Pharmaceutical Benefits in Australia and Sweden: Welfare Policy and the Cost of Prescription Drugs

By Lofgren, Hans | Australian Journal of Social Issues, August 2001 | Go to article overview

Pharmaceutical Benefits in Australia and Sweden: Welfare Policy and the Cost of Prescription Drugs


Lofgren, Hans, Australian Journal of Social Issues


Introduction

In this article I compare pharmaceutical benefits in Australia and Sweden, addressing the following central questions. Why have public subsidies of the cost of prescription drugs proven to be effective, robust and popular in both countries? To what extent have these programs been modified in recent years in response to developments in the pharmaceutical market and broader changes in social policy? And what is the likelihood of retaining effective social protection with respect to drug costs when the global pharmaceutical industry is launching a stream of increasingly expensive products?

Pharmaceutical benefits in many countries are among the most entrenched and widely supported of the social programs first introduced in the 1940s and 1950s. They typify a kind of intervention that governments are able to undertake effectively with strong popular support (Rothstein 1998: 77-79). The relationship between policy measures (the subsidy) and outcomes (relatively equitable access) is incontrovertible. Governments, through procedures requiring relatively straightforward and inexpensive administration, ensure financial security with respect to the cost of prescription drugs, thereby enhancing citizens' individual autonomy. Significantly, in providing pharmaceutical benefits the state does not intrude into individuals' personal circumstances. These are regulatory (as distinct from strongly interventionist) programs that provide a relatively stable and predictable framework within which consumers, prescribers, suppliers, pharmacists and other actors can make choices and undertake transactions. Stigmatisation is wholly absent in the Swedish system; and in the case of Australia's Pharmaceutical Benefits Scheme (PBS) is confined to an extent that is uncommon within the country's predominantly selective welfare system. (It is striking, for instance, that the PBS has precluded demand for private insurance in this domain.)

Australia and Sweden have different welfare state traditions. Australia exemplifies the low taxing, residualist model, while Sweden is the archetypal universal welfare state premised on high levels of taxation. But targeted and universalist programs can be found in both countries. Some of Australia's major social programs -- Medicare being the primary example -- provide support for all permanent residents. Conversely, a range of selective programs can be found in Sweden, including social assistance and housing allowances, and these have been shown consistently to enjoy least popular support (Rothstein 1998: 167). Rising drug prices and other market developments will impel governments to adjust subsidy programs, but the security that pharmaceutical benefits afford to all citizens makes them less vulnerable to change than most other social programs.

The prescription drug sector in Australia and Sweden

To some extent, governments regulate each step of the medicinal drug development, production and distribution chain. While the antecedents of contemporary controls go back centuries -- the Swedish government commenced regulation of drug prices in 1688 (SOU 1998: 50: 37) -- the modern rationale for state intervention largely reflects the identification of various pharmaceutical market `failures', notably information asymmetries affecting the relationship between suppliers, prescribers and consumers (Schweitzer 1997).

The Australian and Swedish pharmaceutical sectors are regulated along similar lines and are subject to the same pressures from the globalisation of R&D, production and marketing. The Swedish Medical Products Agency and Australia's Therapeutic Goods Administration (TGA) perform equivalent functions. Comparable standards are applied in the assessment of product safety and efficacy, and a similar range of products has been approved in both countries. Both agencies take an active role in the process of international regulatory harmonisation -- Sweden for example harmonising its regulation with European Union requirements. …

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