How the Pharmaceutical Benefits Scheme Works and Its Impact on Australia’s Healthcare System
The United States pharmaceutical lobby has complained to US President Donald Trump that Australia’s Pharmaceutical Benefits Scheme (PBS) is damaging their profits and has urged Trump to impose tariffs on pharmaceutical imports from Australia. However, Prime Minister Anthony Albanese has defended the scheme, saying it is “not up for negotiation”. Opposition Leader Peter Dutton has also pledged to protect the PBS, calling it the “envy of the world”.
How did the PBS start?
In the early 1900s, Australians had to pay for medicines out-of-pocket. Some could get free or cheap medicines at public hospitals or through Friendly Society Dispensaries, but otherwise, access was restricted to those who could afford to pay. The development of insulin and penicillin in the 1920s made access to medicines much more important.
How does the PBS work in practice?
The PBS covers the cost of medicines prescribed by doctors, with most dispensed at community pharmacies. In 2023-24, there were 930 different medicines and 5,164 brands listed on the PBS, costing the government $17.7 billion.
When a patient fills a prescription at a pharmacy, they pay a co-payment. The government pays the difference between the agreed price and the co-payment to the pharmacy, which can amount to hundreds of thousands of dollars.
How are medicine prices set?
The PBS is split into two categories: F1 and F2. F1 medicines are new, patent-protected medicines with no competition, while F2 medicines are those with multiple brands, including generics.
To be listed on the PBS, a new medicine goes through a process:
* It’s evaluated for safety, efficacy, and quality.
* A panel of experts recommends which medicines should be listed on the PBS, based on effectiveness, safety, cost-effectiveness, and the total cost on the budget of the medicine versus alternative treatments.
* If the panel recommends a medicine, the price and details of the listing may be further negotiated with the government.
* Finally, the health minister, and subsequently the Cabinet, formally approves or rejects the panel’s recommendation. If approved, the medicine is listed on the PBS.
Is the PBS unique?
Australia is not unique in its approach to medicines. Many countries use similar assessments to determine whether to subsidize new medicines, including the National Institute for Health and Care Excellence (NICE) in the United Kingdom, Canada’s Drug Agency, and Pharmac in New Zealand.
What are the benefits of the PBS?
The PBS ensures all Australian patients have access to highly effective medicines, contributing to a high life expectancy while keeping healthcare costs low relative to other developed countries. This is achieved by keeping prices down for both F1 and F2 medicines.
What are the drawbacks of the PBS system?
No system is without its drawbacks and risks. The PBS’s drawbacks include:
* Limited patient involvement in the process
* High frequency of re-submissions and delays to PBS listing
* Companies being unwilling to submit off-patent medicines for PBS listing due to high costs and low rewards
* Ongoing lack of high-quality clinical evidence about medicines to treat rare diseases and certain patient populations, such as children
* Medicine shortages
* Increased medicine costs can discourage patients from filling necessary prescriptions, which can have longer-term impacts on health and health expenditure
Conclusion
The PBS is a crucial part of Australia’s healthcare system, making essential medicines affordable while keeping costs down. While it has its challenges, the PBS ensures all Australians have access to effective medicines, contributing to a high life expectancy and low healthcare costs.
FAQs
- What is the PBS?
- How does the PBS work?
- What are the benefits of the PBS?
- What are the drawbacks of the PBS system?
The PBS is Australia’s Pharmaceutical Benefits Scheme, which covers the cost of medicines prescribed by doctors.
The PBS covers the cost of medicines prescribed by doctors, with most dispensed at community pharmacies. Patients pay a co-payment, and the government pays the difference between the agreed price and the co-payment to the pharmacy.
The PBS ensures all Australian patients have access to highly effective medicines, contributing to a high life expectancy while keeping healthcare costs low relative to other developed countries.
The PBS’s drawbacks include limited patient involvement, high frequency of re-submissions and delays to PBS listing, and ongoing lack of high-quality clinical evidence about medicines to treat rare diseases and certain patient populations.
