Alex Grove
The 2017–18 Budget contains a number of changes to the
Pharmaceutical Benefits Scheme (PBS). This follows the announcement of a
five-year package of reforms in 2015.[1] This article
focuses on the three most financially significant measures: co-payments will
not be increased, savings will be generated through price cuts, and community
pharmacy will receive extra funding.[2]
Co-payment increase abandoned
The Australian Government subsidises the cost of many
medicines through the PBS. Patients pay a co-payment (currently
$6.30 for concession card holders and up to $38.80 for general patients)
towards the cost of each PBS medicine, and the Australian Government covers the
remaining cost. These co-payments are reduced or eliminated for individuals and
families who spend an amount equal to their PBS safety net threshold on
co-payments in a calendar year.[3]
The 2014–15 Budget contained a measure to increase
the co-payment for general patients by $5.00 and concessional patients by $0.80
(in addition to indexation). It also increased the safety net thresholds above
inflation each year for four years.[4] The measure was widely
criticised amid concerns that it might lead to patients not filling their
prescriptions.[5] Legislation to enact this
measure stalled in the Senate and lapsed at prorogation in 2016.[6]
The Government has announced that it will not proceed with these
increases to co-payments and safety net thresholds, at a cost to the Budget of
$938 million over four years.[7] The Consumers Health
Forum of Australia (CHF) has welcomed the removal of the ‘“zombie” $5 increase
to prescription co-payments’.[8]
Price cuts for PBS medicines
The Budget contains $1.8 billion in savings over five years under
the ‘cheaper medicines’ measure, to be achieved through the expansion of
existing statutory price reductions for PBS-listed medicines.[9]
PBS medicines are divided into two categories for pricing
purposes. Formulary 1 (F1) is for single brand (generally patented) medicines
and Formulary 2 (F2) is for medicines (generally off-patent) that have multiple
brands listed on the PBS.[10] Medicines on F1
currently take a five per cent cut in the price paid by the Government after
five years on the PBS.[11] When a second brand of a
medicine is listed on the PBS, the medicine moves to F2 and takes a 16 per cent
price cut.[12] Under this budget
measure, F1 medicines will continue to take a five per cent price cut after
five years on the PBS (extended to 2022), but will also take further price cuts
of 10 per cent after 10 years and five per cent after 15 years. When a medicine
moves to F2, the price cut will increase from 16 to 25 per cent.[13]
Legislation will be required to implement the price cuts.
These price cuts may result in cheaper PBS medicines for
general patients if medicine prices fall below the maximum general co-payment
of $38.80. However, the largest savings will accrue to the Australian
Government. Largely as a result of this measure, expenditure on pharmaceutical
benefits and services is expected to decrease by 10.3 per cent in real terms
from 2017–18 to 2020–21.[14]
The price cuts are part of a new five-year agreement with Medicines
Australia (MA) representing the innovative pharmaceutical industry, and also in
a two-year extension to the Government’s existing agreement with the Generic
and Biosimilar Medicines Association (GBMA) representing generic and biosimilar
medicine suppliers. Both agreements, announced to coincide with the Budget,
also include measures to encourage (but not mandate) prescribing of lower-cost generic
and biosimilar medicines, including changes to doctor’s prescribing software. MA has also secured a degree of policy
certainty for the life of the agreement, with the Government undertaking to
consult with MA before pursuing any additional savings measures.[15]
The Pharmacy Guild of Australia (the Guild), representing
pharmacy owners, has expressed its support for the F1 and F2 price cuts which
it believes will ‘make many medicines more affordable for taxpayers and
consumers’.[16] The CHF has also
welcomed the savings measures, saying they will enable the PBS to subsidise new
medicines.[17]
Community pharmacy payments
The Budget provides $825 million over three years from
2017–18 for community pharmacies. This is comprised of $600 million (already
provided for by the Government in the Sixth Community
Pharmacy Agreement (6CPA) funding) to continue and expand existing pharmacy
programs, as well as $225 million in payments to community pharmacies and
wholesalers to compensate for lower than forecast PBS prescription volumes.[18]
These payments relate to provisions in the
existing 6CPA between the Guild and the Australian Government, and
should not require legislation.[19] Prior to the Budget the
Guild was reportedly campaigning to ensure that pharmacists were compensated
for revenue foregone due to fewer PBS prescriptions being dispensed.[20]
The Guild was also reportedly concerned that the $600 million in funding for
community pharmacy programs would not be released on time because a review into
the cost-effectiveness of such programs had not commenced.[21]
The majority of the $225 million will be paid to pharmacies
as an increase in the Administration, Handling and Infrastructure fee they
receive each time they dispense a medicine. The $600 million for pharmacy
programs will largely be spent on the expansion of existing programs such as
medicine reviews in the patient’s home and dose administration aids to help
patients manage multiple medicines. There is also $30 million in funding for a
new initiative for medication management programs within Health Care Homes.[22]
While welcoming the funding, the Pharmaceutical Society of Australia, which
represents pharmacists, has questioned whether spending most of the funding on
existing programs will deliver the intended innovative and new services.[23]
The Government has also committed to continue the pharmacy
location rules which regulate where pharmacies can operate beyond the life of
the 6CPA. This will require legislation.[24] An independent Review of Pharmacy Remuneration and Regulation,
which is considering matters including payments to pharmacies and location
rules, is due to provide its final report to the Minister for Health this
month.[25]
The Budget contains a number of other PBS measures,
including new medicine listings and price amendments to already listed
medicines.[26] The Budget also announced
the creation of a new Medicare Guarantee Fund special account from which funding
will be directed to Medicare and the PBS.[27] This fund is discussed
in the Budget review article on Medicare.
The PBS measures in this Budget deliver a number of
positives for patients, including unchanged co-payments, cheaper medicines in
some cases, and increased funding for programs to help them manage their medicines.
The Government continues to contain the cost of the PBS through pricing reform.
The Australian Healthcare and Hospitals Association has called the Budget ‘a
winner ... for pharmacy interests’, noting the various compacts with industry
groups which underpin the measures.[28]
[1].
S Ley (Minister for Health), Pharmaceutical
Benefits Scheme to be reformed, media release, 27 May 2015.
[2].
These measures are the most important in terms of saving or spending
amounts if routine new listings are disregarded.
[3].
Department of Health (DoH), ‘Pharmaceutical
benefits: fees, patient contributions and safety net thresholds’,
Pharmaceutical Benefits Scheme (PBS) website.
[4].
Australian Government, Budget measures: budget paper no. 2: 2014–15, p. 140.
[5].
L Ferris, National
Health Amendment (Pharmaceutical Benefits) Bill 2014, Bills digest, 7,
2014–15, Parliamentary Library, Canberra, 2014.
[6].
Parliament of Australia, ‘National
Health Amendment (Pharmaceutical Benefits) Bill 2014 homepage’, Australian
Parliament website.
[7].
Australian Government, Budget
measures: budget paper no. 2: 2017–18, p. 77–78; Australian Government,
Budget
strategy and outlook: budget paper no. 1: 2017–18, p. 3–38.
[8].
Consumers Health Forum of Australia (CHF), Medicare
thaws, now time to take health reforms off ice, media release, 9 May
2017.
[9].
Australian Government, Budget
measures: budget paper no. 2: 2017–18, pp. 112–113.
[10].
DoH, ‘Formulary
Allocations - 1 May 2017’, PBS website.
[11].
DoH, F1
5% Statutory Price Reduction, PBS fact sheet, DoH, 2015.
[12].
DoH, ‘12.5%
and 16% price reductions - 1 May 2017’, PBS website.
[13].
Australian Government, Budget measures:
budget paper no. 2: 2017–18, pp. 112–113.
[14].
Australian Government, Budget
strategy and outlook: budget paper no. 1: 2017–18, p. 6–21.
[15].
Australian Government, Strategic
Agreement [between the Commonwealth of Australia and Medicines Australia],
2017; Generic and Biosimilar Medicines Association (GBMA), Strengthening
PBS measures to support generic and biosimilar medicines uptake, GBMA,
2017.
[16].
Pharmacy Guild of Australia, Budget
recognises the vital role of community pharmacy, media release, 9 May
2017.
[17].
CHF, Medicare
thaws, now time to take health reforms off ice, op. cit.
[18].
Australian Government, Budget
measures: budget paper no. 2: 2017–18, p. 115.
[19].
DoH, Sixth
Community Pharmacy Agreement, DoH, 24 May 2015, pp. 14, 15.
[20].
A Gartrell, ‘Budget razor gang to consider shake-up to medicine scheme’, The Sydney Morning Herald, 12 April 2017, p. 5
[21].
A Tillett, ‘Pharmacists
in line for $600m Budget boost’, The West Australian, 12 April 2017,
p. 6.
[22].
Pharmacy Guild of Australia, Budget
recognises the vital role of community pharmacy, op. cit.
[23].
Pharmaceutical Society of Australia, Budget
offers security for community pharmacy but misses mark on pharmacists’ primary
healthcare role, media release, 9 May 2017.
[24].
Pharmacy Guild of Australia, Budget
recognises the vital role of community pharmacy, op. cit.
[25]. DoH, ‘Review of Pharmacy Remuneration
and Regulation’, DoH website.
[26].
Australian Government, Budget
measures: budget paper no. 2: 2017–18, pp. 114–115.
[27].
Ibid., p. 167.
[28].
Australian Healthcare and Hospitals Association, Doctors,
industry groups entrusted with the keys for a healthy Australia, media
release, 9 May 2017.
All online articles accessed May 2017.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.