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Some wider context to debate about listing medicines on the PBS

Glenn Salkeld, professor of health economics at the University of Sydney, provides some useful context to the debate about listing of new medicines on the Pharmaceutical Benefits Scheme (PBS). This article was first published at The Conversation.

***

Beyond a lobby-driven debate

Glenn Salkeld writes:

The fanfare around Health Minister Nicola Roxon’s announcement yesterday that the government would fund 13 new medicines on the PBS is a reminder of the power and influence involved in the selection and reimbursement of prescribed medicines.

Politics is never far away from any combination of money and people, but add pharmaceuticals to the mix and you have a real strife of interests.

On the money side, the Australian government spent around $8.4 billion on pharmaceutical benefits in 2010 alone. Add the $1.4 billion that comes from individual patients’ pockets and that’s a sizeable chunk of the nation’s health costs.

In terms of people, taking a prescribed medicine is probably the most common health activity or service consumed on any given day of the year.

Every time someone takes a prescribed medicine that’s listed on the Pharmaceutical Benefits Scheme (PBS), the Australian Government pays the difference between the co-payment ($5.60 for concession card holders and $34.20 for others) and the real price of the medicine (if greater than the co-payment amount).

It’s not surprising that Australians like paying below world-average prices for their medicines – and this is well understood by politicians. When the prospect of higher price pharmaceuticals was flagged during then Prime Minister John Howard’s Australia-US Free Trade Agreement negotiations in 2003, patient lobbyists came out in full force.

Despite pressure from Washington to end or slow down Australia’s “free-ride” on US big Pharma, Australian politicians didn’t want to risk the voter backlash that would come with raising the price of medicines.

That brings in another player – the pharmaceutical sector itself. Big, powerful and necessary, the pharmaceutical industry in Australia relies on the PBS to maintain a profitable operation.

So how do our politicians handle the tough politics of deciding which drugs will be listed on the Pharmaceutical Benefits Scheme and at what price?

Evidence-based evaluation

Since the 1960s thalidomide scare, when thousands of women around the world who used thalidomide during pregnancy gave birth to infants with severe abnormalities, Australia has enforced a culture of scientific evaluation to ensure that all new drugs are safe, effective and can be manufactured to a high quality.

In 1987 another requirement was added – medicines could only be listed for PBS subsidies if there was evidence they were cost effective.

The cost-effectiveness and efficacy of medicines is reviewed by the Government’s Pharmaceutical Benefits Advisory Committee (PBAC), an independent group of experts and a technical advisory committee.

Members of PBAC assess the mountains of evidence submitted by the sponsor (a pharmaceutical company) and make their recommendation to the minister on whether a drug should be listed on the PBS or rejected.

A submission fee is paid by the sponsor to cover the cost of the listing and evaluation process.

The final decision to list a drug on the PBS lies with the Minister – except when the drug is likely cost more than $10 million a year. In these cases, the decision is taken to Cabinet for discussion.

Financial restrictions

In an attempt to save funds in this tight fiscal year, we’ve seen a new pattern emerge in the PBS listing process. All recommendations for PBS listings are going to Cabinet for discussion. Some drugs have been delayed and some are not getting through.

Some commentators have raised concerns that this new process might undermine the evidence-based approach of the PBAC in assessing drugs. But this confuses the role of PBAC.

Our elected politicians have responsibility for total pharmaceutical expenditure – PBAC can only give advice about the opportunity cost of those decisions.

So the question on my mind is: How does Cabinet compare “…new PBS drug listings with other health spending priorities such as training new doctors and nurses, opening new hospital beds and investing in new preventative health programs,” as Health Minister Nicola Roxon summed up its dilemma yesterday?

If the answer is, “we take things into account and bear them in mind,“ then we have reason to worry. We need to know the process for deciding which drugs will be listed.

With health costs rising by around 10% a year, a line must be drawn somewhere between what the government subsidises and what misses out.

What we need to ensure, though, is this process maintains its evidence base and isn’t just hijacked by the lobby group that shouts the loudest.

• Previous Croakey posts on this topic

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