Pharmaceutical policy in Australia. CHERE Working Paper 2013/01

The Commonwealth Government of Australia has subsidised access to drugs since 1948 via the Pharmaceutical Benefits Scheme (PBS). Through the PBS, the Commonwealth Government aims to provide affordable, timely and equitable access to necessary medicines at an affordable cost to the Government. The PBS is one of the three pillars of government funding of the Australian health system. The other two pillars are free treatment in public hospitals, funded jointly by the Commonwealth Government and State and Territory governments, and the Medicare Benefits Scheme (MBS) where the Commonwealth Government subsidises consultations with clinicians occurring out of hospital. Pharmaceutical policy today in Australia is complex as a result of multiple reforms implemented over a number of years. These reforms introduced or changed pre-existing mechanisms with the aim to control prices and manage demand, and thus control expenditure, while maintaining equitable access. However some policies conflict and some result in unintentional, and sometimes detrimental, incentives. Section 1 provides some historical background to the PBS and explains the avenues through which patients can access PBS-subsidised drugs. Section 2 discusses PBS expenditure in the context of total expenditure on drugs in Australia, the high rate of growth in PBS expenditure over time, and the key drivers of the high rate of growth. Section 3 describes the role of the Pharmaceutical Benefits Advisory Committee, focussing on the process used to evaluate the drug, the drivers of PBAC decisions, and issues faced when reviewing currently listed drugs. Section 4 lists several mechanisms that can be used to minimise uncertainty and reduce the risk of making an incorrect decision. Finally Section 5 describes the methods used by the Australian Department of Health and Ageing (DoHA) to manage the costs and demand for, and thus affect uptake of, drugs once listed on the PBS.