Discuss about the Pharmacoeconomics and Outcomes Research.
The Pharmaceutical Benefits Scheme (PBS) is a program through which the Australian government subsidises prescription drugs to Australians. The introduction of the scheme can be traced back to 1944 but in which it had failed to sail through. The successful reintroduction was attained in 1948 with a limit to offering free drugs for pensioners, while the rest of Australians were eligible to a total of 139 free drugs which were considered as “life-saving and disease preventing” (Grove, 2016). It wasn’t until 1960 that the program attained maturity and was then able to provide access to a wide range of drugs. PBS stands out as an integral part of Australia’s National Medicines Policy (NMP) whose aim is to foster favourable health outcomes for Australians by improving accessibility to, and the rational use of drugs (Department of Health (DoH), 2014). The Pharmaceutical Benefits Scheme is founded by provisions of the National Health Act 1953 (Grove, 2016).
The 2014/15 annual report by the Department of Health (DoH) put the cost of PBS at $9.1 billion following over two hundred million prescriptions having been subsidised during the same duration (DoH, 2015). This PBS cost accounted for 21% of the funds that were administered by the department of health during the same duration (Grove, 2016). The expenditure on the scheme is uncapped and as a result, it increases in relation to increase in demand and the introduction of new drugs. Between 2005/6 and 2013/14, the total expenditure on the scheme grew at about 4.9%, which however was not the case for the duration between 2013/14 and 2014/15, in which the expenditure fell slightly by 0.5% (Grove, 2016). Regardless of the marginal decrease, analysis of the projected government spending on pharmaceutical shows a gradual increase. Evidenced by the fact that the expenditure has more than doubled in the last ten years, the same is projected to continue, making this expenditure one of the fastest growing areas of Australian government’s expenditure. It has been established that the scheme pays an excess of at least $1.3 billion for prescription drugs. Therefore, this report seeks to describe the scheme, investigate the costs and causes of medicine consumption in the country, the types of medicines consumed, characterise the problems with the scheme, and lastly make recommendations for cost reduction and lower consumption.
The PBS is undoubtedly an integral component of Australia’s health system that enables consumers timely access to affordable medicines (close to 800 in number as of June 2015). For a medicine to be subsidised, it has to undergo a hierarchical process that ends with the minister who assents for inclusion in the schedule as shown in figure 1 below. Before a medicine is listed on the PBS, it has to be approved by the Therapeutic Goods Administration (TGA). TGA reviews evidence on the safety and effectiveness of the medication for the proposed uses. Pharmaceutical manufacturers make submissions for listing on the PBS schedule for medicines that are TGA-registered or are in the process of registration by TGA (Turkstra, Comans, Gordon, & Scuffham, 2015). For a medicine to be listed on the PBS, it has to be recommended by the Pharmaceutical Benefits Advisory Committee (PBAC) after consideration of factors such as safety, cost, and effectiveness compared with others (Wonder, Blackhouse, & Sullivan, 2012). PBAC also makes recommendations to the minister on medicines for specific palliative listing. The Health Technology Assessment Section (HTAS) looks after and provides secretariat support for PBAC, Economics Sub-committee(ESC), and the Drug Utilisation Sub-Committee (DUSC) (Wonder, Blackhouse, & Sullivan, 2012). The ESC has the mandate of reviewing submissions from sponsors and the commentaries from the evaluation groups, while the DUSC provides advice pertaining to expected drug utilisation prior to PBS listing and also monitors the use post-listing.
Consumers pay a co-payment for each medicine purchased with a PBS subsidy. For concessional access, consumers pay $6.00 whereas for general access, $36.90, and the government pays the rest (The Pharmaceutical Benefits Scheme, 2017). Pharmacies which serve as the primary outlet for dispensing prescription medicines are paid by the government a dispensed price (approximately $6.63) for every PBS medicine they dispense.
Compared to its counterpart, New Zealand’s Pharmaceutical Management Agency (PHARMAC) structure has more bottlenecks. This translates to a characteristic reduced access to new medicines in New Zealanders compared to Australians. This can be supported by New Zealand Medical Association’s observation that the access to new medicines in New Zealand is considerably slower than in Australia (Milne & Wonder, 2012). Australia has a considerably expanded government-subsidy program, with a diverse listing, with comes along with a significant price tag. The expanded access comes along with a monetary opportunity cost and a steady increase through time compared to PHARMAC which has been able to contain the budget of subsidised medicines whereas widening access to other medicines (Milne & Wonder, 2012).
The growth in pharmaceutical benefits expenditure in Australia has been evidenced to be on the rise since its inception. An exponential increase has been documented since the beginning with a staggering 80% rise between 2004 and 2014. Precisely, between 1994/95 and 2004/5, the expenditure on PBS grew by about 13% each year (DoH, 2017). This was followed by a drop in its annual growth rate for the duration 2005/6 to 2013/14 by about 4.86%. In 2014-15, the expenditure on PBS stood at $9.1 billion, followed by a 19.5% increase for the following year (2015-2016) to stand at $10.8 billion. Notably, this is regardless of a drop in the total volume of PBS prescriptions by 1.9% for the same duration (DoH, 2016).
According to the Parliamentary Budget Office, the expenditure on PBS is bound to level out at 0.3% per annum in the medium level ( Parliamentary Budget Office, 2014), but at 4-5% annually in the longer term (Senate Community Affairs Legislation Committee, 2014) one of the possible explanations for the reduction can be partially attributed to the effect of various policies on pricing and changes to arrangements in co-payments and the safety net as introduced around the same time (2005) (Department of Health and Ageing (DoHA) and Medicines Australia (MA), 2013).
Take note of the exponential growth in government expenditure on PBS through the years. The rising trend is projected to rise due to its capacity to hit the targeted groups (pensioners, healthcare card holders, and those who have hit safety net), who are bound to rise with time accompanied with Australia’s demographic change, the increase in the incidence of chronic conditions, and the increase in new PBS medicine listings and changes in technology.
Drug prices in Australia have been described as being ‘unacceptably high’, as evidenced by some drugs costing up to 3.7 times the international prices (Duckett, 2013). Compared to other countries such as New Zealand, France, and Spain, the cost of generic drugs is particularly high. As of 2011-12, Australians spend more than $18 billion annually on medications (Australian Institute of Health and Welfare (AIHW), 2014). It is the fifth most expensive expenditure following hospital and primary health care expenditure. Data from OECD shows that Australia pays more for pharmaceuticals compared to other countries (O’Neill, Puig-Peiró, Mestre-Ferrandiz, & Sussex, 2012).some of the possible explanations to this scenario is that while some countries strived to contain the growth in prices, Australia must have missed out, especially after a 2005 study that concluded Australian prices were substantially lower (Duckett, 2013). There is also the likelihood that there is a limited number of suppliers and tightly regulated prices which can cause some companies maintaining the prices that high. In addition, drug prices are not the only factor that contributes to high pharmaceutical expenditures, rather other factors such as demographics, clinical choices and also comes into play.
The five major classes in Australia include ACE inhibitors, calcium channel blockers, proton pump inhibitors, statins, selective serotonin reuptake inhibitors (Statistica, 2015). ACE inhibitors are the most, with 15 drug types and a total of 242 products. Atorvastatin is the most commonly administered calcium channel blocker (table 3), accounting for over $300 million each year.
The high expenditure on medications under the PBS scheme produces a financial pain meaning that the government is not making savings like other countries. For instance, New Zealand spends far less on the same drug compared to the same in Australia. The government is also unable to make any returns upon the expiry of pharmaceutical patents. These two challenges result in high out of pocket expenditure on medicines and also a high cost of generic medicines. Private expenditure on prescription pharmaceuticals is also reported. Generally, the PBS was designed to generate savings, and also make medicines affordable to both consumers and the government, and this has not been the case.
References
Parliamentary Budget Office. (2014). Projections of government spending over the medium term. 2014: Parliamentary Budget Office.
Australian Institute of Health and Welfare (AIHW). (2014). Australia’s health 2014. Canberra: AIHW.
Department of Health (DoH). (2014, November 6). National Medicines Policy. Retrieved from The Department of Health: https://www.health.gov.au/nationalmedicinespolicy
Department of Health and Ageing (DoHA) and Medicines Australia (MA). (2013). Trends in and drivers of Pharmaceutical Benefits Scheme expenditure report, Report for the Access to Medicines Working Group. Sydney: Department of Health and Ageing (DoHA).
DoH. (2015). Annual Report 2014-2015. Canberra: Commonwealth of Australia.
DoH. (2016). Expenditure and Prescriptions Twlve Months to 30 June 2016. Canberra: PBS Information Management Section Pharmaceutical Policy Branch .
DoH. (2017, July 18). About the PBS. Retrieved from The Pharamaceutical Benefits Scheme: https://www.pbs.gov.au/info/about-the-pbs#Managing_the_cost_of_the_scheme
DoH. (2017, November 1). PBS Publications. Retrieved from The Pharmaceutical Benefits Scheme: https://www.pbs.gov.au/browse/publications
DoH. (2017, October 23). PBS Statistics. Retrieved from The Pharmaceutical Benefits Scheme: https://www.pbs.gov.au/info/browse/statistics
Duckett, S. (2013). Australia’s bad drug deal: High pharmaceutical prices. Melbourne: Grattan Institute .
Grove, A. (2016). The Pharmaceutical Benefits Scheme: a quick guide. Canberra: Parliament of Australia.
Milne, R., & Wonder, M. (2012). Access to new medicines in New Zealand compared to Australia. New Zealand Medical Journal.
O’Neill, P., Puig-Peiró, R., Mestre-Ferrandiz, J., & Sussex, J. (2012). International Comparisons of Medicine Prices 2011 Indices Methodology and Results. London: OHE Consulting.
Senate Community Affairs Legislation Committee. (2014). Official committee Hansard. Canberra: Senate Community Affairs Legislation Committee.
Statistica. (2015). Breakdown of the number of under co-payment prescriptions in Australia in 2015, by ATC group (in millions). Retrieved from Number of non-subsidized prescriptions by ATC group in Australia 2015: https://www.statista.com/statistics/693905/australia-number-of-non-subsidized-prescriptions-by-groups/
The Pharmaceutical Benefits Scheme. (2017, July 1). Pharmaceutical Benefits: Fees, Patient Contributions and Safety Net Thresholds. Retrieved from The Pharmaceutical Benefits Scheme: https://www.pbs.gov.au/info/healthpro/explanatory-notes/front/fee
Turkstra, E., Comans, T., Gordon, L., & Scuffham, P. (2015). Australia – Pharmaceutical. Sydney: International Society for Pharmacoeconomics and Outcomes Research (ISPOR).
Wonder, M., Blackhouse, M., & sullivan, S. (2012). Australian Managed Entry Scheme: A New Manageable Process for the Reimbursement of New Medicines? ScienceDirect, 586-590.
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