Pharmaceutical Benefits Scheme

Budget Review 2015–16 Index

Alex Grove

There are no significant new measures announced in the Budget for the Pharmaceutical Benefits Scheme (PBS), despite earlier media reports that up to $5 billion of savings over four to five years would be sought from reimbursements paid to pharmaceutical companies and pharmacies.[1] Rather, the Government indicated that it is in the final stages of negotiations with the pharmacy sector regarding ‘a balanced range of measures’ to support the sustainability of the PBS.[2] Last year’s budget measure to increase patient co-payments and safety nets has also been retained.

The start date for the increase in co-payments and safety net thresholds announced in the 2014–15 Budget has been pushed back one year to 1 January 2016, resulting in an additional saving of $5.1 million in 2018–19, which now becomes the last year of the measure.[3] This is in addition to the $1.3 billion in savings over four years that were announced in the 2014–15 Budget.[4] The measure increases the co-payment for PBS medicines for general patients by $5.00 and concessional patients by $0.80.[5] It also increases the safety net thresholds above inflation each year for four years. Further information on this measure, including stakeholder responses, is available in Budget Review 2014–15.[6]

The increased co-payments and thresholds were due to start from 1 January 2015, but the legislation to enact the measure has not passed the Senate.[7] Then Health Minister Peter Dutton indicated last December that ‘it remains the government’s policy to implement this change’ but that in the face of Labor opposition to the measure it might be willing to compromise in order to secure cross-bench support.[8] The measure in the 2015–16 Budget has been described by one commentator as ‘politically dead, unlikely to ever be approved by the Senate’, but with savings still contributing to budget forecasts.[9]

In keeping with previous years’ Budgets, new and amended drug listings on the PBS have been included as a budget measure, at a cost of $1.6 billion over five years.[10] This includes drugs to treat a number of cancers, asthma and multiple sclerosis. Price changes recommended by the Pharmaceutical Benefits Advisory Committee (PBAC) have also been listed as a budget measure, and are predicted to save $252.2 million over five years to be directed to fund other health priorities or the proposed Medical Research Future Fund.[11]

Future changes

More significant changes for the PBS have been foreshadowed by the Government. The PBS is forecast to cost $9.7 billion in 2015–16, but this estimate ‘excludes the outcomes of the negotiations on the Sixth Community Pharmacy Agreement and broader PBS Access and Sustainability Package of measures.’[12] Further measures are expected to be introduced from 1 July 2015 following consultation with stakeholders including ‘the pharmacy and pharmaceutical sectors’.[13]

Community pharmacy agreements are five year agreements between the Australian Government and the Pharmacy Guild of Australia that pay pharmacists to dispense PBS medicines, fund professional programs and support the supply of PBS medicines by wholesalers. The Fifth Community Pharmacy (5CPA) was allocated $15.4 billion over five years and is due to end on 30 June 2015.[14] A recent review of the 5CPA by the Australian National Audit Office (ANAO) found that the Department of Health ‘is not well positioned to assess whether the Commonwealth is receiving value for money from the agreement overall, or performance against the six principles and objectives.’[15] There have been calls from some consumer groups to extend the 5CPA by two years to allow an overhaul of the process.[16] However, the Budget reveals that the next pharmacy agreement is ‘in the final stages of negotiation’.[17]

While there is little detail in the Budget, media reports have suggested that the Sixth Community Pharmacy Agreement (6CPA) may include total funding of $18.9 billion over five years, including increases to pharmacy remuneration and program funding, performance measures, and an option for pharmacists to discount the patient co-payment by $1 as long as they absorb the cost.[18] The government wants the discount to boost competition between pharmacies, although the Health Minister has acknowledged that rural and regional pharmacists may not be as well placed to offer the discount.[19] The $1 discount could also reduce the impact on consumers of the Government’s budgeted increases to co-payments.

In addition to the 6CPA negotiations, the Budget also notes that the Government is negotiating a ‘broader PBS Access and Sustainability Package of measures’, but no details are provided.[20] This appears to refer to negotiations with the pharmaceutical industry to reduce the price that the government, and in some cases consumers, pay for PBS medicines. Measures reportedly being considered include:

  • removing over the counter medicines such as paracetamol and aspirin from the PBS[21]
  • closing a loophole in the pricing of combination drugs to ensure that they don’t cost more than the total price of their component drugs[22]
  • requiring patented drugs to take a 5 per cent price cut after 5 years on the PBS[23] and
  • changing price disclosure rules to force the price of brand name drugs that are no longer on patent closer to the prices of their generic competitors.[24]


While the above proposals have received quite a lot of attention, stakeholder reaction to the PBS budget measures has been relatively muted. The Pharmaceutical Society of Australia (PSA) and the Pharmacy Guild, for example, have noted the lack of funding announcements relating to the Sixth Community Pharmacy Agreement and wider proposed PBS changes.[25] Both the Consumers Health Forum (CHF) and the PSA have reiterated their opposition to higher costs for consumers resulting from the co-payment and safety net increases.[26]

It would seem that there are significant changes ahead for the PBS, but that these are being addressed outside of the budget process.

[1].          L Tingle, ‘Abbott set for war with pharmacists’, Australian Financial Review, 5 May 2015, p. 6.

[2].          Australian Government, Portfolio budget statements 2015–16: budget related paper no. 1.10: Health Portfolio, p. 53.

[3].          Australian Government, Budget measures: budget paper no. 2: 2015–16, pp. 107–108.

[4].          Australian Government, Budget measures: budget paper no. 2: 2014–15, p. 140.

[5].          Co-payments for PBS medicines are currently up to $37.70 for general patients and $6.10 for concession card holders. The Australian Government pays any remaining cost. Department of Health, ‘About the PBS’, Pharmaceutical Benefits Scheme website.

[6].          L Ferris, ‘Pharmaceutical Benefits Scheme’, Budget review 2014–15, Research paper series, 2013–14, Parliamentary Library, Canberra, 2014.

[7].          Parliament of Australia, ‘National Health Amendment (Pharmaceutical Benefits) Bill 2014 homepage’, Australian Parliament website.

[8].          S Maher and R Lewis, ‘Dutton willing to bend on PBS rise’, The Australian, 5 December 2014, p. 5.

[9].          P Martin, ‘Hangover of 2014: Haunted by the walking dead’, The Sydney Morning Herald, 13 May 2015, p. 18.

[10].       Budget measures: budget paper no. 2: 2015–16, op. cit., p. 108.

[11].       Ibid., p. 109.

[12].       Portfolio budget statements 2015–16, Health Portfolio, op. cit., p. 57.

[13].       Ibid., p. 53.

[14].       Australian National Audit Office (ANAO), Administration of the Fifth Community Pharmacy Agreement, ANAO, 2015, p. 16.

[15].       Ibid., p. 24.

[16].       Consumers Health Forum of Australia, Cancer Voices Australia and the Chronic Illness Alliance, Now is the time for overhaul of antiquated pharmacy agreement, media release, 1 April 2015.

[17].       Portfolio budget statements 2015–16, Health Portfolio, op. cit., p. 56.

[18].       S Parnell, ‘Billions on table for pharmacists’, The Australian, 11 May 2015, p. 1.

[19].       L Tingle, ‘Pharmacy plans may hit the bush’, Australian Financial Review, 29 April 2015, p. 7.

[20].       Portfolio budget statements 2015–16, Health Portfolio, op. cit., p. 57.

[21].       S Maiden, ‘Cheap drugs for PBS axe’, Sunday Tasmanian, 26 April 2015, p. 13.

[22].       S Dunlevy, ‘$200m pill rort crushed’, Daily Telegraph, 6 May 2015, p. 15.

[23].       S Maher, ‘Defiant Ley stands up to Big Pharma’, The Australian, 8 May 2015, p. 7.

[24].       A Probyn and A Tillett, ‘Cheap drugs’, West Australian, 7 May 2015, p. 1.

[25].       Pharmaceutical Society of Australia, Few surprises, but no answers on 6CPA, media release, 12 May 2015; Pharmacy Guild of Australia, Forefront: Budget edition, media release, 12 May 2015.

[26].       Consumers Health Forum of Australia, 2015–16 Federal Budget: What are the costs to your health?, media release, 13 May 2015; Pharmaceutical Society of Australia, op. cit.


All online articles accessed May 2015. 

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