Pharmaceutical Benefits Scheme: Managing Expenditure and Improving Efficiency

The Pharmaceutical Benefits Scheme (PBS) in Australia provides subsidized prescribed medicine to all citizens. Learn about its origin, success, and drivers towards an increase in expenditure. Discover recommendations for managing expenditure and improving efficiency.

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INTRODUCTION
In the current century, prescription of drugs is perceived to be the focal point of
treatment. Drugs have become so expensive in majority of the developed and the developing
countries making it quite difficult for majority of the citizens to acquire the medicine. The
situation gets worse when the respective governments fail to subsidize or employ price control
mechanisms. Healthcare systems are different among developed countries (Currie, Chiarella, &
Buckley, 2017). In the United States of America for example, the healthcare sector is dominated
by the private sector while In the United Kingdom it is predominantly the public sector .In
Ireland, all the sectors are at equal levels. A common feature however is that there are different
strategies that are employed so as to offer subsidies towards medications to certain groups of
people like the aged or the lower class individuals. Countries across the world including
Australia use different mechanisms so as to contain the cost of drugs such as the price and profit
control towards pharmaceutical companies (Pearson et al., 2015). Partial or fully Subsidized
system with patient co-payments is another mechanism employed. Others prefer using reference
price lists and listing reimbursable drugs. However, most of the countries provide subsidy
specifically to drugs and this forms part of a reimbursable medication list.
PBS increasing access to medicine
The Pharmaceutical Benefits Scheme is an Initiative that was set up by the Australian
Government with the core objective of providing subsidized prescribed medicine to all the
Australian Citizens as well as the foreign visitors from countries that have an agreement with
Australia. The initiative was set up in 1948 and the initial objective was to provide affordable,

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reliable and a wide variety of drugs to the Australian citizens. This was according to the
Department of Health Report that was published in 2014(Currow & Sansom, 2014).The PBS is
usually governed by the National Health of 1953.According to a report by the Australian
Institute of Health and Welfare, the estimated drugs that are subsidized through the PBS per year
is about $9 billion.
Initially, there was less prescriptions that were covered by the PBS since it met a lot of
resistance from the medical professions. The new government that was elected in 1949 however
revised the PBS and in 1950, a list of 139 drugs were provided free to the community (Faunce,
2015). Majority of those drugs were the lifesaving and prevention drugs. From there, more drugs
have been covered by the PBS. According to statistics published in 2014,601 generic products
which were available in 1469 forms of strengths were being covered by the PBS.
Studies have established that drugs that are most prescribed are those that deal with the
cardiovascular system. These group of drugs accounts for over 30% of the prescriptions and
costs (Harris, Daniels, Ward, & Pearson, 2017). The prescriptions for the nervous system are the
second at 20% while the Antineoplastic as well as the immunomodulation agents account for less
than 1% but account for 6% of the costs.
Initially, the PBS never needed any patient copayment but on March 1, in 1960, the PBS
came up with a 50 cent copayment and it was to cover the general beneficiaries. By 1990, the
copayment of a$2.50 for a single prescription was then introduced. As of 2003, the copayment
had already increased to A$3.70 for a single prescription for pensioners alone (Karnon, Edney, &
Sorich, 2017) .For the general beneficiaries however, the copayment by then was A$23.10.

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Trends in the PBS
There has been success in efforts towards reducing expenditure in the PBS. Statistics as
at 2013-14 financial year found out that $526 million lower had been spends. This therefore
reflects savings due to the existing pricing policy and the low demand of the macular
degeneration medicines (Vitry, Thai, & Roughead, 2014). The introduction of improved price
disclosures where the manufacturers are supposed to reveal the exact price they charge for drugs
and then adjusting the listed prices to match the manufacturers price has led to the growth of the
PBS. The growth was estimated to be at 6$ during the 2011-12 year(Knott, Clarke, Heeley, &
Chalmers, 2015) .This was a significant fall in expenditure after so many decades to 3.4% at as
2012-13.
The process of price disclosure is however too long. It takes almost a year before the
price are listed .This therefore denies the citizens from using the drugs whose price has been
reduced up to the time they are listed. The graph below illustrates the projected expenditure by
the PBS.

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Source: National Commission of Audit.
Drivers
There is a variety of drivers towards an increase in the expenditure of the PBS. Some of
the drivers include new PBS medicine listings as well as the technological changes, the
increasing incidences of chronic diseases and the demographic changes of Australia as a whole
country. Recently, there has been an increased expenditure in the PBS and this has been
attributed to the listing of more drugs. According to studies, there different medicines costing
around $6 billion that have been listed as form 2007.The government also amended 156
medicines to be listed between 2011 and 2013(Thai, Vitry, & Moss, 2016).The increased listings
is also due to the current use of biologically processed drugs as opposed to the chemically
processed.
An increase in expenditure has also been attributed to the management of acute
conditions. There has been an increase in the prevalence of conditions such as cancer that need

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long term treatment. The drugs that are also used to treat this conditions are among the leading in
prescribing and this leads to increased expenditure by the PBS (Turkstra, Bettington, Donohue,
& Mervin, 2017). There is also the aspect of the ageing population .According to the Australian
Government, it is estimated that by 2050, 25% of the population would be made up of
individuals with 65 years and above. The ageing population have weak immune systems and
therefore are treated frequently. This leads to increased prescriptions of medications that strains
the PBS expenditure. The increasing expenditure by the PBS can be illustrated by the use of a
graph as shown below.
Source: OECD, 2013a
RECOMMENDATIONS
The Australian government should look for savings from existing PBS listed drugs. This
can either be done through different price reforms as well as higher patient copayments .The

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government can as well use both the alternatives so as to effectively accommodate the future
PBS listings (Mellish et al., 2015).The government should also scrutinize competition both in the
pharmacy and the pharmaceutical sectors by reviewing the pharmacy regulation as well as the
emergence of cheaper biosimilar alternatives to the expensive medicines. These review could
motivate the current debate on how well timely and cost effective listings of new drugs on the
PBS would be carried out. This would in return lead to efficiency and positive impacts on the
costs and consumption of medicine.
The commonwealth government should also consider effective negotiation and
management of the listings. This could be achieved through reducing the government
involvement and establish an independent entity. This is bound to introduce a new way to
negotiate price .A similar approach in the name of the Pharmaceutical Management Agency was
established in New Zealand and the results have been phenomenon (Thai, Moss, Godman, &
Vitry, 2016). The government should finally improvise on mechanisms that would allow it to add
different items on the PBS under exceptional circumstances by introducing a disallowable
instrument in the parliament. The Australian government should also allow those approvals made
from overseas such as the Food and Drug Association. This would reduce the costs of having to
go through the whole process of approval once drugs have been shipped to Australia.
CONCLUSION
The Pharmaceutical Benefits scheme was initiated in 1948 by the Australian Government
and it is one of the most integral parts of the Australian Healthcare system. Its origin can
However be traced back in 1919 when a small initiative had been set up to provide subsidized
drugs to the victims of the world war 1.The scheme has however evolved so much since as of
2012, the scheme was providing over 867 subsidized medicines which were available in more

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than 2267 strengths and marketed as 4871 different drug names or brands. In 2013, more than
9.5 million accessed the subsidized medicines. The objective of the government should always
be delivering safe, affordable as well as effective medicine to all the Australian citizens and they
should also be assured of the value for their money they pay through taxes. Different
governments have identified opportunities through which the PBS can be improved and in 2010
for example, the government signed an MOU with the Medicines Australia to promote a more
efficient PBS. Over the years, the consumption of drugs across Australia has generally improved
and this has been attributed to the reforms In the PBS where manufacturers of different drugs are
supposed to disclose the real price of the drugs which is then listed. The government should
therefore work hard to ensure an efficient and transparent PBS so that the taxpayers get quality
medicine at the value of their money.

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References
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