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Government's reponse to the deferring of medicines on the PBS

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SEPTEMBER 30, 2011

Government's reponse to the deferring of medicines on the PBS

Image source: Department of Health, Victoria

The announcement by the Government earlier today that medicines previously deferred on the Pharmaceutical Benefits Scheme (PBS) will be listed on the PBS has been welcomed by the main stakeholder groups. Medicines Australia (MA), the Consumers Health Forum (CHF) and the Generic Medicines Industry Association (GMiA) have all been lobbying Government to reverse the deferral decision made in February this year. See here and here for background.

At the same time, the Government also released the ‘statement of principles of commitment between stakeholders.’ This sets out the short and medium term arrangements for the deferral of PBS medicines.

In short, between now and October 2012, medicines approved by the Pharmaceutical Benefits Advisory Committee (PBAC) that cost less than $10 million per year (in each year of the Forward Estimates) will not be delayed listing on the PBS. MA, CHF, and GMiA have also committed to ‘discuss’ with Government ways in which future deferrals can be managed and identify possible savings to the PBS in the next Budget. In addition, MA, CHF and GMiA will also present the Government with a paper canvassing additional savings that could be achieved by Government when the Memorandum of Understanding (MOU) with MA expires in 2014.

While this announcement has the broad support of stakeholders, there are many questions left unanswered. For example:

• The Government’s media release indicated that ‘budget savings created by price reductions’ had enabled the listing of these deferred medicines. This represents a subtle shift from the accepted practice of listing PBS medicines, that is, medicines were listed on the PBS if they met the legislative criteria. The PBS is an uncapped program, designed to provide access to a wide range of prescription pharmaceuticals to all Australians. It is one of the few publicly funded programs with an explicit requirement for an economic evaluation (assessment of ‘value for money’) before receiving government subsidy. This raises questions about the role of economic evaluation when the Government makes decisions about PBS expenditure as well as broader questions about the listing of medicines on the PBS.

• It is not possible to verify whether, or how, these particular savings have been made. There is no public reporting on how the saving expected from the MOU and the initial 2007 PBS reform measures are achieved. The Report to the Parliament on the impact of the 2007 PBS reforms revealed that the savings anticipated from these measures have been revised down from $580 million to $103 million over four years but it is not known whether these savings have been achieved. It is important to note that there is no requirement in the MOU which binds MA to deliver the anticipated savings to Government.

• The statement does not explain what will happen to the listing of drugs that cost more than $10 million per year. Will these medicines continue to be considered by Cabinet? Previously, medicines that were expected to cost more than $10 million in any of the first four years of PBS listing had to be considered by Cabinet before they could be listed. Will the listing of these medicines now be deferred until 2012 or ‘until circumstances permit’ (as applied to medicines that were deferred in February)?

• As part of the listing process on the PBS, the PBAC makes an assessment of the clinical and cost-effectiveness of the pharmaceutical. Only products that receive a positive recommendation can be listed on the PBS (subject to Ministerial approval). The Guidelines for listing products on the PBS note that there is no ‘threshold’ for cost-effectiveness which determines a positive recommendation. By guaranteeing that medicines costing less than $10 million per annum over the Forward Estimates (and with a positive recommendation from the PBAC) will be listed, it could be argued that the Government is introducing a de-facto financial threshold for the listing of medicines on the PBS. While the result of such a threshold may be to encourage some pharmaceutical manufacturers to lower their price to government, it may also encourage others to restrict the availability of their medicine to certain populations so this de-facto threshold might be met. If this occurred it could raise questions about whether patients are able to access the most appropriate drug for their clinical need.

Today’s announcement gives the Government another year to determine the best way to deal with the listing of high cost drugs on the PBS. The Government has also committed to engaging with MA, CHF and GMiA to develop future policy options for savings on the cost of the PBS. Given the differing concerns of each of these groups, balancing their competing objectives will be no mean feat, especially if savings are to be achieved. There is no shortage of ideas for savings from the PBS (see here and here and here) but there is no consensus about the best approach. It remains to be seen whether pharmaceutical policy stakeholders will continue their united front when putting forward options to Government. For the Government, the ongoing challenge of balancing access and affordability to PBS medicines remains. Posted by Rebecca de Boer at 4:25 PM

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