Did You Know…

Did you know….

Did you know that Australia has one of the most highly regarded Pharmaceutical Benefits Schemes (PBS) in the world? It enables Australian consumers to buy medicines at highly subsidised rates, thus making them more affordable for those who need them. One of the strengths of the Australian PBS has been the requirement for all new drugs to be approved in terms of their effectiveness and cost-effectiveness before they can be added to the PBS. Despite this careful scrutiny however, the cost of Australia’s PBS to the Federal Government has been growing so fast recently that many fear the scheme cannot be sustained.

In 2002-2003, the PBS cost the Federal government $5.5 billion. This represents 85% of the total amount spent on pharmaceuticals in Australia in that year (with consumers making up the remaining 15%). A decade ago the Government’s share of the PBS was only 80% of total cost. Further, a recent investigation revealed that PBS costs continue to rise in Australia because of growing consumer demand for expensive new drugs; Australia’s aging population (older people need more medications); and doctors’ prescribing habits (where PBS-listed drugs have been prescribed for conditions outside PBS guidelines). All these things the Government cannot easily remedy alone.

The Federal Government can control the rising costs of the PBS by:

a) limiting the type and number of drugs listed on the PBS (through the Pharmaceutical Benefits Advisory Council);

b) limiting the price paid to pharmaceutical companies for drugs;

c) determining their share of total cost of the PBS by modifying eligibility criteria for concession cards;

d) and modifying levels of safety net thresholds and consumer co-payments.

However, curtailing the rising costs of the PBS, and thus protecting its sustainability, relies on the combined efforts of not only the Federal government, but also the pharmaceutical lobby (who in the context of the US-Australia Free Trade Agreement have increased power to charge more for their drugs), the medical profession (and their prescribing habits) and consumers (and how much they are willing to support the PBS and contribute to the cost of drugs). The PBS is an example of how market forces can be modulated for the benefit of all. To maintain the PBS requires strong community awareness of its benefits, wide support for its continuation, and political leadership committed to equity.

Anne-marie Boxall
PhD student
Australian Health Policy Institute


Sweeney, K. Centre for Strategic Economic Studies, Victoria University of Technology. Working Paper No. 5. Trends in the Use and Cost of Pharmaceuticals Under the Pharmaceutical Benefits Scheme 2002.

Parliamentary Library, Research Note No. 29. How Much Will the PBS Cost? Projected Trends in Commonwealth Expenditure 2004.

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