The PBS: A Universal Scheme

The Australian Pharmaceutical Benefits Scheme (PBS) commenced over 50 years ago. At that time, there was concern that many people could not afford expensive but valuable new drugs such as penicillin. A Pharmaceutical Benefits Advisory Committee (PBAC) was set up; they recommended that a limited list of life saving or disease-preventing drugs should be made available on prescription free of charge, the costs to be paid for by the Federal Government. The World Health Organization subsequently endorsed this approach as a useful mechanism to ensure equity of access to necessary drugs.

Our PBS has evolved from a scheme that fully subsidised a small number of drugs to one that partially subsidises about 650. The cost of the PBS has escalated and patient co-payments, brand premiums and other strategies have been used to transfer some of the cost to consumers.

The PBS purchases about 90% of all prescription medicines. This near monopoly power has resulted in Australian drug prices being substantially lower than the OECD average while still retaining general access to a comprehensive range of medicines. This has been good for Australian consumers but it has attracted determined opposition from the international pharmaceutical industry.

Escalating PBS Costs

In 1948/1949 the PBS cost the Federal Government $298,074. It took 40 years for the costs to reach a billion dollars but more recently costs have been rising far more rapidly. In 1999/2000 the PBS cost the government $3.45 billion, an increase of 16% on the previous year. The 2001 budget papers estimated PBS expenditure for 2000/01 to be $4.26 billion, a 22% increase on the previous year.

There are several reasons for escalating PBS costs.

National campaigns have improved drug treatment of asthma, depression and elevated blood cholesterol levels. Hospitals have limited supplies of drugs to patients when discharged and have privatised outpatient clinics and pharmacies.

But the major cause of increased PBS costs has been the growth of new, more expensive medications. Their prescription has not always accorded with clinical best-practice guidelines. Many of the prescriptions written for these drugs are for uses that have not been approved by the PBAC as cost-effective. In many cases the PBS is paying a price for these expensive medications that is far higher than would be justified by the health benefit achieved.

One of the main drivers for increasing pharmaceutical costs is industry marketing. According to the industry’s own figures, manufacturers spend up to one-third of sales revenue on marketing, twice as much as they spend on research. A clash occurred in 2000-2001 over direct-to-consumer advertising (DTCA) of prescription drugs. The Australian Pharmaceutical Manufacturers Association (APMA) is lobbying the Federal government to remove current restrictions on DTCA of prescription drugs. The U.S. experience shows why.

In 1999, U.S. pharmaceutical companies spent $US 1.8 billion on DTCA. This was a 40% increase over 1998. $1.1 billion was spent on television ads, a 70% increase over 1998. Forty one percent of DTCA spending was concentrated on ten products. The top-selling 25 DTCA drugs accounted for 40.7% of the total increase in retail drug sales between 1998 and 1999 (i.e. $7.7 billion of the $17.7 billion increase). There was a 19% increase in retail drug sales in 1999 compared to 1998. Doctors wrote 34.2% more prescriptions in 1999 than in 1998 for the top 25 DTCA drugs. Doctors wrote only 5.1% more prescriptions for all other prescription drugs.

Changes to the PBAC

Over the past few years, individual pharmaceutical companies have taken legal action over PBAC decisions to deny listing of drugs such as the erectile dysfunction treatment sildenafil (Viagra). They have successfully lobbied the Federal Health Minister to replace PBAC members judged antagonistic to pharmaceutical industry and have succeeded in getting a former industry lobbyist appointed to the committee.

Minister Wooldridge has argued that these changes to the PBAC have resulted in a better committee. Critics see this move as the latest pro-industry initiative of the Federal Government. They argue that adding a former industry lobbyist to the PBAC is akin to placing the defendant on the jury. They claim it is likely to inhibit free debate among independent experts and could result in more costly drugs (with more marginal benefits) being added to the PBS.

This, in turn, would lead to an even greater PBS cost blow-out that the government would inevitably pass on to consumers via higher co-payments, de-listing “less-essential” drugs and other strategies. The end result would be a U.S. style pharmaceutical system where poorer citizens could no longer afford necessary drugs.

Sustaining Equity and Access in the PBS

Over the last 10 years a variety of strategies have been employed in Australia to try to improve medicinal drug use.

The Pharmaceutical Health and Rational Use of Medicines (PHARM) Committee recommended a quality use of medicines (QUM) policy as the final integrating arm of national medicinal drug policy. They advocated independent information; drug audits and targeted education aimed at both consumers and health providers. PHARM was successful both in gaining small amounts of funding for QUM projects and in proving that certain strategies worked.

Government then set up a National Prescribing Service (NPS) in addition to PHARM. The NPS works with Divisions of General Practice and has primarily focused on educating prescribers. For an expenditure of about $5 million per annum they have demonstrated improvements in prescribing worth about $15 million per annum. While NPS activities are undoubtedly worthy, the savings achieved represent less than 2% of the $800 million annual increase in the cost of the PBS.

The 2001 federal budget provided another 4 years funding for the NPS (at the same level) and also allocated $14.6 million (over four years) for “a consumer education strategy”. The challenge for government and opposition is to re-examine existing strategies and structures and formulate better ways of ensuring the sustainability of the PBS.

The Friends of Medicare Alliance believes such strategies should include removing the former industry lobbyist from the PBAC, more rigorous PBS price / volume negotiations, more independent information, audit and other decision support functions incorporated into prescribing software, less pharmaceutical promotion (especially resisting DTCA), and budget holding or other forms of clinical governance to encourage physicians to prescribe more cost-effectively.

We also believe that new structures are required and that PHARM, the NPS, the PBAC and related bodies should be rationalised and reorganised.

References

Supporting references, links to policy documents, PBS statistics, media debates and related sites such as QUM and the NPS can be found at www.phaa.net.au

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