The majority of submitters to the inquiry expressed support for ongoing
efforts to maintain the sustainability and cost-effectiveness of the
Pharmaceutical Benefits Scheme (PBS) and the Repatriation Pharmaceutical
Benefits Scheme (RPBS). Submitters noted that these schemes are an integral
part of the Australian health care system and stressed the importance of
ensuring equitable, reliable and affordable access to pharmaceuticals for all
Australians, with adequate safeguards for the most vulnerable in society.
Consumers Health Forum of Australia (CHF) stated:
The PBS is critical to supporting the medicine needs of
Australians. With the growing prevalence of chronic conditions and rising
out-of-pocket costs, CHF believes that the measures protecting the
sustainability of the PBS are essential to consumers, but they do not over-ride
fundamental principles of ensuring timely, reliable and affordable access to
necessary medicines for all Australians.
Key issues examined during the inquiry were:
the sustainability of the PBS and the RPBS;
the impact of co-payments on vulnerable Australians;
the impact of co-payments on prescription adherence; and
alternatives to co-payment increases.
Sustainability of the PBS and the RPBS
In introducing the Bill, the Minister for Health (Minister), the Hon
Peter Dutton MP, noted increasing demand in the Australian health system for
access to more services, medicines and more expensive technologies and the need
for a whole-of-community approach if the PBS is to grow in a sustainable way. The
Minister made particular note of the government's approval of new listings of
medicines in 2014, including treatments for breast cancer, melanoma and
multiple sclerosis at an expected cost to the PBS of $436 million:
Funding for new listings is not factored into the forward
estimates. It is new money that this government must find every four months to
provide access to those medicines, something we have committed to do.
But we cannot do that and contain spending without more help,
a greater contribution from all Australians who benefit from the PBS.
Some submitters questioned the necessity for the measures in the Bill. The Australian
Medical Association (AMA) noted the findings of the Productivity Commission's Report
on Government Services 2014 that the PBS had the slowest growth across all
areas of health expenditure in the ten years to 2011–12.
The Department of Health (Department) told the committee that over the
last 10 years the cost of the PBS had increased by 80 per cent and is expected
to increase by between four and five percent annually over the longer term. At
the same time, medicines being recommended for listings are becoming
significantly more expensive.
The Department submitted:
For example, over the past three meetings the PBAC
[Pharmaceutical Benefits Advisory Committee] has recommended on average more
than $450 million in new or amended listings per meeting, which equates to $1.4
billion over the forward estimates. That is roughly one-half of the
Commonwealth’s entire budget for mental health.
The proposed increases to PBS co-payments and safety nets
need to be considered in the context of maintaining access for patients to
medicines that would otherwise be prohibitively expensive for most Australians,
including those with common chronic conditions such as diabetes and
Impact of co-payments on vulnerable Australians
The Department stated:
From 1 January 2015, general patients will pay $5 more per
subsidised PBS prescription. Concessional patients, including pensioners and
veterans, will pay 80 cents more per PBS or RPBS prescription. The safety net
threshold for general patients will increase by 10 per cent each year for four
years, commencing in 2015. The threshold for concessional payments will
increase by two prescriptions each year from the current 60 prescriptions to 62
in 2015 and up to 68 in 2018 and onwards. These increases will occur in addition
to the annual Consumer Price Index indexation. General patients who use the
average two PBS-subsidised prescriptions per year will pay $10 more in 2015,
and very high users will pay $145.30 extra per single, couple or family per
year to reach the general patient safety net.
The committee notes that while there is general acceptance that
co-payments are a long standing feature of the PBS and RPBS,
a number of submitters expressed concern that an increase in the PBS co-payment
may have a disproportionate impact on a number of groups in the community who
are already vulnerable to the impact of rising out-of-pocket costs, such as
people with chronic illnesses, people on low incomes, older Australians, young
families and people living in rural and remote areas.
Some submitters told the committee that cost was already a barrier for
access to medicines. According to The Council of Social Service of New South
Wales (NCOSS), 12.8 percent of people in the most disadvantaged socio-economic
areas reported medicine costs barriers, as opposed to 6 percent in most
NCOSS noted that for persons experiencing poverty, increased medicine costs can
mean having to choose between filling prescriptions and access to other
CHF submitted that a recent study by Commonwealth Fund indicates that
Australian consumers already contribute more in out-of-pocket costs than their
counterparts in most other developed western countries.
However, as provided to the committee’s Inquiry into Out-of-pocket health
costs, international comparisons are difficult to quantify. For example, in
some analysis, out-of- pocket health costs for pharmaceuticals includes
vitamins and supplements.
The CHF argued that the measures in the Bill could compound the vulnerability
of some Australians, who suffer from long term chronic illness, are on low
incomes or who live in rural or remote Australia.
Departmental representatives told the committee that PBS safety nets are
designed to provide assistance to those patients and their families who require
a large number of PBS or RPBS items and apply to a family unit regardless of
the composition of that family unit:
When a patient or household reaches the safety net threshold
within a calendar year, they qualify to receive PBS or RPBS items at the
concessional rate for general patients or free of charge for the rest of the
year for concessional patients. Certain members of the community, such as those
holding pensioner concession cards are eligible to receive PBS subsidised
prescriptions at a reduced rate and for free after they reach the safety net
The Department told the committee that the price of 70 percent of PBS
prescriptions used by general patients will not change under these measures.
The price of PBS medicines that are already priced below the general co-payment
will not increase under the proposed measures, as no PBS subsidy is payable on
Concessional patients and high users of PBS prescriptions will pay a maximum
additional cost of $61.80 per year before receiving their remaining medicines
for that year for free. The Department stated:
In 2012-13 that represented over one in five prescriptions
subsidised free of charge irrespective of whether the medicine cost $50 or
The Department advised that Aboriginal and Torres Strait Islander people
will continue to be able to access support under the Remote Area Aboriginal
Health Services Programme and the Closing the Gap arrangements.
Additionally, a bulk billing incentive is available in rural and regional areas
to support out of pocket health costs for people in those communities.
Impact of co-payments on prescription adherence
Some submitters questioned whether the increases in co-payments may
result in unintended consequences due to the inability of some patients to fill
their prescriptions due to rising costs. Submitters expressed concern that this
may result in severe health consequences for vulnerable patients and increased
health expenditure in the longer term as well as consequences for the
The Grattan Institute (Institute) submitted that there was evidence to
suggest that co-payments stop patients from obtaining the medicines recommended
by their doctors. The Institute presented data that indicated more than 15 percent
of adults surveyed report that they did not take their medicine due to cost
The Institute did confirm that their evidence was based on a comparison of a
small proportion of medicines listed under the PBS.
The Institute suggested that lowering co-payments would have a positive effect,
due to the lower costs associated with fewer hospital visits over the long
term, due to the successful management of chronic illnesses.
However, the Department stated that the evidence provided by some
submitters could not be relied upon due to complexity of issues influencing
One of the reasons for this is that the surveys that were
done at the time only looked at data relating to payments over the co-payment
levels – so where people were paying a contribution to the medicine and
government was making a payment as well. It has not allowed for the fact that
a number of drugs went under the general co-payment, and we actually found that
there was an increase in the use of these drugs.
The AMA pointed to Australian and international research which it said demonstrates
increases in co–payments leads to poorer adherence to prescriptions which would
cost taxpayers and the government more in the long term.
Medicines Australia submitted that, like any price increase, an increase
in the rate of co-payment and safety net thresholds would result in a reduction
in consumer utilisation of medicines. Medicines Australia said:
Missing medicines and interrupting treatment may lead to
adverse patient outcomes and potentially avoidable medical interventions,
including hospital admissions. Reducing the appropriate use of medicines can
result [in] significant additional expenditure in other parts of the healthcare
The Pharmaceutical Society of Australia argued the Bill may result in an
unnecessary burden being placed on community pharmacists. They submitted the co-payment
increases, together with the proposed Medicare co-payment, would result in:
...a situation where [vulnerable patients] need to make a
financial decision about seeking medical attention or continuing with their
medications instead of focusing on their health. Pharmacists' primary role is
as medicines experts and they should not be put into a position where they need
to counsel patients about managing their medicine use based on financial
In its submission the Department noted the limited hard evidence
available to support claims that an increase in the co-payment will lead to
Many submissions to this and the previous inquiry have
claimed there is significant evidence that demonstrates patients are already
not fulfilling scripts due to cost. The fact is there is very little hard evidence
to support this claim.
Alternatives to co-payment increases
Some submitters questioned whether it was appropriate to ask consumers
to make a higher contribution to the cost of the PBS and RPBS and advocated
further structural reform of the PBS as an alternative. Submitters noted the
positive impact of price disclosure and suggested expanding this policy.
The Institute suggested that instead of increasing co-payments, an alternative
way to reduce costs associated with maintaining the PBS would be to address apparent
disparities in the prices the Australian Government pays for medicines,
especially in contrast with New Zealand and parts of the United Kingdom.
The Institute argued that matching Australian medicine prices to the prices
paid by governments overseas could save the government more than $1 billion a
year, in contrast to the measures in the Bill that would only raise $450
million in 2017–18. Further, any additional cost or challenges caused by price
changes for community pharmacies could be offset by allowing pharmacies to
provide additional services to patients.
COTA Australia (COTA) expressed support for achieving savings through
implementation of a cheaper purchasing policy for medicines on the PBS. COTA told
the committee that the government should also undertake a review of:
...the cost of prescribing, prescribing habits and more
careful examination of the efficacy of drugs rather than taking the easy path
of passing health system inefficiencies onto consumers.
Departmental representatives told the committee that the system that
underpins Australia's PBS is internationally recognised for delivering some of
the most cost-effective prices for pharmaceuticals in the world:
So, we really need to look at the system as a whole and the
balance we are achieving. I think also we need to be careful of that fact that
we are very much focusing on F2 when the Grattan Institute is talking about
drugs—that is those that are subject to market competition—versus F1, where
drugs are still on patent. Again, the OECD [The Organisation for Economic
Co-operation and Development] and a number of other countries recognise that
Australia's Pharmaceutical Benefits Advisory Committee and the process that
leads to those drug recommendations lead to some of the most cost-effective
prices in the world.
The Department also noted that while numerous reforms to the PBS since
2007 had contributed significantly to reducing the price of medicines, reforms
such as price disclosure have an impact on the pharmaceuticals sector. The
Department told the committee:
Care must be taken to ensure that the rising cost of the PBS
is not disproportionately borne by any particular partner to the National
The committee concurs with the Department's conclusion that the proposed
increases in costs for consumers as a result of measures in this Bill are
reasonable, necessary and proportionate given the increasing costs of listing
medicines on the PBS and the factors driving PBS growth in the longer term.
The committee recommends that the bill be passed.
Senator Zed Seselja
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