Drug policy down under: Australia's pharmaceutical benefits scheme

Drug policy down under: Australia's pharmaceutical benefits schemeAustralia is a federation of six Slates and two territories with a national (Commonwealth) government. In 2003, the population was just over 20 million, mostly concentrated on the eastern side of the continent

Australia has a mixed government and private health care system. In 2000-2001, they spent approximately 9 percent of its gross domestic product on health services--70 percent by the government and 7 percent mediated by private health insurance organizations and the remainder by other arrangements, including private out-of-pocket costs. There is a universal health insurance arrangement that provides government rebates for the costs of private medical practice and for stays in public hospitals. Approximately 45 percent of the population has private health insurance covering the costs of slays in private hospitals. Persons taking out private health insurance are eligible for a government rebate of 30 percent of the cost of that insurance. The third element of government protection against health costs is in the form of the PBS that predated the major expansion of government support for hospital and medical care. Expenditure on pharmaceuticals is 12.4 percent of total health expenditure and 14.1 percent of government health expenditure. In 2000, Australia spent approximately $292 per person, per year on pharmaceutical services (adjusted to U.S. dollars using purchasing parities), compared with U.S. expenditure of $541 per capita (Organisation for Economic Co-operation and Development, 2003).

Taking a prescription or non-prescription medication is the most common health care activity among Australians. Australian Health Survey data show that almost 70 percent of the population used some form of medication 2 weeks prior to the interview (Australian Bureau of Statistics, 1997). The most common forms of medication usage was vitamins or minerals (258 persons per 1,000).

The second most common form was in pain relievers (236.2 persons per 1,000) followed by heart problems or blood pressure medications (105.8 persons per 1,000). Use of these medications is not necessarily preceded by any form of medical or other health professional advice, and many of these medications (e.g., vitamins and herbal medications) do not have any form of government rebate.

Over two-thirds of doctor visits involve recommendations about medication, most of which result in a prescription drug (Britt et al., 2001), 38.7 percent involved one, 13.6 percent involved two, 7.5 percent more than two, and 40.2 percent involved no prescription.

Australia has adopted a National Medicines Policy to guide policy development of pharmaceuticals (Harvey and Murray, 1995). Key elements are:

* Timely access to the medicines that Australians need, at a cost to individuals and the community can afford.

* Medicines meeting appropriate standards of quality, safety, and efficacy.

* Quality use of medicines.

* Maintaining a responsible and viable medicine industry. (Commonwealth Department of Health and Aged Care, 1999).

The principal mechanism for ensuring access to medicines is the PBS. Quality, safety, and efficacy of medicines are regulated through the Therapeutic Goods Administration, with policies and processes similar to the United States' Food and Drug Administration. Quality use of medicines involves a range of policies in terms of educational programs, consumer information, etc. The responsible and viable medicines industry component is achieved through the pharmaceutical industry support program. This article reviews and outlines Australia's policies for ensuring access and promoting quality use of medicines.


The PBS was introduced on July 1, 1948, but relatively few prescriptions were covered under it because of opposition from the medical profession. The new (conservative) government elected in 1949 revised the PBS on September 4, 1950, introducing a list of 139 "life saving and disease preventive drugs" that were provided free of charge to the entire community (Sloan, 1995). Since then, the range of drugs covered by the PBS has increased dramatically and by August 2003, it covered 601 generic products, available in 1,469 forms or strengths, and marketed as 2,602 different brands. Some of these items are restricted, requiring some form of preauthorization to prescribe them (over and above medical registration). Obtaining this preauthorization requires contact with the administering agency of the PBS, the Health Insurance Commission and may, for example, require the medical practitioner to certify that specific indications for prescribing the medication are present. Obtaining authorization is not well received by doctors and is seen as bureaucratic and not evidence based (Liaw et al., 2003).

The major types of drugs prescribed under the PBS are shown in Table 1. Drugs are grouped using the Anatomical Therapeutics Chemical Code (ATC). There are five levels to the ATC: anatomical main group, therapeutic main group, therapeutic subgroup, chemical/therapeutic subgroup, and generic drug name.

The most frequently prescribed group of drugs are those for the cardiovascular system, accounting for just over 30 percent of all prescriptions and costs. Twenty percent of both prescriptions and costs are for the nervous system. Antineoplastic and immunomodulating agents, although accounting for less than 1 percent of prescriptions, account for 6 percent of costs. These cost, on average, ten times as much as the average drug dispensed under the PBS.

The PBS initially required no patient copayment, then on March 1, 1960, a 50-cent copayment was introduced for general beneficiaries under the PBS. A copayment for pensioners of A$2.50 (1) per prescription was introduced on November 1, 1990. The copayment amounts are indexed for inflation and, by 2003, the copayment for pensioners had increased to A$3.70 per prescription and for general beneficiaries to A$23.10. The PBS provides some protection from the cumulative impact of these copayments through a safety net threshold that is set for pensioners at 52 times the copayment. If pensioners require more than 52 prescriptions in any one CY, they can obtain a safety net card that entitles them to further prescriptions without any copayment. The safety net threshold for general beneficiaries applies after they (or their immediate family) purchase PBS items that total a copayment of at least A$708.40 in any CY, after that, prescriptions are supplied for the concessional copayment.

Where a pharmaceutical is listed on the PBS under more than one brand name, pharmacists may dispense generic forms of the drug unless specifically directed not to do so by the prescribing medical practitioner on the prescription form. If generic equivalents are available, the PBS will only pay for the least-costly product and the consumer pays any additional costs for a specific brand-name alternative in addition to the copayments previously discussed. This brand name equal is not counted as part of the safety net arrangements. An additional alternative is also payable if other pharmaceuticals in the same therapeutic class are deemed to be equivalent, and an exemption on clinical grounds has not been granted for that patient. This policy (known as Therapeutic Group Premiums) applies only to items in three therapeutic groups: H2-receptor antagonists; calcium channel blockers; and ACE inhibitors.

The generic substitution policy is facilitated by a government requirement that, where computer software used by medical practitioners to generate prescriptions for the PBS has a default preferred drug, it defaults automatically to the generic form of a drug rather than a proprietary form of the drug. As of May 2002, 293 products had a brand premium, with the premium ranging from 1 cent to A$79.48. Over 30 million prescriptions had been dispensed with a brand-premium, being about 50 percent of all prescriptions covered by the brand-name premium policy (Lofgren, 2002).

Figure 1 shows the growth in pharmaceutical benefits expenditure since the inception of PBS. Expenditure on pharmaceutical benefits has increased exponentially since the beginning of the program, with particularly rapid growth in expenditure on drugs used by pensioners and concessional cardholders. More importantly, 73 percent of government pharmaceutical benefits prescription expenditure is for pensioners, severely limiting the ability of government to curtail expenditure using the strategy of shifting costs to consumers. People age 65 or over have a 50-percent higher prescription rate than those under age 45. This high percentage of use for pensioners should not be surprising because the elderly generally have poorer health status than younger persons and have higher hospital utilization rates.


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