL BENEFITS ADVISORY COMMITTEE

JUDGE:	MATHEWS J
DATE:	20 MARCH 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 The applicant, Pfizer Pty Limited ("Pfizer"), is the exclusive importer into Australia of a drug commonly known as Viagra, but generally referred to in these proceedings by its scientific name, sildenafil. The respondents are members of the Pharmaceutical Benefits Advisory Committee ("PBAC" or "the Committee"). On 16 September 1998 the applicant filed a submission with the PBAC seeking that sildenafil be listed on the Pharmaceutical Benefits Scheme ("PBS"). Under the National Health Act 1953 (Cth) ("the Act") the Minister for Health and Aged Care may declare that a particular drug be included in the PBS, but only if the PBAC has made a recommendation to that effect.

2 At its meeting on 3 and 4 December 1998 the PBAC decided not to recommend the inclusion of sildenafil on the PBS. Pfizer was informed of this decision. On 18 March 1999 Pfizer filed a further submission with the PBAC seeking the listing of sildenafil on the PBS. This was rejected at a meeting of the PBAC on 3 and 4 June 1999. Pfizer seeks review of this decision pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act"). It relies on a number of grounds which will be discussed later. In the meantime, it is appropriate to describe the statutory scheme under which the PBAC operates and the course of dealings between Pfizer and the PBAC.

Legislative Scheme

3 The Pharmaceutical Benefits Scheme is established under Part VII of the Act. It enables certain drugs or medicinal preparations (described in the Act as "pharmaceutical benefits") to be made available to the public under Commonwealth subsidy. Members of the public can obtain these drugs from approved pharmacists on presentation of prescriptions written by approved medical practitioners and on payment of a statutorally fixed charge. The pharmacist is then entitled to receive from the Commonwealth the difference, if any, between the fixed charge and the "Commonwealth price" of the pharmaceutical benefit. The Commonwealth price is determined by the Pharmaceutical Benefits Remuneration Tribunal, a body which is established under s 98A of the Act.

4 The central provision of Part VII is s 85. This provides, in essence, that a drug or medicinal preparation will be available under the PBS if the Minister makes a declaration to that effect. Subs (1) and subs (2), as relevant here, provide as follows:

"85 Pharmaceutical benefits

(1) Benefits shall be provided by the Commonwealth, in accordance with this Part, in respect of the drugs and medicinal preparations in relation to which this Part applies.

(2) Subject to subsection (3), the drugs and medicinal preparations in relation to which this Part applies are:

(a) drugs and medicinal preparations that are:

(i) declared by the Minister, in writing, to be drugs and medicinal preparations to which this Part applies; or

(ii) included in a class of drugs and medicinal preparations declared by the Minister, in writing, to be a class of drugs and medicinal preparations to which this Part applies; and

(b) ......"

5 Subs (3), referred to in subs (2), gives the Minister power to determine the strength, unit size and form of drug or medicinal preparation for which benefits are to be provided under Part VII.

6 By subs 85(2A) and s 88A, the Minister has power to specify the circumstances in which prescriptions are to be written in relation to pharmaceutical benefits.

7 Section 85(2AA) empowers the Minister to make a declaration that a particular drug or medicinal preparation will cease to be a pharmaceutical benefit under Part VII. Before doing so the Minister must obtain the written advice of the PBAC (s 85(2AB)). Both the PBAC's advice and the declaration to which it relates are to be laid before each House of Parliament (s 85(2AC)).

8 Under s 101(4) the PBAC has a decisive role to play in the making of a declaration under s 85(2). That section provides as follows:

"(4) A drug or medicinal preparation shall not be declared, pursuant to paragraph 85(2)(a), to be a drug or medicinal preparation in relation to which this Part applies unless:

(a) the drug or medicinal preparation was, immediately before the commencement of this subsection, a pharmaceutical benefit; or

(b) the Committee has recommended to the Minister that it be so declared."

9 The PBAC is established under s 101(1) of the Act. It comprises the following members:

· a pharmacist who is an officer of the Department of Health;

· 6 medical practitioners appointed by the Minister from 10 practitioners nominated by the Australian Medical Association;

· a pharmacist appointed by the Minister from nominees of the Pharmacy Guild of Australia; and

· a consumer representative appointed by the Minister.

10 The Minister may also appoint, as additional members of the Committee, a pharmacologist and up to 3 further medical practitioners, at least one of whom must be a nominee of the Doctors' Reform Society.

11 The power of the PBAC to make recommendations to the Minister is set out in s 101(3) of the Act as follows:

"The Committee shall make recommendations to the Minister from time to time as to the drugs and medicinal preparations which it considers should be made available as pharmaceutical benefits under this Part and shall advise the Minister upon any other matter concerning the operation of this Part referred to it by the Minister."

12 The power conferred by s 101(3) is qualified by subss 101(3A) to (3C) which provide as follows:

"(3A) For the purpose of deciding whether to recommend to the Minister that a drug or medicinal preparation, or a class of drugs and medicinal preparations, be made available as pharmaceutical benefits under this Part, the Committee shall give consideration to the effectiveness and cost of therapy involving the use of the drug, preparation or class, including by comparing the effectiveness and cost of that therapy with that of alternative therapies, whether or not involving the use of other drugs or preparations.

(3B) Without limiting the generality of subsection (3A), where therapy involving the use of a particular drug or medicinal preparation, or a class of drugs and medicinal preparations, is substantially more costly than an alternative therapy or alternative therapies, whether or not involving the use of other drugs or preparations, the Committee:

(a) shall not recommend to the Minister that the drug, preparation or class be made available as pharmaceutical benefits under this Part unless the Committee is satisfied that the first-mentioned therapy, for some patients, provides a significant improvement in efficacy or reduction of toxicity over the alternative therapy or therapies; and

(b) if the Committee does recommend to the Minister that the drug, preparation or class be made available as pharmaceutical benefits under this Part, the Committee shall include in its recommendation a statement that the Committee is satisfied as mentioned in paragraph (a).

(3C) Where the Committee is of the opinion that a drug or medicinal preparation, or a class of drugs and medicinal preparations, should be made available as pharmaceutical benefits under this Part, but only in certain circumstances, the Committee shall, in its recommendation under subsection (3), specify those circumstances."

13 Under s 101A the PBAC may establish such sub-committees as it thinks fit to assist it in performing its functions. Sub-committees are to consist of persons appointed by the Committee and/or nominated by the Minister. Two sub-committees have been established under s 101A. They are the Drug Utilization Sub-Committee and the Economics Sub-Committee. The Drug Utilization Sub-Committee monitors the patterns and trends of drug use. The Economics Sub-Committee advises on cost-effectiveness policies and evaluates cost-effectiveness aspects of major submissions to the PBAC.

Factual Background

14 Sildenafil is indicated for the treatment of "organic impotence of neurogenic or vasculogenic origin". It is to be taken orally in tablets of 25, 50 or 100 milligrams. The normal recommended dose is 50 milligrams, to be taken approximately one hour before sexual activity. When it came onto the market there was no other oral therapy for the treatment of erectile dysfunction. The principal therapy previously available was alprostadil, commonly known as Caverject. This is an intracavernosal injection, which is inserted at the base of the penis. It is manufactured by Pharmacia and Upjohn Pty Limited and has been listed on the PBS since 1996. It remains the only treatment for erectile dysfunction available under the PBS.

15 Patients require medical instruction and monitoring when they use alprostadil. Its side-effects, if they occur, are local, including priapism and penile fibrosis. Sildenafil, being an oral preparation, requires no particular medical instruction. It has no local side-effects but has been known to have some general side-effects, including transient hypotension and headaches.

16 On 16 September 1998 Pfizer lodged a submission with the PBAC seeking that sildenafil be listed on the PBS. The submission's executive summary commenced in the following terms:

"Optimal therapy in the treatment of erectile dysfunction is characterised by a simple, non-invasive and non-painful treatment. The therapy aims to achieve high success in men's ability to achieve and maintain an erection sufficient for sexual activity with minor side effects - Viagra achieves this objective."

17 The proposed "indication" for sildenafil was specified as "treatment of organic impotence of neurogenic or vasculogenic origin", this being the same indication as for alprostadil. Alprostadil was specified in the submission as the main comparator, being the only therapy for erectile dysfunction listed on the PBS. The submission commented that "it is expected that in practice, most prescribers will replace Caverject with Viagra".

18 The submission described the various clinical trials of sildenafil. It referred to the advantages of sildenafil over alprostadil in the following terms:

· "significantly higher patient acceptability of Viagra;

· lower overall discontinuation rates;

· the natural response to sexual stimulation when taking Viagra;

· no complex titration is required; and

· no ongoing medical monitoring for Viagra. It is an important part of the management of intracavernosal injection therapy."

19 None of Pfizer's clinical trials had directly compared sildenafil with alprostadil. The submission noted that different outcome measures had been adopted in trials relating to the two preparations and concluded that "[T]here are limitations to comparing the success of [sildenafil] treatment with alternative treatment management strategies".

20 Under "cost analysis" the submission made the following observation:

"A cost-effectiveness analysis resulted from the preliminary economic evaluation. The cost per successfully treated male suffering from organic erectile dysfunction using Viagra has been estimated at $1,087. Caverject is estimated to cost $1,330 per successfully treated patient. This represents a saving of $243 or almost 20% less for Viagra than Caverject to achieve continuation of treatment at 12 months."

21 The submission discussed the overall financial implications of listing sildenafil on the PBS. In this context it made the following estimates:

"At the proposed dispensed price estimated prescription volumes can be estimated at approximately $53 million in PBS outlays. Approximately $8 million of the estimated expenditure will be offset by a reduction in current Caverject sales (ie 85% of current Caverject expenditure). Therefore the growth in expenditure has been estimated at approximately $45 million in the first year.

It has been estimated that PBS outlays will increase to a total of approximately $72 million and a growth in PBS expenditure of $64 million in the second year."

22 Pfizer's submission was in general conformity with guidelines issued by the PBAC in a document entitled Guidelines for the Pharmaceutical Industry on Preparation of Submissions to the Pharmaceutical Benefits Advisory Committee ("the Guidelines"). These Guidelines alert sponsors that major submissions will be assessed at three levels: evaluation by the Pharmaceutical Evaluation Section, consideration by each Economics Sub-Committee member and consideration by each PBAC member. Sponsors are told that it is the executive summary of submissions, not the full submissions, that will be included in the agenda papers for the Economics Sub-Committee and the PBAC meetings. As relevant to the issues in this case, the Guidelines require that details be given of all relevant trials which enable a comparison to be drawn between the proposed drug and its main comparator. They also require that submissions include estimates as to the financial implication for the PBS of the proposed drug being accepted into the Scheme.

23 In accordance with normal procedures, the Health Department's Pharmaceutical Evaluation Section was asked to report on Pfizer's submission. This report, which was described as a "Commentary on the Economic Analyses", was critical of certain aspects of Pfizer's submission. It commented that the submission did not use appropriate outcome measures as the basis of its comparison between siladenafil and alprostadil. It observed that there were many problems in trying to compare the two preparations from the data provided in the submission. It categorised as "not reasonable" Pfizer's claim that sildenafil was more effective and less toxic than alprostadil. Pfizer's submission had estimated that approximately 540,000 males would be eligible for treatment with sildenafil, of whom approximately 15% would be likely to seek treatment, resulting in an eligible population of about 80,000 people. The report criticised the basis upon which the estimate of 540,000 had been reached. It went on to categorise as "not justified and not reasonable" the submission's estimate that only 15% of the eligible population would seek treatment. The report concluded that the submission's estimates of costs to the PBS were likely to be a substantial understatement. It commented that, if Pfizer's estimates were doubled, or quadrupled, the cost to the PBS could be as much as $200 million in the first year. Under the heading of "Overview of the Submission" the report commented:

"Generally the submission conforms to the 1995 PBAC Guidelines. It is well-presented with key information easily located by the evaluator. The majority of the submission presents the evidence accurately. The main indication and choice of main comparator are adequately justified although the justification for not providing a preliminary economic evaluation is not adequate (see Section 2.8)

The key matters in the submission for consideration by the PBAC are:

· the dissimilarity between the trial populations and the population targeted by the proposed listing;

· the uncertainty over the relative effectiveness of sildenafil and alprostadil;

· the lack of preliminary economic evaluation;

· the potential for over-use of sildenafil;

· the likely under-estimate of the financial implications of listing sildenafil; and

· the inconsistency between the pack size as described in the PI (4 tablets) and that proposed for PBS listing - 5 tablets, equivalent to 1 month's supply, according to page 8 of the submission.

All of the above could be addressed by the sponsor in its pre-PBAC response."

24 On 16 November 1998 the secretary of the PBAC, Mr Des Threlfall, sent to Pfizer a copy of the Pharmaceutical Evaluation Section's report, together with an overview of the submission which had been prepared by the PBAC secretariat. Certain passages were deleted or obliterated from the copies which were sent to Pfizer. The full unedited texts later became part of the agenda papers for the PBAC meeting which discussed and rejected Pfizer's submission. The omission of this material from the documents sent to Pfizer is relied upon by Pfizer as a breach of natural justice, and I shall be discussing it later.

25 The furnishing of these reports to Pfizer was part of the normal "pre-PBAC consultation process" whereby sponsors are invited to comment on material which is to be placed before the PBAC when it considers their submission. Pfizer was invited to provide a response by 23 November 1998 which would then be incorporated into the agenda papers for the forthcoming meeting of the Committee.

26 On 23 November 1998 Pfizer provided its response to these documents. The opening passage of its response was in the following terms:

"Pfizer is particularly concerned with the content and tone of the Pharmaceutical Evaluation Section (PES) report. It fails to present a balanced view of the clinical evidence as the report overstates the benefits of alprostadil, while being overly critical of the effectiveness of Viagra. The PES comments do not adequately reflect the submission as presented or the issues Pfizer has highlighted within it."

27 The document proceeded to respond to a number of matters raised in the Pharmaceutical Evaluation Section's report. In relation to the report's concern as to the potential for overuse of sildenafil, resulting in significantly higher financial outlay, Pfizer suggested that a special patient contribution might be applied to sildenafil. This would reduce the total cost to government of including the drug on the PBS, whilst still allowing subsidised access to patients with organic erectile dysfunction.

28 One of the steps the PBAC had taken shortly after receiving Pfizer's original submission was to write to the Urological Society of Australasia, seeking advice as to how drugs such as alprostadil or sildenafil might be targeted to the most deserving patients, thus limiting PBS outlays. Pfizer was not told about this letter. Indeed any reference to it was obliterated from the documents which were sent to Pfizer as part of the pre-PBAC consultation process. In the event the Urological Society did not reply until 1 December 1998, which was too late for the reply to be included in the agenda papers for the December PBAC meeting. However it was used in other contexts, and this sequence of events forms a further basis for one of Pfizer's complaints under its breach of natural justice ground.

29 The PBAC met on 3 and 4 December 1998. The Committee decided not to recommend the listing of sildenafil. The minutes of the meeting record the following discussion:

"5.4.13 The Committee was of the view this was a poor submission and disputed remarks made by the sponsor claiming the PES evaluation had failed to present a balanced view of the clinical evidence. The strong language adopted in this regard by the sponsor in the pre-PBAC response was not considered helpful. The data as presented were not accepted as supporting the claim that sildenafil is more effective than alprostadil. The evidence indicated that sildenafil is more acceptable, less effective and causes fewer overall side effects compared with alprostadil.

5.4.14 The PBAC's major concern was the predicted cost to the PBS for sildenafil, even if a special patient contribution was applied. Given that the condition to be treated is not life-threatening, the overall cost to the PBS, estimated by the sponsor, of greater than $50 million in year one and $70 million in year two (and likely to be considerable underestimate given the usage of alprostadil and the promotion of the product in Australia) was difficult to support. As a result of these concerns, the Committee concluded that there is no satisfactory means to ensure that use in the community would be clinically justified or cost effective.

Recommendation: Reject"

30 On 22 December 1998 Pfizer was informed that its submission had been rejected. The reasons given were as follows:

"The data as presented were not accepted as supporting the claim that sildenafil is more effective than alprostadil. The evidence indicates that sildenafil is more acceptable, less effective and causes less overall side effects compared to alprostadil.

Given that the condition to be treated is not life-threatening, the overall cost to the PBS of greater than $50 million in year one and $70 million in year two (likely to be a considerable underestimate given the usage of alprostadil) was difficult to support.

Given the promotion of the product in Australia, there is no satisfactory means to ensure that use in the community would be clinically justified or cost effective."

31 During the course of considering Pfizer's submission, concerns had been raised in the PBAC that the usage of alprostadil under the PBS was significantly higher than had been estimated. On 9 December 1998 Mr Threlfall, as secretary of the PBAC, wrote to Pharmacia and Upjohn Pty Limited, pointing out the discrepancy between the estimated and actual usage of alprostadil and seeking suggestions as to how the restrictions for use of a

BETWEEN:	PFIZER PTY LIMITED APPLICANT
AND:	DONALD JOHN BIRKETT FIRST RESPONDENT MERVYN JOHN EADIE SECOND RESPONDENT TERESA RITA O'ROURKE CRAMOND THIRD RESPONDENT GORDON JOHNSON FOURTH RESPONDENT ROSEMARY MUNRO FIFTH RESPONDENT SIAN MARY HUGHES SIXTH RESPONDENT DAVID ALEXANDER HENRY SEVENTH RESPONDENT EDWARD KEITH GRAVER EIGHTH RESPONDENT JOHN FARQUHAR MACDONALD NINTH RESPONDENT AUBREY PITT TENTH RESPONDENT ERICA MARY COHN ELEVENTH RESPONDENT EACH IN THEIR CAPACITY AS MEMBERS OF THE PHARMACEUTICAL BENEFITS ADVISORY COMMITTEE
JUDGE:	MATHEWS J
DATE OF ORDER:	20 MARCH 2000
WHERE MADE:	SYDNEY