The Budget provides funding for new medicines and vaccines,
while continuing to control overall expenditure on the Pharmaceutical
Benefits Scheme (PBS). Reforms to the way the Government pays for high cost
medicines do not directly affect consumers, but do have implications for the
pharmaceutical supply chain, including pharmaceutical companies, wholesalers
Pharmaceutical Benefits Scheme
The Australian Government subsidises the cost
of many medicines through the PBS. The Budget contains
changes to the way the Government pays for certain high cost medicines on the
PBS. Under the current system, the Government may enter into special price
arrangements for the listing of a PBS medicine through a deed of agreement. This
allows the published PBS price (which can affect international markets) to be
higher than the actual price of the medicine to the Government. The pharmaceutical
company funds the difference between the published price and the ‘cost-effective
price’ through a confidential rebate which is paid to the Government in
arrears. Rebates have been growing
in recent years. In 2016–17 the Department of Health (DoH) received $3.27
billion in ‘PBS drug recoveries’, much of which related to rebates paid for new
medicines to treat Hepatitis C.
The Government has negotiated with individual pharmaceutical
companies to reduce the published PBS price of some high cost medicines from 1
July 2018, with a corresponding decrease in the rebate to be repaid by the
companies. The Government will also implement an ‘improved payment
administration trial’ for some high cost medicines from 1 July 2019.
The design of the trial is still being negotiated, but the intent is to pay
pharmaceutical companies the cost-effective price of the medicine, while
continuing to remunerate wholesalers and pharmacists based on the published
price. These changes to the
remuneration of the PBS supply chain may make it easier for pharmacists to
stock high cost medicines. They may require
As part of the same budget measure, the Government has set
aside $1.0 billion over the forward estimates to pay for medicines which have
not yet been listed on the PBS. Including both the
changes to rebates and the $1.0 billion that has been set aside, the overall measure
is budget neutral because government upfront expenditure on the PBS will
reduce, but revenue from rebates will also fall. When the $1.0 billion is
included, overall PBS investment (expenditure minus rebates) is forecast to
grow slightly in nominal terms to 2021–22, but to decline in real terms by 7.3
New medicines are listed each month on the PBS, following a
positive recommendation from the Pharmaceutical Benefits Advisory Committee and
pricing negotiations with DoH. The Budget provides $1.4
billion (less confidential rebates) over five years from 2017–18 for new and
amended listings on the PBS. This includes medicines to treat cancers, multiple
sclerosis and spinal muscular atrophy (SMA, a form of motor neuron disease), as
well as a medicine to prevent HIV/AIDS.
The Budget contains measures to encourage appropriate use of
medicines and increased prescribing of generic and biosimilar medicines. This
includes $28.2 million over five years from 2017–18 to upgrade doctors’
prescribing software, including an option for electronic rather than paper PBS
prescriptions. There is also $5.0
million over three years from 2017–18 to continue a campaign to encourage prescribing
of generic and biosimilar medicines (which are often cheaper than their brand
name equivalents). This will include changes to doctors’ prescribing software to
allow medicine ingredient name prescribing by default, without preventing
doctors from prescribing by brand name. Increased uptake of these
medicines is expected to reduce PBS spending by $335.8 million over five years
from 2017–18. The Government will also target prescribers with education
activities to encourage appropriate use of certain medicines, and blood and
blood products for an expected saving of $77.6 million over five years from 2017–18.
Life Saving Drugs Program
The Life Saving Drugs Program (LSDP) funds expensive
medicines for rare and life threatening diseases. It is not part of the PBS.
The Government responded to the Post-market Review of the Life Saving Drugs
Program in January 2018. The Government announced
it would retain and improve the LSDP (despite the review recommending that it
should transition to the PBS), and apply pricing policies such as statutory
price reductions (which currently apply to PBS medicines) to LSDP medicines.
The Budget includes $5.4 million over five years (already
provided for in forward estimates) from
2017–18 to implement improvements to the administration of the LSDP. The
Government has reached an agreement with Medicines Australia (MA) on behalf of
pharmaceutical companies to implement PBS-like pricing policies for the LDSP.
This is likely to result in savings, but the financial impact is not published
in the Budget as it is commercial-in-confidence.
The National Immunisation Program (NIP) is a series of free immunisations
given at specified ages or to people in specified risk groups.
The Budget provides $42.5 million over five years from 2017–18 to list whooping
cough vaccines for pregnant women, high dose influenza vaccines for people aged
65 or over and a vaccine for children aged 12 months to protect against
meningococcal A,C,W and Y.
Reaction to the budget measures has been largely positive,
apart from concerns about the overall level of funding for the PBS.
MA has welcomed funding for the listing of new
PBS medicines, and will continue to negotiate regarding the payment
trial for high cost medicines. The Generic
and Biosimilar Medicines Association (GBMA) has welcomed prescribing and other
measures to encourage uptake of generic and biosimilar medicines, as well as
funding for new PBS listings and the LSDP. Pharmaceutical industry
media publication PharmaDispatch has taken a more negative view,
questioning why PBS funding is declining in real terms over the forward
estimates when funding for other health programs is growing.
The Pharmacy Guild of Australia, representing
pharmacy owners, has welcomed changes to rebates to the extent that they
reduce cash flow pressures on pharmacies. In negotiating the terms of the
trial, the Guild states it will insist on automated arrangements for pharmacies
and no reduction in dispensing related remuneration.
The Consumers Health Forum of Australia has
welcomed budget measures promoting infant and maternal health, including the
listing of a medicine to treat SMA in infants and whooping cough immunisations
for pregnant women.
Department of Health (DoH), ‘About the PBS’,
Pharmaceutical Benefits Scheme (PBS) website, last updated 1 January 2018.
pushing on with rebate change but implementation the challenge’, PharmaDispatch.com,
27 February 2018.
report 2016–17, pp. 291, 302.
The budget figures in this brief have been taken from the following
document unless otherwise sourced: Australian Government, Budget
measures: budget paper no. 2: 2018–19, pp. 112–120.
news: Changes to PBS payment arrangements for certain medicines’, PBS
website, last updated 3 May 2018.
G Hunt (Minister for Health), Speech
to the APP Conference, Gold Coast, speech, 3 May 2018.
Provision for future increases in new medicine listings is made in the
Contingency Reserve, but in this Budget such expenses have been allocated to
the pharmaceutical benefits and services sub-function. See Australian
strategy and outlook: budget paper no. 1: 2018–19, pp. 6-20, 6-21,
Ibid, pp. 6-21, 6-22.
A Grove, The
Pharmaceutical Benefits Scheme: a quick guide, Research paper series,
2015–16, Parliamentary Library, Canberra, 2016.
access to medicines – ePrescribing for safer medicines, Budget 2018–19
fact sheet, DoH, 8 May 2018.
access to medicines – encouraging greater use of generic and biosimilar
medicines, Budget 2018–19 fact sheet, DoH, 8 May 2018.
review of the Life Saving Drugs Programme: June 2014–June 2015, report
to the Australian Government, 2018; Australian Government, Australian
Government response to the post-market review of the Life Saving Drugs Program,
Immunisation Program schedule’, DoH website, last updated 8 December 2017.
Medicines Australia, Government
commits to PBS, time to unpack the detail, media release, 8 May 2018.
Generic and Biosimilar Medicines Association, Commitment to affordable healthcare, media
release, 9 May 2018.
is the PBS being starved of funding?’, PharmaDispatch.com, 10 May
Pharmacy Guild of Australia, ‘The PBS – now more than ever the most sustainable part of the health
system’, Forefront, 8(9), 8 May 2018.
Consumers Health Forum of Australia, Health
budget includes welcome consumer focus, media release, 8 May 2018.
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