Explainer: How medicinal drugs get listed on the PBS (Part 1 of 2)

Part 1 of 2.

When the Pharmaceutical Benefits Scheme (PBS) began in 1948, it listed 139 ‘life-saving and disease preventing’ medicines that were supplied free of charge to Australian citizens.

Seven decades later, that number is dwarfed by the ever-growing scheme which aims to provide people with timely, affordable access to necessary medicines, prescribed by doctors and bought in pharmacies.

The PBS is a list of government-subsidised medications that can be truly life-changing, saving people thousands of dollars and relieving their afflictions. But what’s listed on the PBS – and what drugs are not subsidised – can be make or break for some Australians.

Research suggests more than half a million Australians couldn’t afford to fill a script in 2020-2021. Other estimates put that figure closer to 7 per cent or 1.8 million Australians. Those who forgo essential medicines tend to be in worse health, and are unfortunately often the ones that need to access healthcare most. 

“We know that even with our subsidised medicines and subsidised health services, the burden on some people can still be really high, and have a really significant impact,” says pharmacist Professor Lisa Pont of University of Technology Sydney.

What’s listed on the PBS – and what drugs are not subsidised – can be make or break for some Australians.

So how do drugs get listed on the PBS and how do those weighty decisions affect people in need?

A new medicine first has to be approved by Australia’s drug regulator, the Therapeutic Goods Administration (TGA), before it is assessed by the Pharmaceutical Benefits Advisory Committee (PBAC), an independent expert advisory body made up of clinicians, health economists, and consumer representatives, who make recommendations to the government about drug listings.

Where the TGA considers whether or not new drugs are safe and effective in improving health, the PBAC considers how well a medicine works and the need for that medicine. That includes how many people are affected by the disease, how rare or severe the disease is, what alternatives are otherwise available, and what it would cost – or could save – the Australian healthcare system to subsidise the drug.

In other words, just how much are patients going to benefit compared to existing treatments? Does it extend life and by how long? How many heart attacks, trips to hospital, operations or future GP visits does using the medication prevent? Is it the only treatment option available?

Where the TGA considers whether or not new drugs are safe and effective in improving health, the PBAC considers how well a medicine works and the need for that medicine.

“That’s really what the PBAC is about, maximising the health of the entire Australian population,” says Associate Professor Bonny Parkinson, a health economist at Macquarie University who evaluates submissions to the PBAC.

In its work, the PBAC wrestles with some thorny questions about which drugs the government should subsidise. Should it recommend listing a moderately effective drug for a common condition that would cost a lot to subsidise, or subsidising a new, expensive drug for a rare disease where fewer people stand to benefit, but perhaps greatly improves their lives?

“We don’t have infinite amount of money so it’s all about trade-offs,” explains health economist, Dr Susan Mendez, of the University of Melbourne. “You want to maximize health for everybody but you cannot deny some people access to the drugs they need.”

Despite the challenges, the PBS stacks up well against other health systems. Pont says Australia was the first country to start assessing the cost-effectiveness of new medicines in this way, an approach many countries around the world have since adopted.

Despite the challenges, the PBS stacks up well against other health systems.

“It is an incredibly efficient and equitable system, which benefits not just the patients receiving the treatment under consideration, but it also benefits future patients with totally different conditions” by subsidising medicines that represent good value for money, says Parkinson.

“And while it seems like quite a bureaucratic process, and at times slow, it’s actually quite efficient and effective compared to worldwide standards.”

Research shows that on average, it takes just shy of two submissions before the PBAC recommends a new drug be listed on the PBS. As part of the resubmission process, pharmaceutical companies come back with more data to show their drug is efficacious over a longer period of time or in a larger group, and how it impacts or improves quality of life. They might also lower their price for supplying the drug.

“If the price comes down, this creates headroom for the investment in other new pharmaceuticals that might want to be listed on the PBS,” explains Parkinson. “So in the end, Australians do benefit from these negotiations, it’s just not that obvious.”

Competition between drug manufacturers who produce the same medicines once the original patent has expired can also reduce costs. One example is Truvada, which was PBS-listed in early 2018 after competing manufacturers lowered their prices, a decision heralded as a golden opportunity in HIV prevention. The price of the drug has dropped from $1000 a month to $40.

However, because of government pricing agreements, Australians pay more for generic prescription medicines than some other countries: twice as much as in the UK and triple drug prices in New Zealand.

Some clinicians also feel that certain areas of health, such as mental health and chronic, life-long autoimmune diseases, are underserved by the PBS. Lupus – which affects around 20,000 Australians – is but one example: two new immunotherapies have been approved by the TGA in recent years, but neither drug is listed on the PBS so access is extremely limited.

Some clinicians feel that certain areas of health, such as mental health and chronic, life-long autoimmune diseases, are underserved by the PBS.

“The PBS has never previously approved a drug for lupus, and the complexities and nuances of this disease may make it hard for regulators to understand the value equation for Australian patients,” Monash University rheumatologist Professor Eric Morand wrote in 2021, lamenting the lack of treatment options he could offer his patients.

But Pont says this stems from the fact that less common and rare diseases are too often under-represented in research funding – and without a critical mass of researchers studying a given disease, the chances of discovering a new therapy grow slim.

A common source of frustration for people affected by disabling, chronic conditions such as migraine, psoriatic arthritis and cystic fibrosis, is the apparent lag time between when a drug is approved by the TGA and when it is listed on the PBS, if at all.

According to one recent analysis, it can take on average anywhere from one to two years for a drug to be listed on the PBS after the pharmaceutical company makes its first submission – and this can be years after the drug was approved by the TGA. Those delays restrict access to medicines to only those who can afford to pay the full cost of treatment.

To speed up the process, pharmaceutical companies have since 2011 been able to apply to the TGA for drug licensing in Australia at the same time as listing on the PBS in the so-called parallel submissions process.

A 2014 Senate inquiry into the availability of new cancer drugs heard evidence that parallel submissions do not necessarily result in faster listing of medicines. But Pont, who evaluates assessments for the PBAC, says the streamlined process is making a difference. “There’s more transparency around this now,” she adds.

However, the government cannot compel a drug company to submit its medicine for PBS listing and, Pont says, companies are unlikely to do so until they think they have a fairly good chance of success – and can see a viable market for selling the drug in Australia.

The government cannot compel a drug company to submit its medicine for PBS listing, and companies are unlikely to do so until they think they have a fairly good chance of success.

“It sounds really brutal but if there’s not a perceived profit to be made with a medicine, then [companies] will be less likely to invest in submitting that medicine for [PBS] listing,” Pont says.

When a drug is added to the PBS, its use is restricted to a group of people in which data shows it either works best or is safest to use.

New therapies are also often subject to strict eligibility criteria that permit people access once they have exhausted other available treatment options, which can take months or years. This exacts a terrible toll on people who are desperate to find a drug that works for them.

Although, the PBS by design enables greater access to affordable medicines, doctors’ tendencies to adopt and prescribe new therapies once they become available is another factor affecting whether or not patients can access new treatments.

“Even with universal coverage for prescription drugs, access to new drugs is different among patients, partially because who their doctors are and where they practice,” writes Mendez in a recent research paper.

And those prescribing practices are just one factor that could be addressed to alleviate strain on the PBS – which has to keep pace with a growing number of submissions every year.

This is a two-part series from Cosmos Weekly on the PBS. Part 2 goes live next week, on October 28.