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Cost Recovery Arrangements for PBS

Country: 
Australien
Partner Institute: 
Centre for Health, Economics Research and Evaluation (CHERE), University of Technology, Sydney
Survey no: 
(12) 2008
Author(s): 
Gallego, Gisselle
Health Policy Issues: 
Arzneimittelpolitik, Finanzierung
Current Process Stages
Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein ja nein nein nein nein
Featured in half-yearly report: G-politik in Industrieländern 12

Abstract

The Pharmaceutical Benefit Scheme (PBS) provides public subsidies for prescribed medicines in Australia. To date the cost of evaluating, pricing and listing of medicines and vaccines on the PBS or the National Immunisation program (NIP) has been funded by taxpayers. The Commonwealth Government wants to introduce application fees and thereby recover the costs associated with the services and activities related to listing of medicines in the PBS or designated vaccines for the NIP.

Purpose of health policy or idea

Australia has a two tier system that distinguishes access and subsidised access to approved pharmaceuticals. The first is the application for registration (licensing approval) made to the Therapeutic Goods Administration (TGA). The second is reimbursement for or subsidisation of the cost of pharmaceuticals through the Pharmaceutical Benefits Scheme (PBS). (1) The Pharmaceutical Benefits Advisory Committee (PBAC) is the committee which advises the Minister of Health and Ageing as to which pharmaceuticals should be listed on the PBS and which vaccines are to be funded under NIP.

The PBS cost recovery arrangements have been introduced to cover the costs of supporting PBAC and Pharmaceutical Benefits Pricing Authority (PBPA) activities and all sub-committees of PBAC. The proposal involves two payments: the first payment will be made by the applicant when the submission is made for consideration by the PBAC; the second payment will be made following a positive recommendation by PBAC, when the final price has been agreed. Any resubmissions will be subject to further fees. (2)   Submission fees range from AU$119,500 for innovative drugs to $500 for listing a new brand of an existing medicine. Pricing fees range from AU$6000 to $25000. However there are some exceptions, orphan drugs will not have to pay a submission fee and fees would also be waived due to exceptional circumstances (e.g. if the submission involves a public interest component). This will be determined by a delegate of the Secretary. (2)

Australia would take the lead

Even though cost recovery arrangements are common international practice for regulation of pharmaceuticals, if these measures are implemented Australia would be one of the first countries in the world to introduce cost recovery arrangements for the public reimbursement of pharmaceuticals and funding of vaccines. (3)

Main points

Main objectives

The PBS cost recovery arrangements have been introduced to cover the costs of supporting PBAC and Pharmaceutical Benefits Pricing Authority (PBPA) activities and all sub-committees of PBAC. (2)

Type of incentives

Financial

Groups affected

Pharmaceutical industry, sponsors

 Suchhilfe

Characteristics of this policy

Innovationsgrad traditionell innovativ innovativ
Kontroversität unumstritten kontrovers kontrovers
Strukturelle Wirkung marginal recht fundamental fundamental
Medienpräsenz sehr gering sehr hoch sehr hoch
Übertragbarkeit sehr systemabhängig recht systemabhängig systemneutral

Political and economic background

The measures were first announced in the 2005-06 Budget and it was proposed that they be implemented in 2007-08. The announcement generated widespread concern about the introduction of this measure. The main issue canvassed was that it may undermine the independence of the PBAC. (3)   Elections were held in Australia on the 24th of November 2007 and the newly elected Government (Australian Labor Party - ALP) described this initiative as an election commitment. Interestingly, the measures have not been recorded in the ALP election platform or other health policy documents. Furthermore in a debate held in May 2007 the then shadow health minister noted that there was no justification for the move to implement a cost recovery model as this could undermine the PBAC's independence.  So whilst in opposition the ALP was against the measure but changed its mind once in Government and closer to the time of the Federal budget.

Will service cost recovery increase efficiency and price efficiency?

The principle behind cost recovery measures lies in the fact that Government agencies should set charges to recover costs of products or services where it is efficient to do so. Furthermore according to the Australian Government cost recovery guidelines, charges for goods and services can give an important message to users or their customers about the cost of resources involved. (4) However pharmaceutical companies already bear the cost of preparing the application so a price signal is already in place. Cost recovery may undermine government health policy objectives in relation to "timely and affordable access to essential medicines" (which is the primary focus of the PBS), especially if the fee structure creates disincentives for companies to apply for PBS listing for medicines with a small target market.

Purpose and process analysis

Current Process Stages

Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein ja nein nein nein nein

Origins of health policy idea

The initial idea was first proposed by the previous Government. The Department of Health and Ageing (DoHA) noted that pharmaceutical companies need to gain marketing approval from the Therapeutic Goods Administration which is funded through cost recovery. Therefore it is a "logical extension" for the PBAC assessment to operate under the same arrangements. (2)   Currently the TGA and the evaluation of protheses for listing on the Medicare Benefits Schedule (MBS) operate using cost recovery arrangements.   In 2006-07 the cost of the PBS and the NIP to the Government was over AU$6 billion dollars. In the same period a turnover in the Australian pharmaceutical industry was estimated at AU$18 billion. The government noted that therefore it is "unreasonable" to require the industry to contribute to the cost of operating the PBS. (5)

Initiators of idea/main actors

  • Regierung
  • Leistungserbringer
  • Privatwirtschaft, privater Sektor
  • Medien

Approach of idea

The approach of the idea is described as:
new:

Stakeholder positions

Medicines Australia, the peak lobby group for pharmaceutical manufacturers in Australia expressed their surprise and disappointment with the new measure. The move to recover the cost of the PBAC was described as inappropriate. (6) One pharmaceutical company considers that this measure will add to the already substantial costs of bringing innovative medicines to the market and having them reimbursed. (7)   The Pharmacy Guild of Australia, the peak body representing community pharmacies also expressed their concern about the impact of cost recovery on PBS listing times and listing of new pharmaceuticals that target small to medium populations. Innovator manufactures may choose not to apply for PBS listing for these types of pharmaceuticals. The cost recovery measure may act as a disincentive for some pharmaceutical manufacturers. (8)

Is PBAC's independence at stake?

Fears were articulated in the media that this measure could undermine the independence of the PBAC and result in higher drug prices for consumers. (7, 9)   The Australian Medical Association (AMA) did not support the measure and considered that the fees paid for submission will be passed onto patients. It also agreed with the Guild about the perception that it the arrangements may act as a disincentive for pharmaceutical companies with low volume products. The AMA also considers the measure is inconsistent with government policy objectives. (10)

Actors and positions

Description of actors and their positions
Regierung
Department of Health and Ageingsehr unterstützendsehr unterstützend stark dagegen
Leistungserbringer
Australian Medical Associationsehr unterstützenddagegen stark dagegen
Pharmacy Guildsehr unterstützenddagegen stark dagegen
Privatwirtschaft, privater Sektor
Pharmaceutical Industrysehr unterstützendstark dagegen stark dagegen
Medien
Mediasehr unterstützenddagegen stark dagegen

Actors and influence

Description of actors and their influence

Regierung
Department of Health and Ageingsehr großsehr groß kein
Leistungserbringer
Australian Medical Associationsehr großneutral kein
Pharmacy Guildsehr großneutral kein
Privatwirtschaft, privater Sektor
Pharmaceutical Industrysehr großneutral kein
Medien
Mediasehr großneutral kein
Department of Health and AgeingAustralian Medical Association, Pharmacy Guild, MediaPharmaceutical Industry

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

The initial commencement date of 1 July 2008 has been delayed. The enabling legislation has been referred to the Senate Community Affairs Committee for an inquiry. Final parliamentary approval is still pending. Once the Government's response is available further information will be provided as to the implementation of the cost recovery arrangements. (2)

Monitoring and evaluation

The Department of Health and Ageing will provide ongoing monitoring of the fees to ensure they remain at an appropriate level. It is also expected that the fees will be indexed annually. As per the Government cost recovery guidelines, within five years a full review of the arrangements will be conducted. (2)  

Expected outcome

The shift towards cost recovery of the administration of PBAC was initially expected to generate additional revenue of AU$7 million over four years, with net costs of AU$2.2 million. New figures describe the amount expected to be recovered in a full year as $14 million at a net costs of $600 000. (5)

References

Sources of Information

1.Gallego G, Taylor SJ, Brien JA. Provision of pharmaceuticals in Australian hospitals: equity of access? Pharm World Sci 2007 Apr;29(2):47-50.

2.Department of Health and Ageing. Cost Recovery for evaluation and listing on the Pharmaceutical Benefits Scheme (PBS) and National Immunisation Program (NIP) - Frequently Asked Questions Commonwealth of Australia 2008 [cited 2008 August 26]; Available from: www.pbs.gov.au/html/healthpro/factsheet/view?date=20080501&type=XML&name=Health_Professional_Cost_Recovery_FAQ&folder
=cost_recovery&area=professional
.

3.de Boer R. National Health Amendment (Pharmaceutical and Other Benefits-Cost Recovery) Bill 2008. Parliament of Australia; 2008 [cited 2008 August 26]; Available from: www.aph.gov.au/Library/pubs/bd/2007-08/08bd125.pdf.

4.Commonwealth of Australia. Commonwealth Cost Recovery Guidelines for Information and Regulatory Agencies. Canberrra2005.

5.Parliament of Australia. National Health Amendment (Pharmaceutical and Other Benefits-Cost Recovery) Bill 2008. Commonwealth of Australia; 2008 [cited 2008 August 27]; Available from: www.aph.gov.au/SENATE/COMMITTEE/clac_ctte/nat_hth_pharm_cost_recover_08/
report/c01.pdf
.

6.Medicines Australia. Medicines Australia surprised by PBAC measure - Media release. Medicines Australia; 2008 [cited 2008 August 26]; Available from: www.medicinesaustralia.com.au/pages/images/MR%20May%201308%20Medicines%20Australia%20surprised%20at%20PBAC%20measure4.pdf.

7.Ryan S. Red-tape costs threaten drug for dying. The Australian; 2008 [cited 2008 August 26]; Available from: www.theaustralian.news.com.au/story/0,25197,24032537-23289,00.html.

8.The Pharmacy Guild of Australia National Secretariat. National Health Amendment (Pharmaceutical and Other Benefits - Cost Recovery) Bill 2008. Submission to the Senate inquiry. The Pharmacy Guild of Australia National Secretariat; 2008 [cited 2008 August 26]; Available from: www.aph.gov.au/SENATE/COMMITTEE/clac_ctte/nat_hth_pharm_cost_recover_08/
submissions/sub09.pdf
.

9.Ryan S. Drug committee left to rely on industry funding. The Australian; 2008 [cited 2008 August 26]; Available from: www.theaustralian.news.com.au/story/0,25197,23700655-5017018,00.html.

10.Australian Medical Association. Submission to the Senate inquiry. Australian Medical Association; 2008 [cited 2008 August 26]; Available from: www.aph.gov.au/SENATE/COMMITTEE/clac_ctte/nat_hth_pharm_cost_recover_08/
submissions/sub01.pdf
.

Author/s and/or contributors to this survey

Gallego, Gisselle

Empfohlene Zitierweise für diesen Online-Artikel:

Gallego, Gisselle. "Cost Recovery Arrangements for PBS". Health Policy Monitor, Oktober 2008. Available at http://www.hpm.org/survey/au/a12/5