F. Parliamentary Budget Office costing: Subsidise insulin pumps for all Australian living with type 1 diabetes
1.1Person/party requesting the costing: Dr Mike Freelander MP, Australian Labor Party.
1.2Date costing completed: 28 March 2024.
1.3Expiry date of the costing: Release of the next economic and fiscal outlook report.
1.4Status at time of request: Submitted outside the caretaker period.
1.5Not confidential.
Summary of proposal
1.6The proposal would provide Commonwealth subsidies for insulin pumps for all Australians living with type 1 diabetes, with 6 options, from 1 July 2025.
- Option 1: Fully subsidise Medtronic, AMSL Tandem, YpsoPump and Omnipod DASH insulin pumps for all Australians living with type 1 diabetes.
- Option 2: Partially subsidise (50%) Medtronic, AMSL Tandem, YpsoPump and Omnipod DASH insulin pumps for all Australians living with type 1 diabetes.
- Option 3: Fully subsidise the Medtronic insulin pump only for all Australians living with type 1 diabetes.
- Option 4: Fully subsidise the AMSL Tandem insulin pump only for all Australians living with type 1 diabetes.
- Option 5: Fully subsidise the Ypsomed insulin pump only for all Australians living with type 1 diabetes.
- Option 6: Fully subsidise the Omnipod DASH insulin pump only for all Australians living with type 1 diabetes.
- The request also sought distributional analysis of the impact of providing Commonwealth subsidies for insulin pumps under each option.
Costing overview
1.8The options in the proposal would be expected to decrease the fiscal and underlying cash balances by between around $348 million (Option 2) and $749 million (Option 6), over the 2023-24 Budget forward estimates period (Table 1). The impacts on the fiscal and underlying cash balances reflect increases in expenditure on insulin pumps and consumables, as well as departmental costs to administer the program.
1.9The demand for insulin pumps and the departmental impacts are the same under all options. As such, the only variance between the options is the price of the pumps. For Options 1 and 2, the price is the average of the four pumps while the remaining four options use the price of the specified pump.
1.10The proposal would have an impact beyond the 2023-24 Budget forward estimates period. A breakdown of the financial implications over the period to 2033-34 is provided at Attachment A. Distributional information in relation to Australians living with type 1 diabetes is provided at Attachment B.
1.11The financial implications of the proposal are highly uncertain and are sensitive to the assumptions outlined below. In particular, only a complete procurement process and commercial discussions with vendors would be able to confirm the prices that could be achieved by the Australian government for the insulin pumps. The costs estimated in this response should therefore be considered on an order of magnitude basis. Other assumptions to which the estimated costs are particularly sensitive include:
- Changes to the demand for insulin pumps and prices of pumps over time under the policy.
- Availability of the specified insulin pumps to meet any changes in demand.
- The financial implications of Options 3 and 4 are similar due to price similarity between the Australasian Medical & Scientific Limited (AMSL) and Medtronic insulin pumps. The split of costs between pump acquisition and insulin pump consumables differs in option 6 relative to the other options due to the different operation of the Omnipod DASH insulin pump. The Omnipod DASH system uses a tubeless, wearable pod that provides up to 72 hours of non-stop insulin delivery, compared with the other insulin pumps being based around a standard tubed system.
Figure F.1Subsidise insulin pumps for all Australians living with type 1 diabetes – Financial implications ($m)(a)
(a) A positive number represents an increase in the relevant budget balance; a negative number represents a decrease.
(b) PDI impacts are not included in the totals.
- Indicates nil.
Key assumptions
1.13The Parliamentary Budget Office (PBO) has made the following assumptions in costing this proposal.
- Pricing for the Medtronic, AMSL Tandem and Omnipod DASH insulin pumps would be in line with the reported retail prices for a private individual in 2023-24, grown across the medium term in line with the Consumer Price Index (CPI).
- On the basis of limited available information about commercial arrangements for bulk purchase of insulin pumps, and in the absence of a full procurement process, the PBO has not factored in any potential discounted pricing that could be negotiated for these brands of insulin pump due to the Government’s purchasing power.
- Pricing for the Ypsomed insulin pump would be in line with the pricing achieved by the Department of Health and Aged Care as part of its 2023 open tender process for a supplier for the Insulin Pump Program.
- Insulin pumps would be available from their respective manufacturers in sufficient quantities to meet the demand.
- This is a particularly sensitive assumption given the large volume of pumps that would be prospectively acquired under any options of the policy.
- For Options 1 and 2, insulin pump procurement would be in even proportions across the four specified brands. This would assist in mitigating any potential supply constraints from any particular brand under these two options.
- An insulin pump acquired under the program will need to be replaced after 4 years, in line with standard insulin pump warranty periods.
- Australians with existing insulin pumps acquired privately will roll onto the program as warranties for their privately-sourced pumps expire.
- Warranties for these privately-sourced insulin pumps will expire evenly over the first 4 years from the policy start date, 1 July 2025.
- 12 Australians per 100,000 will be newly diagnosed with type 1 diabetes in each year to the end of the medium term (2033-34), informed by Australian Institute of Health and Welfare data.
- Insulin pump uptake across Australians with type 1 diabetes would reach 80% after 4 years of the policy, with the growth in uptake evenly distributed over the four years, and then remain at 80%.
- This is consistent with evidence from a study over the period January 2015 to June 2018 that found a 20% insulin pump discontinuation rate in patients after 18 months.
- While individuals may have certain brand or product preferences, there are minimal clinical limitations in terms of the interchangeability of one insulin pump brand for another. Factors that would limit full uptake of insulin pumps under a policy where there are no longer cost constraints, per the disadvantages listed in the Monash Children’s Hospital Insulin Pump Therapy guide, include:
» Potentially higher risk of Diabetic Ketoacidosis (DKA) in a situation where insulin is interrupted.
» Skin infections and irritations due to the adhesive tape.
» Constant attachment of the device, 24 hours per day.
» Increased monitoring of glucose levels, 6-8 tests per day or continuous glucose monitoring.
» Steep learning curve for individuals commencing with an insulin pump.
- Departmental costs for the Department of Health and Aged Care to administer the program would be in proportion to the costs of administering the existing Insulin Pump Program, based on the number of pumps to be acquired and distributed.
Methodology
1.14The administered expenses were estimated as follows:
- The number of Australians with type 1 diabetes was forecast over the medium term (to 2033-34) based on the number of existing diagnoses and the number of new diagnoses assumed each year per Key assumptions.
- The number of Australians with type 1 diabetes with an existing insulin pump as at the policy start date was then projected, to form a baseline from which new pumps would be acquired.
- This projection was based on data from the AIHW and Diabetes Australia that in 2011 and 2014 there were respectively 10,500 and 15,000 Australians with type 1 diabetes using an insulin pump. The PBO projects that as at 1 July 2025, there will be 30,670 insulin pumps in use by Australians with type 1 diabetes.
- Taking into account existing insulin pumps and their warranty expiries, demand from Australians with existing type 1 diabetes with no existing insulin pump, and new diagnoses, the total pump acquisition requirement was then projected in each year to 2033-34.
- These volumes were then multiplied by the assumed prices of each pump brand in each year to determine the total pump acquisition cost.
- A similar process was followed to determine the additional funding for the National Diabetes Services Scheme (NDSS) to provide subsidised insulin pump consumables.
- The additional cost was calculated as the number of new pump users under the policy multiplied by the estimated net cost to the NDSS resulting from 1 additional insulin pump user (annual cost of insulin pump consumables per user less the annual cost to the NDSS of needles and syringes per individual with type 1 diabetes not using an insulin pump).
- The departmental expenses were estimated as the number of pumps provided under the policy, multiplied by the departmental cost per pump under the existing Insulin Pump Program administered by the Department of Health and Aged Care.
- The departmental costs would be the same under each option of the policy – that is, even though option 2 provides for a 50% subsidy instead of a full subsidy, departmental costs would be the same as the Department of Health and Aged Care would performing the same role under all options.
- Financial implications were rounded consistent with the PBO’s rounding rules as outlined on the PBO Costings and budget information webpage.
Data sources
- The Department of Health and Aged Care provided data on the current Insulin Pump Program, including details of the program funding from 2023-24 to 2026-27; information about the 2023 procurement process for a supplier for the Insulin Pump Program; background on insulin pump technology; and distributional information of Australians with type 1 diabetes as at 31 January 2024.
- The PBO spoke anonymously with representatives from Medtronic and AMSL to obtain current private pricing information for the 780G and Tandem insulin pumps respectively.
- The Department of Finance and the Treasury provided economic parameters as at the 2023-24 MYEFO.
- Australian Bureau of Statistics (2024) Provisional Mortality Statistics, Jan - Dec 2023, accessed 27 March 2024
- Australian Institute of Health and Welfare (2023) Diabetes: Australian facts, Type 1 diabetes, accessed 27 March 2024
- Australian Institute of Health and Welfare (2012) Insulin pump use in Australia, accessed 27 March 2024
- Diabetes Australia (2014) Insulin Pump Therapy in Australia: The Case for Action, accessed 27 March 2024
- Gargouri, I., et al (2022) Factors Associated With Insulin Pump Discontinuation in Adults With Diabetes: A Time-to-Invent Analysis and Prediction Model, accessed 27 March 2024
- Insulet Australia (2024) Omnipod DASH Insulin Management System Order Form, accessed 27 March 2024
- Juvenile Diabetes Research Foundation (2022) All about insulin pumps, accessed 27 March 2024
- Juvenile Diabetes Research Foundation (2023) Changes to the Federal Government’s Insulin Pump Program, accessed 27 March 2024
- Monash Children’s Hospital (2023) Insulin pump therapy 2023, accessed 27 March 2024
- National Diabetes Services Scheme (2024) Insulin pump consumables, accessed 27 March 2024
- Royal Children’s Hospital Melbourne (2024) Diabetes at the RCH: Process for upgrading an insulin pump, accessed 27 March 2024
- Telethon Kids (2022) Insulin Pump Comparison Table, accessed 27 March 2024
Note: The PBO's attachments have not been provided in this appendix. The full costings document, including the attachments, will be available on the PBO's website.