Critical Analysis Of Australian Pharmaceutical Benefits Scheme (PBS)

Background of Australian Pharmaceutical Benefits Scheme (PBS)

Discuss about the Pharmaceutical Benefits Scheme Data.

The primary objective of Australian government healthcare system is to provide affordable, protective and clinically effective medications to Australian people ensuring taxpayers money value. The Australian Pharmaceutical Benefits Scheme (PBS) plays an important role in achieving this objective as an essential part of the healthcare system in Australia. PBS is operational from more than 50years in Australia (part of National Medicines Policy) providing lifesaving essential medicines at affordable rates to the public (Biggs, 2018). However, critical observations indicate a huge escalation in subsidised medicine cost in Australia leading to the essentiality of reviewing the PBS structure (Duckett et al. 2013).

This study is a critical analysis report on Australian Pharmaceutical Benefits Scheme involving a study on its general background, statistics, processes and issues to detect the possible reason behind increasing cost of PBS. Further, report involves certain options to get a control over this growing cost of PBS expenditures and pharmaceutical prices.

Functional since 1919, PBS is working to provide subsidised medicine to sufferers of World War 1 to Australian people of 21^st century. This scheme involves a list of prescribed medicines that are provided to the patient at government-subsidised cost (9.4 The Pharmaceutical Benefits Scheme, 2018). The cost of prescription drugs in Australia is very high that involves minimum $1.3 billion/year or $3.5 million/day covering 14% budget of PBS (Mellish et al. 2015). According to Blanch, Pearson & Haber (2014) studies only one drug named atorvastatin cost around $700 million/year to the Australian government and the individual patient. Australian PBS pays $51/30tablet box whereas New Zealand scheme pays only $5.80/90tablets box of 40mg atorvastatin. This example indicates a critical abnormality in the financial management system of pharmaceutical benefits scheme of Australia. The below-provided table demonstrates expenditure on PBS by commonwealth since 1991 (Mellish et al. 2015).

Table 1: Expenditure on PBS by the commonwealth from 1991 -2002

(Source: Mellish et al. 2015)

Further, Whitty & Littlejohns (2015) indicated that government investment in PBS is continuously observed increasing 6% yearly from 2010-2011. Government is paying more than 80% of the cost of PBS drugs cost. According to Page et al. (2015) study, Australian pharmaceutical prices were lower than that of USA, Canada, UK and Sweden and closer to cost in New Zealand, Spain and France in 2007.  However, since then, there have been dramatic cut in pharmaceutical prices of other countries whereas no such price cut was observed in Australia till 2011. As compared with other countries the cost of generic medicines is very high in Australia. The reasons like limited suppliers, tightly regulated prices etc. can be considered as the reason for high drug price in Australia. In contrast, Hartung et al. (2015) indicated that high drug prices couldn’t be considered as the only reason for increased expenditure in PBS cost of Australian healthcare system.

Lopert & Elshaug (2013) studied that Australian PBS expenditure on anti-cancer drugs has shown a major growth that is leading example to issue of high drug cost in Australia. This rate is increased by 63% from 2009 to 2014.

Rising Cost of Subsidised Medications

Further, Vitry & Roughead (2014) studied that commonwealth is the funder of healthcare services in Australia that funds PBS, Medical Benefits Scheme and other healthcare services. In the past three decades, there has been a tremendous increase in the commonwealth health funding which is more than double (4% of GDP). Alongside, PBS is detected to be fastest growing component consuming commonwealth funds. In addition to this data, Whitty & Littlejohns (2015) indicated that if not controlled with proper techniques, PBS expenditure could place a top priority position in coming future (more than double of GDP by 2042).

According to Hassali et al. (2014) studies on OECD average annual pharmaceutical expenditure growth in real terms from 2000 to 2011, Australia is amongst countries showing high-cost growth from 2000 to 2011 instead to a reduction in expenditure. These statistics indicate that Australian medicine consumption a problem for its economic growth including PBS cost management a major part of this expenditure growth.

The major issue in PBS functionality is the price paid by the government for the medicines is lagging behind price paid by other countries due to various factors leading to this issue. As mentioned above price for Atorvastatin is $51/30tablet box whereas New Zealand scheme pays only $5.80/90tablets box of 40mg atorvastatin.

Another example is of Simvastatin (cholesterol control medicine) was $2.00 per tablet in Australia and almost $3.00 per tablet in England under patent condition. But, as the patent expired the medicine price in England reduced gradually whereas for Australia it took around 4years to make the price $1.00 per tablet (Australia’s Demographic Challenges —Australia’s Demographic Challenges, 2018).

According to Page et al. (2015) studies new PBS medicine listing, negotiations and de-listing existing medicines (once new medicines are recommended) requires better holistic management approach. The committee pays very little attention to de-listing medicines not in trend, time to time reducing in price and negotiation with suppliers. Further, Pearson et al. (2015) indicated that drug-pricing decision by PBS are unconfined and opaque because decision committee involves representatives from drug companies and members of the health department. In contrast, New Zealand government appoints independent experts team to deliver better decisions in negotiations, pricing and prioritizing the medicines. These expert decisions are further reviewed by committee members whereas in Australia expert judgements can be overruled by political decision leading to six times high wholesale prices of medicine in Australia compared to New Zealand.

Another issue demonstrated in Vitry & Roughead (2014) study is the Australian Community Pharmacy Agreements as per which only pharmacy guild of country and commonwealth can manage the medicine of PBS. This has lead to business profit interest in healthcare scheme making the government pay up to 80% of PBS medicine cost as well an increase in medicine consumption rate in Australia. However, other countries are now allowing non-pharmacist to own pharmacies leading to market competition, better negotiations for customers and pressure on the pharmacist to reduce the medicine price. This availability of variety also provides more medicine options to the customers. These are certain issues hindering functionality of PBS in Australia.

Factors Contributing to the Increasing Cost of PBS

However, there are certain changes introduced in PBS expenditure processes that have bought certain success in reducing PBS expenditure. The improvement in price disclosure agreements, which require the manufacturer to release the medicine price in PBS listing, has lead to a fall of 3.4% in PBS expenditure in 2012-13 (Duckett, 2018). Many potential options are available to work upon and overcome the issue of rising PBS expenditure. As per the understanding by Australian commission, a sustainable reformation is required to overcome cost drivers in PBS system (Stephenson, Karanges & McGregor, 2013). According to Parkinson et al. (2015) studies, PBS expenditures can be controlled by, freezing expenditures at the current stage, decreasing PBS subsidies amount and reducing coverage of prescribed drugs in PBS. The freezing expenditures of medicine at current stage involve a balance where new medicines will only be listed with the removal of similar existing medicines in PBS list. This process will provide a huge control over continuously increasing PBS expenditure cost. Further, Vitry & Roughead (2014) suggested that establishing an independent team to manage PBS decision and limiting the role of government will significantly improve negotiations and management of price listing in medicines. The Pharmaceutical Management Agency (PHARMAC) of New Zealand is a perfect example to follow in this case. This independent entity will help to rationalise the decision-making process supported with the logical and technical skill of experts.

Page et al. (2015) studied another method to overcome growing PBS expenditure that involves tough regulations on generic medicine pricing in Australia. The generic drugs are extremely costly in Australia being 7times costlier than New Zealand. The companies in Australia producing generic medicine have very low R&D and manufacturing cost. Therefore, it is justified that a control over high generic medicine cost is a must because it covers approximately 88% savings in Australia. There is a need of 50% cut-off in generic medicine price compared to originator price as soon as the patent expires.

Lastly, Hartung et al. (2015) studied future reforming strategies of cost-effective PBS choices. This involves encouraging people to use cost-effective drugs from the therapeutic list as per their Doctor’s advice. People can smartly select their drug by applying a sense of strategy that can be explained to them by the expert group. This group can help people to understand the benefit of their choices to themselves as well as government. Therefore, these three strategies of establishing an independent entity, tougher generic pricing rules and awareness among people regarding medicine use can help to save more than $1.6 million yearly in PBS expenditure (Duckett, 2018). In this manner, the PBS can work differently getting control over the issue of growing expenditure.

Conclusion

The study involves a critical analysis of the Pharmaceutical Benefits Scheme of Australian government working to release the uncertain burden of drug expenses for Australian people. The PBS scheme in process of fulfilling its objective is becoming a financial disturbance on Australian economy with continuously growing expenditures. From 1991 to 2001 the expenditure grew from $1.11 billion to $4.18 billion with nearly 6% yearly increase from 2010-2011. This uncontrolled PBS expenditure is due to detected issues like uncontrolled drug rates, improper drug listing, no negotiations, lacking proper expert panel in decision committee, scheme agreements and unawareness among people. These issues are leading to an improper increase in PBS expenditure.

Options to Control the Growing Cost of PBS Expenditures and Pharmaceutical Prices

However, the study involves certain recommendations to overcome these issues to balance PBS expenditure. Firstly, implementing independent expert panel, to handle PBS decisions with their skilful and logical suggestion. Further, freezing expenditures, decreasing PBS subsidiaries and reducing prescribed drug coverage could also help to minimise expenses. Further, the control over generic medicine pricing can also help to control PBS expenditure rate. Lastly, creating awareness among people to pick medicine in a smarter and safer manner would be beneficial for the government as well as people themselves. The functionality of PBS is good but a control over growing expenditure will help to get a better healthcare system in Australia.

References

Duckett, S. J., Breadon, P., Ginnivan, L., & Venkataraman, P. (2013). Australia’s bad drug deal: high pharmaceutical prices. Melbourne: Grattan Institute.

Blanch, B., Pearson, S. A., & Haber, P. S. (2014). An overview of the patterns of prescription opioid use, costs and related harms in Australia. British journal of clinical pharmacology, 78(5), 1159-1166.

Hartung, D. M., Bourdette, D. N., Ahmed, S. M., & Whitham, R. H. (2015). The cost of multiple sclerosis drugs in the US and the pharmaceutical industry Too big to fail?. Neurology, 84(21), 2185-2192.

Hassali, M. A., Alrasheedy, A. A., McLachlan, A., Nguyen, T. A., Al-Tamimi, S. K., Ibrahim, M. I. M., & Aljadhey, H. (2014). The experiences of implementing generic medicine policy in eight countries: a review and recommendations for a successful promotion of generic medicine use. Saudi pharmaceutical journal, 22(6), 491-503.

Lopert, R., & Elshaug, A. G. (2013). Australia’s ‘fourth hurdle’drug review comparing costs and benefits holds lessons for the United States. Health affairs, 32(4), 778-787.

Mellish, L., Karanges, E. A., Litchfield, M. J., Schaffer, A. L., Blanch, B., Daniels, B. J., … & Pearson, S. A. (2015). The Australian Pharmaceutical Benefits Scheme data collection: a practical guide for researchers. BMC research notes, 8(1), 634.

Page, E., Kemp-Casey, A., Korda, R., & Banks, E. (2015). Using Australian Pharmaceutical Benefits Scheme data for pharmacoepidemiological research: challenges and approaches. Public Health Res Pract, 25(4), e2541546.

Parkinson, B., Sermet, C., Clement, F., Crausaz, S., Godman, B., Garner, S., … & Elshaug, A. G. (2015). Disinvestment and value-based purchasing strategies for pharmaceuticals: an international review. Pharmacoeconomics, 33(9), 905-924.

Pearson, S. A., Pesa, N., Langton, J. M., Drew, A., Faedo, M., & Robertson, J. (2015). Studies using Australia’s Pharmaceutical Benefits Scheme data for pharmacoepidemiological research: a systematic review of the published literature (1987–2013). Pharmacoepidemiology and drug safety, 24(5), 447-455.

Stephenson, C. P., Karanges, E., & McGregor, I. S. (2013). Trends in the utilisation of psychotropic medications in Australia from 2000 to 2011. Australian & New Zealand Journal of Psychiatry, 47(1), 74-87.

Vitry, A., & Roughead, E. (2014). Managed entry agreements for pharmaceuticals in Australia. Health Policy, 117(3), 345-352.

Whitty, J. A., & Littlejohns, P. (2015). Social values and health priority setting in Australia: an analysis applied to the context of health technology assessment. Health Policy, 119(2), 127-136.

9.4 The Pharmaceutical Benefits Scheme. (2018). Ncoa.gov.au. Retrieved 4 April 2018, from https://www.ncoa.gov.au/report/appendix-vol-1/9-4-pharmaceutical-benefits-scheme.html

Australia’s Demographic Challenges —Australia’s Demographic Challenges. (2018). Demographics.treasury.gov.au. Retrieved 4 April 2018, from https://demographics.treasury.gov.au/content/_download/australias_demographic_challenges/html/adc-05.asp

Biggs, A. (2018). The Pharmaceutical Benefits Scheme – an Overview – Parliament of Australia. Aph.gov.au. Retrieved 4 April 2018, from https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/archive/pbs

Duckett, S. (2018). Australia’s Bad Drug Deal: High Pharmaceutical Prices. Grattan.edu.au. Retrieved 4 April 2018, from https://grattan.edu.au/wp-content/uploads/2014/04/Australias_Bad_Drug_Deal_FINAL.pdf

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