The Guardian November 14, 2001

Save our PBS!

by Andrew Jackson

The Australian Pharmaceutical Benefits Scheme (PBS) commenced over 50 years 
ago, at a time when there was great concern that many people could not 
afford the expensive but valuable new drugs  such as penicillin  that 
were becoming available. Today the Australian Government is dismantling the 
system to allow the international pharmaceutical companies to, literally, 
make a killing.

In 1948 the Federal Government set up the Pharmaceutical Benefits Advisory 
Committee (PBAC), which subsequently recommended that a limited list of 
life saving or disease-preventing drugs should be made available on 
prescription free of charge, the costs to be paid for by the Federal 

The World Health Organisation endorsed Australia's approach as a useful 
mechanism for ensuring equity of access to necessary drugs.

From a scheme that fully subsidised a small number of drugs, the PBS has 
evolved into one that partially subsidises about 650 drugs.

Over the years the cost of the PBS has escalated, and patient co-payments, 
brand premiums and other strategies have been used to transfer some of the 
cost to consumers.

The PBS purchases about 90 per cent of all medicines prescribed in 
Australia. This near monopoly power has resulted in Australian drug prices 
being substantially lower than the OECD average (while still) enabling 
people retain general access to a comprehensive range of medicines.

This has been good for Australian consumers, but it has attracted 
determined opposition from the international pharmaceutical industry.

Escalating costs

In 1948/1949 the PBS cost the Federal Government $298,074. It took 40 years 
for the costs to reach a billion dollars, but in recent years the costs 
have been rising far more rapidly.

In 1999/2000 the total was $3.45 billion, an increase of 16 per cent on the 
previous year. The 2001 budget estimated this would rise to $4.26 billion, 
a further 22 percent increase.

There are several reasons for escalating PBS costs.

National campaigns have improved drug treatment of asthma, depression and 
elevated blood cholesterol levels. Hospitals have limited supplies of drugs 
to patients when discharged and have privatised outpatient clinics and 

But the major cause of increased PBS costs has been the growth of new, more 
expensive medications. Their prescription has not always accorded with 
clinical best-practice guidelines. Many of the prescriptions written for 
these drugs are for uses that have not been approved by the PBAC as cost-

In many cases the PBS is paying a price for these expensive medications 
that is far higher than would be justified by the health benefit achieved.

One of the main drivers for increasing pharmaceutical costs is industry 
marketing. According to the industry's own figures, manufacturers spend up 
to one-third of sales revenue on marketing, twice as much as they spend on 

A point of conflict arose in 2000-2001 over direct-to-consumer advertising 
(DTCA) of prescription drugs. The Australian Pharmaceutical Manufacturers 
Association (APMA) is lobbying the Federal Government to remove current 
restrictions on DTCA of prescription drugs.

The US experience shows why.

In 1999, US pharmaceutical companies spent US$1.8 billion on DTCA. This was 
a 40 percent increase over 1998. Television ads alone cost US$1.1 billion, 
a 70 percent increase over 1998.

Forty-one percent of DTCA spending  US$720 million  was concentrated on 
just ten products!

The effectiveness of this advertising soon becomes apparent  there was a 
19 percent increase in retail drug sales in 1999 compared to 1998, with 
doctors writing 34.2 per cent more prescriptions for the top 25 DTCA drugs.

This compares to only a 5.1 percent increase in doctors' prescriptions for 
all other drugs.

Under attack

Over the past few years, individual pharmaceutical companies have taken 
legal action over PBAC decisions to deny listing of drugs, such as the 
erectile dysfunction treatment sildenafil (Viagra).

They have also successfully lobbied the Federal Health Minister to replace 
PBAC members opposed to the pharmaceutical industry gaining control of 
pricing and of decisions over which drugs are to be subsidised and the 
extent of that subsidy, and succeeded in getting a former drug industry 
lobbyist appointed to the committee.

Health Minister Michael Wooldridge has argued that these changes to the 
PBAC have resulted in a better committee. Critics see this move as the 
latest pro-industry initiative of the Federal Government.

They argue that adding a former industry lobbyist to the PBAC is akin to 
placing the defendant on the jury. They claim it is likely to inhibit free 
debate among independent experts and could result in more costly drugs 
(with more marginal benefits) being added to the PBS.

This, in turn, would lead to an even greater blowout in PBS costs, which 
the government would inevitably pass on to consumers via higher co-
payments, de-listing of "less-essential" drugs and other strategies.

The end result would be a US style pharmaceutical system where poorer 
citizens could no longer afford necessary drugs.

Securing the future of PBS

A strong Pharmaceutical Benefits Scheme is essential if we are to maintain 
our fair, high quality, universal health care system.

The Federal Government must undertake an urgent restructure of the PBS, and 
all associated government funded pharmaceutical organisations involved in 
both assessing drugs and facilitating quality use of medicines.

One of the primary aims of the restructure must be to reduce the power of 
drug companies to influence both prescribing habits and the price at which 
drugs are listed for public subsidy on the PBS.

This would involve the removal from the PBAC of pharmaceutical industry 
lobbyists, and any other members of the PBAC who have demonstrable conflict 
of interest. Then, the workings of all committees should be opened up to 
allow much greater public scrutiny.

Strict control must be maintained over pharmaceutical promotion, especially 
in the case of "direct-to-customer" advertising.

And the full price of the each medication should be listed on its 
container, a step that would help to raise public awareness of the PBS, and 
of the true costs involved.

The Doctors' Reform Society (DRS) says the Federal Government's approach is 
to promote the cost blow-out whilst pretending that it is a major problem.

"Its agenda is to gradually change the PBS from a system which supports the 
principle of equity", said the DRS's Dr Tim Woodruff, "to one which is 
dominated by private payment either in the form of increased co-payments, 
and/or the increased use of private insurance and private scripts.

"However there is a pot of over $2.5 billion (the Government's private 
health insurance rebate) waiting to be redirected by a government genuinely 
interested in improving our current health system and maintaining equity.

"Are any politicians interested?", asked Dr Woodruff.

* * *
Acknowledgement to The Friends of Medicare and the Doctors' Reform Society.

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