Affordability and access to the Pharmaceutical Benefits Scheme

Parliament house flag post

Affordability and access to the Pharmaceutical Benefits Scheme

Posted 28/09/2011 by Rebecca de Boer

Expenditure on the Pharmaceutical Benefits Scheme (PBS) grew by 9.3 per cent last year (to 30 June 2010). Growth in PBS expenditure (and other health care programs) and the subsequent pressure on growth in spending was noted in paper recently released by Senator Wong as background to the upcoming tax forum. Yet it is not only government that is feeling the financial pain. A recent study found that expenditure by consumers on prescription medicines trebled between 1991 and 2007. The Government has attempted to rein in PBS spending through the Memorandum of Understanding (MOU) it signed with Medicines Australia and, controversially, the deferral of the listing of some medicines on the PBS.

Affordability of the PBS is only one of a number of PBS-related policy challenges facing the Government. The comparative high cost of generic medicines in Australia means that the Government is not making savings in the magnitude of other countries when pharmaceutical patents expire. Patent protection ensures a monopoly on manufacture and supply, resulting in such drugs commanding higher prices. Both of these unresolved challenges: the high out-of-pocket cost for pharmaceuticals and the (comparatively) high cost of generic medicines were recently canvassed in the latest edition of the Australian Health Review.

Kemp et al compared private expenditure on prescription pharmaceuticals in Australia with 15 other OCED countries. Private expenditure is the co-payment amount (currently $34.20 for general patients, $5.60 for concession card holders) plus any additional payments like brand premiums. They found that private expenditure on prescription pharmaceuticals in Australia trebled between 1991 and 2007. This does not include spending on pharmaceuticals that might be under the co-payments or over-the-counter medications such as pain killers or topical creams. Of the countries studied, Australia ranked 6th highest for private prescription expenditure.

This finding supports an earlier (international) survey that reported that Australians are skipping medications due to cost. A recent Newspoll suggested that around 13 per cent of Australians had delayed buying a prescription drug because of cost. The Council of Australian Governments (COAG) Reform Council National Healthcare Agreement Performance Report for 2009-10 also found that one in ten Australians over the age of 15 were foregoing prescription medication due to cost (p. 44). This raises important questions about timely and affordable access to PBS medicines, one the stated objectives of the National Medicines Policy. It also raises questions about whether the changes to PBS implemented in 2007 designed to generate savings have made medicines more affordable to patients and government alike.

The cost of generic medicines has long been of concern to government. The Government’s most recent attempt to address this was the MOU signed with Medicines Australia. It further extends the arrangements introduced in 2007 and imposes statutory price reductions to generic medicines (most of which have already taken effect) and price reductions as a result of price disclosure. For further analysis see here.

Spinks and Richardson demonstrated that Australia pays significantly higher for many of its pharmaceuticals, especially generics, ‘than is necessary’. Many pharmaceutical patents have expired or are about to expire. This means that pharmaceuticals previously protected by patent are subject to competition as generic products enter the market. Generic products contain the same active ingredient as the original version and must meet safety and quality standards. In other countries, the introduction of generic medicines has usually resulted in significant price reductions and savings to government (and consumers).

Widespread change to the pricing of generic medicines is proposed by Spinks and Richardson. They contend that current framework is largely administrative in nature, resulting in higher prices (despite the statutory price reductions and price disclosure arrangements negotiated as part of the MOU). Other countries have successfully negotiated significant price reductions for generic medicines. The authors argue that Australia should take note of these price arrangements and adopt a more competitive approach to the pricing of generic medicines.

Stakeholder groups and the Parliament, justifiably, have been concerned with the deferral of medicines on the PBS. A major source of contention with the Government’s policy was that medicines would not be listed on the PBS ‘until circumstances permit’ (widely interpreted as when the Budget returned to surplus) and that medicines would only be listed if savings could be found to offset the fiscal impact. This was considered by some to undermine the clinical and economic evaluation conducted by the independent Pharmaceutical Benefits Advisory Committee (PBAC) as part of the listing process. What further fuelled debate was the decision that each positive recommendation of the PBAC required Cabinet consideration before it could be listed on the PBS. Previously, only drugs which cost more than $10 million in any of the first four years of listing required Cabinet consideration. See here for further explanation.

A Senate Inquiry to investigate the impact of deferral of PBS medicines and associated administrative processes (namely the ‘criteria’ to determine the medicines to be deferred) has been completed. The Report recommended that the Government revert to previous PBS listing processes. It called on the Government to reinstate the $10 million Cabinet threshold and argued that listing of medicines on the PBS should not be dependent on finding savings in other areas of health. The Government Senators minority report argued that the decision to defer medicines on the PBS was a ‘difficult decision on the ground of financial responsibility’. The Australian Greens, noted that savings from the PBS could be achieved by alternative methods of pricing generic medicines rather than the deferral of PBS medicines.

Around the time the report was tabled, Prime Minister Gillard promised a ‘solution’ to the deferral of medicines on the PBS would be achieved by the end of September. To date, the Government has not given any indication as to what their policy response might be. In her keynote address to a conference jointly organised by the Department of Health and Ageing and Medicines Australia, Minister Roxon was reported as being committed to work with industry and consumers to develop a 'fair and efficient' process for deferrals.


‘Value for money’ and the ‘right price’ is a perennial issue in Australian pharmaceutical policy. Principles of economic evaluation have served Australia well but perhaps the time is right for a new approach for the pricing of generic medicines to be considered. Although it may be too early to tell, it is doubtful that the Government’s current approach will offer savings in the magnitude achieved by other countries. The deferral of medicines on the PBS is, at best, a short term solution to rising expenditure on the PBS. Even if the Government is able to develop a solution by the end of September, the underlying policy challenges of affordability and the price of generic medicines will remain.






Thank you for your comment. If it does not require moderation, it will appear shortly.

Add your comment

[Click to expand]




Facebook LinkedIn Twitter Add | Email Print

FlagPost

Flagpost is a blog on current issues of interest to members of the Australian Parliament


Parliamentary Library Logo showing Information Analysis & Advice

Archive

Syndication

Tagcloud

refugees asylum immigration Australian foreign policy Parliament climate change elections women social security Australian Bureau of Statistics Employment indigenous Australians Sport illicit drugs gambling people trafficking taxation Medicare welfare reform Australian Defence Force higher education welfare policy United Nations health financing Asia Middle East criminal law disability Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget school education forced labour statistics Australian Electoral Commission WADA income management Industrial Relations emissions trading dental health Australia in the Asian Century steroids detention 43rd Parliament Private health insurance OECD ASADA labour force transport Law Enforcement Australian Federal Police aid people smuggling poker machines National Disability Insurance Scheme Australian Crime Commission slavery Australian Public Service constitution International Women's Day corruption Afghanistan Fair Work Act child protection Aviation debt federal election 2013 parliamentary procedure ALP New Zealand Newstart Parenting Payment Census politics High Court skilled migration election results voting mental health Federal Court terrorist groups Higher Education Loan Program HECS governance Papua New Guinea youth paid parental leave environment foreign debt gross debt net debt defence capability customs Senate doping health crime health risks multiculturalism aged care Gonski Review of Funding for Schooling sex slavery sea farers Special Rapporteur Electoral reform political parties banking firearms public policy Population violence against women domestic violence China ADRV terrorism science research and development social media pensions welfare ASIO intelligence community Australian Security Intelligence Organisation accountability public service reform Carbon Pricing Mechanism carbon tax mining military history employer employee fishing by-election European Union same sex relationships international relations coal seam gas family assistance planning Senators and Members United Nations Security Council Australian economy food vocational education and training Drugs health reform Indonesia children codes of conduct terrorist financing pharmaceutical benefits scheme Parliamentary remuneration health system money laundering early childhood education Canada Financial sector UK Parliament national security fuel disability employment Tasmania integrity transparency Australian Secret Intelligence Service sexual abuse federal state relations World Trade Organization Australia housing affordability bulk billing water renewable energy children's health health policy Governor-General US economy export liquefied natural gas foreign bribery question time speaker superannuation expertise climate Intergovernmental Panel on Climate Change leadership Department of Agriculture Fisheries and Forestry food labelling Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets Indigenous constitutional recognition of local government local government consumer laws PISA royal commission US politics language education baby bonus Leaders of the Opposition Australia Greens federal election 2010 servitude Trafficking Protocol energy forced marriage rural and regional Northern Territory Emergency Response ministries Hung Parliament social citizenship human rights child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories workers Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation standards NATO Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly public health smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine regional unemployment asylum refugees immigration political finance donations foreign aid Economics efficiency productivity human rights; Racial Discrimination Act employment law bullying asylum seekers Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies trade unions same-sex marriage disorderly conduct retirement Parliament House standing orders public housing prime ministers election timetable sitting days First speech defence budget submarines Somalia United Kingdom GDP forestry world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission regulation limitation period universities Ireland cancer gene patents genetic testing suspension of standing and sessional orders animal health live exports welfare systems infant mortality middle class welfare honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Constitutional reform referendum Rent Assistance competition policy obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant homelessness regional engagement social determinants of health abortion Youth Allowance Members suspension citizen engagement policymaking workplace health and safety Trafficking in Persons Report marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament alcohol Korea rebate Australian Greens presidential nomination Racial Discrimination Act entitlements political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education social inclusion Social Inclusion Board maritime early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin Iran sanctions Norway hospitals republic President Barack Obama Presidential visits ANZUS qantas counselling Korean peninsula

Show all
Show less
Back to top