The Pharmaceutical Benefits Scheme or PBS is a program of the Australian Government that provides subsidised prescription drugs to residents of Australia. The PBS ensures that all Australians have affordable and reliable access to a wide range of necessary medicines.
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The PBS was established in 1948 by supplying approximately 140 lifesaving and disease-preventing drugs. The PBS was introduced by Prime Minister Ben Chifley as part of wider plans to create a British-style National Health Service, but the High Court of Australia soon ruled most of Chifley's health care plans as unconstitutional. However, the PBS was not ruled as unconstitutional. Medicines on the PBS list were free to the consumer until 1960, when nominal user charges were introduced.
The PBS is governed by the National Health Act 1953 (Cth) and National Health (Pharmaceutical Benefits) Regulations 1960 (Cth). Pharmaceutical Benefits under the PBS may only be supplied by pharmacists and medical practitioners approved under the Act. The PBS is administered by Medicare Australia (formerly the Health Insurance Commission) under the Health Insurance Act 1973 (Cth).
In order to receive a Pharmaceutical Benefit under the PBS, a consumer is prescribed the drug listed in the Schedule of Pharmaceutical Benefits. The subsidy is automatically applied when the drug is dispensed at a pharmacy and the cost to the patient is the patient co-payment contribution rather than the full cost of the medication.
The cost of a medication is negotiated between the Commonwealth Government, through the Pharmaceutical Benefits Pricing Authority (PBPA), and the supplier of the drug. This agreed price is then the basis of the dispensed price of the medication which is negotiated between the Commonwealth Government and the Pharmacy Guild of Australia under the Community Pharmacy Agreement. The dispensed price includes the wholesaler's markup, pharmacist's markup, and a dispensing fee. Pharmacies purchase PBS-listed drugs from the wholesaler or supplier, and claim the difference between the dispensed price and the patient co-payment contribution from Medicare Australia.
When purchasing a medication under the PBS the maximum price a consumer pays is the patient co-payment contribution which, as of January 1, 2011 is A$34.20 for general patients. Those covered by government entitlements (low-income earners, welfare recipients, Health Care Card holders, etc.) and those covered under the Repatriation Pharmaceutical Benefits Scheme (RPBS) have a reduced co-payment which is $5.60 in 2011. The table below indicates the changes in co-payments over the years. These co-payments are compulsory and cannot be discounted by pharmacies under any circumstances.
| Year | Co-payment (general) | Co-payment (concession) |
| 1960 | 5 shillings | n/a |
| 1990 | $10.00 | $2.70 |
| 1997 | $20.00 | $3.20 |
| 2002 | $22.40 | $3.60 |
| 2003 | $23.10 | $3.70 |
| 2004 | $23.70 | $3.80 |
| 2005 | $28.60 | $4.60 |
| 2006 | $29.50 | $4.70 |
| 2007 | $30.70 | $4.90 |
| 2008 | $31.30 | $5.00 |
| 2009 | $32.90 | $5.30 |
| 2010 | $33.30 | $5.40 |
| 2011 | $34.20 | $ 5.60 |
There are Safety Net provisions for a reduction in the patient co-payment contribution once a family has exceeded a certain amount on PBS subsidised medications in a calendar year. General patients are entitled to PBS medications at the concession price for the remainder of the calendar year, while concession patients are entitled to PBS medications at no cost for the remainder of the year.
In 2005, the Safety Net thresholds were $874.90 (general) and $239.20 (concession). In 2006, these thresholds were $960.10 (general) and $253.80 (concession). In 2007, these thresholds were $1059.00 (general) and $274.40 (concession). In 2008, these thresholds were $1141.80 (general) and $290.00 (concession). In 2009, these thresholds were $1264.90 (general) and $318.00 (concession). In 2010, these thresholds are $1281.30 (general) and $324.00 (concession). In 2011, these thresholds are $1317.20 (general) and $336.00 (concession).
In an effort to limit the cost of the PBS, the Commonwealth Government introduced Brand Premiums on medications where cheaper generic brands were available. The Brand Premium is usually the price difference between the innovator brand and the generic brand. The patient must pay this Brand Premium in addition to the normal patient co-payment contribution if they refuse to purchase the generic brand. The Brand Premium paid does not count toward the Safety Net threshold and must still be paid even once the threshold is reached.
Pharmacists are allowed to substitute generic brands for prescribed brands if the brands are flagged "a" in the Schedule of Pharmaceutical Benefits, and if consent is obtained from the patient and prescriber. The prescriber's consent is always assumed to be granted unless "brand substitution not permitted" is indicated on the prescription.
Another effort to limit the cost of the PBS involved the introduction of Therapeutic Group Premiums (TGPs) on medications that are priced significantly above the cheapest medication in a defined therapeutic sub-group where the drugs are considered to be of similar safety and efficacy. The TGP is the price difference between the premium brand and the benchmark (base) price for drugs in the class. The patient must pay this TGP in addition to the normal patient co-payment contribution if they have been prescribed such a medication. The TGP paid does not count toward the Safety Net threshold.
However, a prescriber may obtain an exemption from the TGP if:
Such an exemption requires an approved PBS Authority prescription from the Medicare Australia.
Although PBS subsidies are available only to Australian residents, certain foreign visitors are also eligible under Reciprocal Health Care Agreements between Australia and the United Kingdom, Ireland, New Zealand, Malta, Italy, Sweden, the Netherlands, Finland, Norway and Slovenia.
The Pharmaceutical Benefits Advisory Committee (PBAC) makes recommendations to the Minister for Health and Ageing regarding drugs which should be made available as pharmaceutical benefits, which are listed on the Schedule of Pharmaceutical Benefits. The Schedule is published monthly since January 2007, (prior to this it was published three times a year).
In considering a medication for listing on the PBS, the PBAC considers factors including:
Decisions on PBS listing are generally made on a health economics perspective, using cost-effectiveness analysis. Cost-effectiveness analysis evaluates the cost and health effects of one technology versus the cost and health effects of another technology, which is usually standard of care. A new technology whose incremental health benefit jutifies its additional expense is deemed to be cost-effective and thus reimbursed by PBAC. Drugs that provide little health benefit at considerable additional expense, such as the PDE5 inhibitors (e.g. sildenafil) and certain expensive cancer chemotherapy drugs are not listed on the basis of poor cost-effectiveness.
Certain medications listed on the PBS are available only for specific indications or to patients meeting specific criteria where the PBAC has deemed that the cost-benefit analysis is favourable only in those indications/patients. These are noted as "restricted benefits" on the Schedule. The HIC has placed the onus of policing restricted benefits on the prescribers themselves and the pharmacists dispensing. For example, the COX-2 inhibitor celecoxib is listed on the PBS as a restricted benefit for the symptomatic treatment of osteoarthritis and rheumatoid arthritis. Prescribers using celecoxib for other indications are expected to indicate "non-PBS" on the prescription, and/or the pharmacist dispensing the celecoxib should charge the patient the full cost.
Some PBS medications are restricted and require prior approval from Medicare Australia. These are noted as "authority required benefits" on the Schedule. Again, the PBAC has deemed that the cost-benefit analysis is favourable only under in specific indications/patients under certain circumstances. Authority may be obtained by telephone to Medicare Australia (known as "phone approval") or in writing from an authorised delegate of the Minister for Health and Ageing. Prescriptions must be written on Authority Prescription Form, and the approval number must be noted on the prescription. Pharmacists cannot dispense the item as a pharmaceutical benefit unless it has been approved by Medicare Australia (indicated by the presence of the approval number).
In obtaining a phone approval, the doctor simply identifies themselves (using their name and provider number), the patient (using their Medicare number), and when asked by the operator, confirms which of the conditions eligible for an authority the patient is suffering from. The health department normally assumes the doctor's assertion that the condition exists as sufficient.
In its first year, the PBS cost the Commonwealth Government £149,000 (or $7,600,000 in 2009). The PBS now costs the Commonwealth approximately $6.5 billion a year to operate, despite consumers contributing around $1.3 billion in patient co-payments. Further attempts to restrain the growth in costs of the PBS may be needed, however, attempts to increase consumer prices of drugs have always proved politically unpopular. The comparative cost-effectiveness processes of the PBS nonetheless ensure it provides Australian citizens with more equitable access to medicines than in many other developed nations and for many the issue of sustainability of the PBS as a key component of the egalitarian architecture of Australian society is equivalent to asking whether that nation's education system or defence forces are sustainable.
Former federal Treasurer Peter Costello and the Liberal Party attempted to raise the patient co-payment of PBS medicines by up to 30 per cent in the 2002 Federal Budget, however this measure was blocked in the Senate in which various minor parties held the balance of power. However, in June 2004 the main opposition party, the Australian Labor Party, announced that it would allow the PBS co-payment increases to proceed through the Senate, ostensibly to prove its fiscal responsibility before the then upcoming Federal election.
In July 2007 changes to the National Health Act 1953 (Cth) divided the PBS formulary into an F1 category (for patented, single brand medicines) and an F2 category (for generic medicines)with reduced reference pricing between them. Academic opinion is divided about the value of these changes and the extent to which they arose from industry lobbying drawing strength from Annex 2C of the AUSFTA.[1][2][3]