A joint report between the Australian Department of Health and Ageing and industry group Medicines Australia has examined price and volume growth drivers of Pharmaceutical Benefits Scheme (PBS) spending for the period 2004/05 to 2010/11.
IHS Global Insight perspective | |
Significance | Pharmaceutical Benefits Scheme (PBS) spending reached AUD8.9 billion (USD9.08 billion) in 2011, from AUD6.2 billion in 2005, representing a compound annual growth rate (CAGR) of 6.7%. |
Implications | This reflects the effects of a number of pricing policies introduced from 2005, as the CAGR in PBS spending during the four years to 2003–04 was 13%. |
Outlook | Minister of Health Tanya Plibersek has celebrated the report as showing PBS spending is continuing to grow at a manageable rate, with price cuts against existing PBS drugs compensating for volume growth in the form of new listings. |
Australia's Department of Health and Ageing (DoHA) has released the report Trends in and drivers of Pharmaceutical Benefits Scheme expenditure, produced in conjunction with innovative industry group Medicines Australia under a memorandum of understanding to conduct joint monitoring of price and volume drivers of Pharmaceutical Benefits Scheme (PBS) spending. For a link to the report, see here.
Key findings
Covering the period from 2004/05 to 20010/11, government spending on the PBS reached AUD8.9 billion (USD9.08 billion) in 2011, a rise of AUD2.9 billion from AUD6.2 billion in 2005, representing a compound annual growth rate (CAGR) of 6.7%. This is compared with the four-year period to 2003/04, when the PBS saw a CAGR of around 13%. New drug listings and increased demand for existing drugs are identified as the main drivers of increased spending, along with the ageing population and increased incidence of chronic disease.
A number of reforms are identified as contributing to the falling growth trend. Co-payments for concessional patients were increased from 2005 (from AUD3.80 to AUD4.60), while co-payments for general patients were also bumped up from AUD23.70 to AUD28.60. The report's review period covers the introduction in 2005 of the 12.5% price cut for a drug upon market entry of generic competitor (see Australia: 29 March 2005: Authorities in Australia Detail 12.5% Price Cut for Generics), a reduction of the safety net also in 2005 (see Australia: 11 May 2005: Government Installs Controversial New Safety Net Thresholds in Australia), the PBS reforms that saw 25% price cuts to certain generics in 2007/08 (see Australia: 16 November 2006: Government Announces Reforms to Streamline PBS in Australia), and further PBS reforms introduced in 2010/11. Ongoing pricing policies that were already in place during the review period were the Weighted Average Monthly Treatment Cost (WAMTC), reference pricing, and Pharmaceutical Benefits Pricing Authority (PBPA) price revisions.
Although Concessional and General expenditure categories have consistently accounted for the majority of spending and growth of spending, the Highly Specialised Drug (HSD) programme – referring to specialist drugs that must be dispensed in hospitals – has shown consistent growth to account for AUD1 billion in spending by 2011. Within this, over half of HSD spending went towards immunosuppressive agents, HIV/AIDS antiretroviral agents, and pulmonary arterial hypertension agents.
Australia's PBS expenditure, 2004–11 | ||||||
2005-06 | 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 | |
PBS expenditure (AUD bil.) | 6.2 | 6.4 | 7.0 | 7.7 | 8.4 | 8.9 |
% accrual | 2.7 | 4.3 | 9.4 | 9.2 | 9.3 | 5.7 |
PBS expenditure by category | ||||||
Concessional (AUD bil.) | 4.32 | 4.44 | 4.81 | 5.19 | 5.64 | 5.87 |
- % growth contribution | 42% | 47% | 61% | 59% | 62% | 48% |
General (AUD bil.) | 1.07 | 1.05 | 1.24 | 1.39 | 1.52 | 1.59 |
- % growth contribution | -1% | -10% | 32% | 24% | 17% | 17% |
Highly specialised drugs (AUD bil.) | 0.53 | 0.63 | 0.65 | 0.75 | 0.86 | 1.01 |
- % growth contribution | 40% | 38% | 4% | 15% | 15% | 33% |
Section 100 | 0.22 | 0.29 | 0.30 | 0.31 | 0.35 | 0.36 |
- % growth contribution | 18% | 25% | 2% | 2% | 6% | 3% |
Source: DoHA | ||||||
Outlook and implications
The report shows the various steps taken by the Australian government to rein in growth of PBS spending since 2005. Minister of Health Tanya Plibersek celebrated the report as showing that pricing reforms for existing PBS-listed drugs have offset additional expenditure driven by new listings, highlighting the 780 new listings and indications for existing PBS medicines since 2007, at a cost of over AUD5 billion. The scope of the report does not include the introduction of the Expanded and Accelerated Price Disclosure scheme, as the first-round price reductions occurred on 1 April 2012; these savings will be reflected in later reports from DoHA, and are expected to see PBS spending AUD2 billion lower than forward estimates by 2016.
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- Australia: 27 March 2013: Australia's Pharmacy Guild interprets PBS spending data as showing decline, new report finds pharma industry low on confidence