Academic journal article Australian Health Review

Costs of Paying Higher Prices for Equivalent Effects on the Pharmaceutical Benefits Scheme

Academic journal article Australian Health Review

Costs of Paying Higher Prices for Equivalent Effects on the Pharmaceutical Benefits Scheme

Article excerpt


The Pharmaceutical Benefits Schedule (PBS) in Australia lists all the medicines available to be dispensed to patients at a government-subsidised price. A requirement for the listing of a new pharmaceutical on the PBS is that the pharmaceutical provides value for money, relative to a comparator, that is the therapy likely to be most replaced by prescribers in practice. Sponsors of new pharmaceuticals make submissions to the Pharmaceutical Benefits Advisory Committee (PBAC), which reviews the evidence and makes a recommendation to the Minister for Health regarding the listing of proposed pharmaceuticals.

New pharmaceuticals can be listed on either a cost-minimisation or a cost-effectiveness basis. Pharmaceuticals listed on a cost-minimisation basis have demonstrated equivalence of effect with regard to a relevant comparator, and their price is generally set such that the costs are also equivalent between the listed pharmaceutical and its comparator. The prices of pharmaceuticals listed on the basis of cost-effectiveness are set such that demonstrated additional benefits against a relevant comparator are achieved at an acceptable additional cost to the government.

The PBS includes an F1 formulary for on-patent, singlebrand pharmaceuticals and an F2 formulary for off-patent pharmaceuticals that have multiple brands. In most cases, comparators are listed on the F1 formulary when the value of a new pharmaceutical is being assessed, but the comparator will generally come off-patent and move onto the F2 formulary before the more recently listed pharmaceutical.

A statutory price reduction of 16% is applied to PBS-listed products when the first new brand or item that is bioequivalent or biosimilar and has the same manner of administration as an existing brand or item lists on the PBS. Moreover, off-patent pharmaceuticals are subject to competition from generic versions of the pharmaceutical, which can further reduce the listed price through price disclosure. Under price disclosure, pharmaceutical companies report the price at which medicines are supplied to pharmacies, and the PBS then funds the original pharmaceutical and its generic versions at the average price paid by pharmacies.

Prices are not referenced between these two categories; thus, a new pharmaceutical on the F1 formulary cannot be linked to the price of its comparator when this declines following recategorisation onto the F2 formulary. This increases the price difference between the newer pharmaceutical and its comparator, leading to the possibility that the newer pharmaceutical no longer provides value for money at the price at which it was originally listed.

This paper illustrates and discusses the effect of the nonmaintenance of equivalent prices when the comparators of pharmaceuticals listed on the PBS on a cost-minimisation basis move onto the F2 formulary, and the cost savings that could have been achieved if the prices of those pharmaceuticals had declined at the same rate as their comparators.


Public summary documents describing all positive recommendations made by the PBAC in 2008, 2009, 2010 and 2011 (available from elements/pbac-meetings/psd, accessed 25 June 2015) were reviewed to identify pharmaceuticals that were recommended for listing on the PBS on a cost-minimisation basis. For each pharmaceutical identified, data describing the annual number of services and the annual costs for each relevant PBS code for the recommended and comparator pharmaceuticals were extracted from the PBS statistics website (http://medicarestatistics.human, accessed 25 June 2015). Data from July 1 2008 to April 30 2015 were extracted. The dispensed price for maximum quantity (DPMQ) in the first month of listing and on July 1 of each subsequent year was extracted from the PBS Publications Archive for each constituent PBS code for identified pharmaceutical and their comparators (http://www. …

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