Managing future expenditure on new medicines

Posted October 1st, 2015

Exploring the implications of a fixed budget for new medicines: A study of reimbursement of new medicines in Australia and New Zealand

Spending on medicines under the Pharmaceutical Benefits Scheme (PBS) represents the ninth largest expense to the Federal Government. Australians are living longer, yet many are doing so while managing chronic diseases. There is ongoing debate as to whether current spending on medicines for disease management is unsustainable, leaving the door open to reform.

New Zealand has achieved success with its PHARMAC model, which allows an independent entity to manage access to subsidised medicines under a capped budget. Until now, little information has existed regarding access indices for new medicines in New Zealand and Australia.

This paper examines the current reimbursement system in Australia and compares it with the New Zealand model. It also provides insight into listing outcomes for new medicines in both countries. The results presented here have implications for practitioners who are concerned about continued subsidised access to new medicines via PBS, as well as policymakers supporting PBS reform.

Most critical, it raises the question as to whether a capped budget for new medicines is a viable solution for Australia.