23 February 2022
PDF version [296KB]
Rebecca Storen, Rosalind Hewett and Emma Vines
Social Policy Section
This is an update of an earlier version of this quick
guide by Alex Grove, published in April 2016.
This quick guide provides an introduction to the
Pharmaceutical Benefits Scheme (PBS), the Australian Government program which
subsidises the cost of approved medicines. The quick guide highlights the cost
of the PBS to the Australian Government, the price of PBS medicines for
patients, medicines available on the PBS and the approval process that
pharmaceutical companies undertake to have their medicines subsidised. It also
outlines agreements between the Australian Government and external stakeholders
that are relevant to the PBS and identifies some key future developments.
The Australian Government subsidises the cost of many
medicines for Australians through the Pharmaceutical Benefits Scheme
(PBS). The first
attempt to legislate for a scheme to provide approved prescription
medicines, such as antibiotics, free of charge to Australian residents was made
by the Curtin Labor Government in 1944 but the legislation was struck down by
the High Court as unconstitutional. Following an amendment to the Constitution
in 1946, a limited version of the PBS began in 1948, offering
free medicines for pensioners and 139 ‘life-saving and disease preventing’
medicines free of charge to the general public. The PBS became
a comprehensive scheme offering access to a wide range of medicines in
The PBS is now regarded as a key component of the National Medicines
Policy (NMP) which ‘aims to improve positive health outcomes for all
Australians through their access to and wise use of medicines’. The PBS is
established under Part VII of the National Health Act 1953
All Australian residents who hold a current Medicare card
for the PBS. In addition, some overseas visitors are eligible for some PBS
medicines through reciprocal
health care agreements.
Expenditure on the PBS is uncapped, and can therefore
increase as new drugs are added and demand grows. The Parliamentary
Budget Office has modelled the PBS’s projected growth between 2018–19 and
2030–31 (based on the policy setting underlying the 2020–21 Budget), which
shows nominal Australian Government payments for the PBS rising from $13
billion to $21 billion. However, as a percentage of Gross Domestic Product
(GDP), the PBS would stay steady at 0.7 per cent. According to these
projections, by 2030–31, the PBS will account for a 2.5 per cent share of
total Government payments (p. 23).
Co-payments and safety nets
Patients pay a co-payment towards the cost of each PBS
medicine, with the Australian Government generally covering the remaining cost
(there are instances where people may pay
more than the co-payment, for example if they choose a particular brand of
medicine over another brand of the same medicine). This keeps otherwise
expensive medicines affordable for people. Patient
co-payments are currently set at $6.80 for concession
card holders and a maximum of $42.50 for those ineligible for a concession
(known as general patients). Under the Closing
the Gap PBS Co-Payment Program, eligible Aboriginal and Torres Strait
Islander people who would normally pay the full co-payment only pay the
concessional rate, and those who would normally pay the concessional rate are
not required to pay the PBS co-payment. In 2020–21, co-payments
from patients on PBS-subsidised medicines amounted to $1.4 billion.
Safety Net scheme is intended to protect patients needing a large number of
medicines in one year from excessive out of pocket costs. Individuals and families who spend an amount equal to their Safety Net
threshold on co-payments in a calendar year receive further prescriptions
for that year for free (if they are concession card holders) or for the
concessional co-payment of $6.60 (if they are general patients). The
2022 thresholds are $326.40 for concession card holders and $1,542.10 for
general patients, with families
able to reach the threshold sooner.
Since 1 January 2016, pharmacists have been
permitted to offer consumers a
discount of up to $1 on each PBS co-payment, as long as the pharmacist
absorbs the cost of the discount.
Under section 99G of the NHA, co-payments and
Safety Net thresholds are adjusted in line with the Consumer Price Index (CPI)
on 1 January each year. The PBS website provides a table outlining the history of PBS co-payments and Safety Net thresholds since 1960.
Medicines subsidised under the PBS
As at June 2021, the PBS included
906 different medicines sold under 5,380 brands.
Medicines that are subsidised under the PBS are listed on
the Schedule of Pharmaceutical Benefits (the Schedule). The Schedule can be downloaded, browsed or searched
via the ‘PBS Medicine Search’ box on the PBS website. Changes to the Schedule
are made every month by amendments to the National Health (Listing of
Pharmaceutical Benefits) Instrument 2012, which is made under the NHA.
Most PBS medicines are dispensed by community pharmacies and
used by patients at home. These are known as ‘General Schedule’ or ‘section 85’
medicines because they are dispensed under section
85 of the NHA.
Medicines with special arrangements
100 of the NHA, some PBS medicines are supplied through special
arrangements where normal supply through community pharmacies is not suitable.
For example, some medicines may require special storage or dispensing,
specialist monitoring during treatment, or administration in a hospital
Such medicines are subsidised on the PBS under a number of ‘Section 100’ programs,
In addition to the above programs for specific medicines,
section 100 also allows for the supply of many PBS
medicines to remote area Aboriginal Health Services (AHS). Under these
arrangements, patients of an approved AHS can receive
medicines at the time of consultation without being charged and without the
need for a normal PBS prescription form.
Subsidised medicines for veterans
Eligible veterans receive subsidised medicines through the Repatriation
Pharmaceutical Benefits Scheme (RPBS), which is administered by the
Department of Veterans’ Affairs (DVA) under the Veterans’ Entitlements
Act 1986. This includes medicines listed on the PBS, as well as
additional items such as wound care products, which are listed on the Repatriation Schedule of
PBS expenditure 2020–21
According to the PBS
Expenditure and Prescriptions Report for 1 July 2020 to 30 June 2021, total
Government expenditure for the
supply of medicines under section 85 and section 100 was $13.8
billion (excluding revenue), compared with $12.6 billion for 2019–20 (an increase of 9 per cent).
According to the DVA
2020–21 Annual Report, administered expenses for the RPBS were $313.5
million (p. 234).
Statistics on PBS medicines
statistics are available in a number of forms. The annual PBS
Expenditure and Prescriptions reports include information on the most
frequently prescribed medicines and the highest cost medicines. These reports
focus mainly on general (section 85) medicines, but also include some
statistics on RPBS and section 100 medicines.
Statistics on the number of
prescriptions and cost of subsidies paid for individual PBS and RPBS medicines
are available via PBS
Item Reports on the Services Australia
website. The item numbers or codes for individual medicines can be located by
entering the name of the medicine in the ‘PBS Medicine Search’ box on the PBS website. Caution should be used
when generating these reports, as the same medicine may have more than one item
number, and item numbers may change over time.
Life-saving drugs supplied outside
The Australian Government provides subsidised access,
outside of the PBS, to 16 expensive ‘life saving drugs’ for 10 very rare
conditions through the Life
Saving Drugs Program (LSDP). As with the PBS, only patients
eligible to receive Medicare benefits can access the LSDP. In 2020–21,
463 patients received drugs through the LSDP (p. 88).
The listing process for PBS
Therapeutic Goods Administration
Before a medicine can be listed on the PBS, it must first be
approved for use in Australia by the Therapeutic
Goods Administration (TGA). The sponsor of the medicine, usually a
pharmaceutical company, applies to the TGA to have the medicine included in the
Register of Therapeutic Goods (ARTG) so that it can be sold in Australia.
The sponsor must provide evidence
(such as from clinical trials) that the medicine meets the required standards
of quality, safety and effectiveness for the intended use (noting that some
medicines may be used for multiple conditions).
PBS approval process
A medicine or vaccine that is listed on the ARTG can be
legally supplied in Australia. However, the medicine will not attract an
Australian Government subsidy unless the sponsor applies, and is successful, in
having their medicine listed on the PBS. Without the subsidy, patients must pay
the full cost of the medicine. Applications for PBS listing are considered by
Benefits Advisory Committee (PBAC), which is an independent expert body
appointed by the Australian Government. A new medicine cannot be listed on the
PBS unless the PBAC makes a positive recommendation for its listing. Under section
101 of the NHA, the PBAC must take into account both the cost and clinical
effectiveness of the medicine when compared with other treatments for the same condition.
to list vaccines, including requests that they be included in the National
Immunisation Program, must also include advice from the Australian
Technical Advisory Group on Immunisation (ATAGI), which provides advice on
vaccines, including their effectiveness.
Guidelines set out in detail the information that the sponsor needs to
include in their application. This includes information about the new medicine
and the medicine or treatment it is being compared to, evidence from clinical
trials, an economic evaluation and an estimate of the impact of supplying the
medicine on the Budget.
The PBAC has 17
weeks to assess and decide on the application, based on the cost-effectiveness
or ‘value for money’ of the new medicine when compared to existing treatments,
as well as the quality,
safety, efficacy and effectiveness of the item.
Consideration of a new medicine by the PBAC can result in
one of three outcomes:
a recommendation to Government that the medicine be listed on the PBS; a
decision not to recommend listing on the PBS; or the deferral of a decision
pending additional information. Since 2005, the PBAC has published Public
Summary Documents giving reasons for its decisions on each medicine
considered for listing.
If a medicine does not receive a positive recommendation
from the PBAC, the sponsor may prepare and resubmit a new application for PBS
listing, or they may choose not to reapply and only to sell the medicine in
Australia via private
If a positive recommendation is given by the PBAC, the
sponsor must still negotiate the final arrangements
for listing on the PBS, including pricing, with the Department of Health. The Minister
for Health has the power to list a medicine on the PBS (in accordance with
the NHA); however, since 2001, the Government has required decisions for
listings anticipated to have a significant financial impact (currently over $20
million per annum) must
be considered by Cabinet. Submissions to include medicines and vaccines to
the TGA and the PBAC can be made under parallel
process arrangements. This approach may be used to decrease the time needed
for a new medicine or vaccine to be listed on the PBS when it has not been approved
for use in Australia, making it more readily available for people to access
(although a medicine must be registered on the ARTG before it can be listed on
The PBAC and the Minister for Health can request
reviews of PBS listings, including for cost-effectiveness and medicine
utilisation. Items can be deleted from the PBS. Medicines are removed from the
Schedule for different reasons, including at the request of the
sponsor, and may be listed as a Supply Only
item (available for dispensing but not prescribing, generally for 12 months
from the deletion date), where appropriate. All changes are summarised on
the PBS website.
The Medicine Status Website
allows people to monitor the status of medicines as they progress through the
PBS listing process.
Agreements with industry
The Australian Government maintains agreements with external
stakeholders who have a direct interest in the operation of the PBS. These
include agreements with community pharmacies and with the pharmaceutical
Community Pharmacy Agreements
Pharmacists need approval
90 of the NHA to dispense PBS medicines from a particular pharmacy. The
pharmacist charges the patient the relevant co-payment, and claims the
remainder of the PBS-dispensed
price for the medicine from the Australian Government. The PBS-dispensed
price is made up of the cost of the medicine to the pharmacist, plus handling,
dispensing and other fees.
These remuneration arrangements for pharmacists have been
determined in a series of agreements between the Australian Government, the Pharmacy Guild of Australia (the
national peak body representing community pharmacies), and, in the most recent
agreement, with the Pharmaceutical
Society of Australia (the national peak
organisation representing pharmacists). The most recent agreement, the Seventh
Community Pharmacy Agreement (7CPA), commenced on 1 July 2020 and will
remain in place for five years. In addition to pharmacist remuneration and Community
Service Obligations for pharmaceutical wholesalers, the 7CPA encompasses funding
for community pharmacy programs, Pharmacy
Location Rules (which regulate where approved pharmacies can operate), a
commitment from the Government to support the adoption of a nationally
consistent approach to vaccine administration by pharmacists, and other
Pharmaceutical Industry Agreements
PBS policy and price settings have a significant impact on
pharmaceutical companies, who in turn lobby and negotiate with the Government,
in particular through their peak bodies.
Australia represents the research-based (patented) medicines industry.
Medicines Australia and the Australian Government reached a Strategic
Agreement in 2017 which promised to deliver $1.8
billion in PBS savings over five years. The next
5-year agreement is due to commence from 1 July 2022. Amongst its measures
are commitments from the Australian Government to support an independent review
of the Health Technology Assessment policy and methods used by PBAC in 2022–23,
as well as reinvesting all savings from the Agreement in the PBS.
The Generic and
Biosimilar Medicines Association (GMBA) represents generic and biosimilar (off
patent) medicine suppliers in Australia. In 2015, GMBA signed its first Strategic
Agreement with the Government (under its previous name of the Generic
Medicines Industry Association), containing measures to promote the increased
usage of cheaper generic and biosimilar medicines on the PBS. As with Medicines
Australia, the next
strategic agreement with GMBA is due to commence from 1 July 2022. The
agreements with both GMBA and Medicines Australia include a clause for
providing security of medicine
supply through the implementation of three main measures, including the
establishment of a minimum floor price for F2
medicines and the continuation of a modified 30 per cent price
Recent and ongoing reviews relating to the PBS are
expected to lead to Government reforms in the coming years. These reviews
- The House of Representatives Standing Committee on Health, Aged
Care and Sport’s inquiry into approval processes for new drugs and novel
medical technologies in Australia, which tabled
its report, The New Frontier – Delivering better health for all
Australians, in November 2021
- The Review
of the National Medicines Policy (NMP), which is currently examining
whether the NMP’s objectives should be modified, the utility of the NMP in the
context of rapidly evolving treatments and other factors, and whether the NMP
captures the diversity of consumers’ needs and expectations, and
- An independent
review of Health Technology Assessment (HTA) current policy and methods
used by the PBAC to assess new medicines for listing on the PBS, along with
contemporary research, and relevant methodologies and purchasing practices used
in comparable international jurisdictions.
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