Health economists have a number of strategies up their sleeve that could help ease the growing strain on the Pharmaceutical Benefits Scheme.
Last week: How do drugs get on the PBS List?
Funding medicines in a sustainable way is an ongoing challenge for Australia’s Pharmaceutical Benefits Scheme. First introduced in 1948, the PBS now has to keep pace with global drug development and a growing number of applications for prescription drugs to be listed each year.
To future-proof our heath, the PBS has to be both sustainable and flexible to accommodate new treatments, such as gene and cell therapies, and deal with it when prices are only going up.
“We’ve seen this phenomenal jump in the cost of medicines,” says Lisa Pont, a pharmacist at the University of Technology Sydney who evaluates submissions to the PBAC.
Spending big on effective treatments might yield huge cost savings elsewhere in the healthcare system, by preventing serious conditions, improving quality of life and reducing hospital stays. These are the very real calculations the Pharmaceutical Benefits Advisory Committee (PBAC) has to make in recommending whether or not new medicines should be subsidised.
But with the cost of the PBS growing and an aging population, “we have to think about how we’re going to manage,” says Pont. 36% of all people aged over 70 are prescribed five or more pharmaceuticals concurrently.
So how do we make sure the PBS delivers the biggest health bang for our tax-payer buck from prescription medicines?
Hitting the market in recent years are biologics, also known as biological medicines, that have become the mainstay of treating inflammatory diseases and cancers, but which are now being used to treat common conditions such as asthma.
These drugs, which work by modifying parts of the immune system, include cell-based therapies and large molecules such as monoclonal antibodies that are isolated from living cells, so they are expensive to make and administer – but can be incredibly effective.
“That’s the tension in the PBS,” says Pont. “We’re looking to provide high-quality, safe and effective medicines at a cost that the individual and society can afford.”
In 2020-2021, biologics accounted for 8 out of 10 of the most expensive drugs on the PBS and earlier this year, the former federal government pledged to list a multimillion-dollar, one-off gene therapy for spinal muscular dystrophy, a rare inherited disorder. If so, it would be the most expensive drug listed on the PBS.
We’re proud to have listed Zolgensma in #Budget22. At a record $2.5 million for a one-off treatment, this is the most expensive drug listed on the PBS & will save many Australian lives.— Josh Frydenberg (@JoshFrydenberg) April 4, 2022
Despite the PBAC making its recommendations public, researchers say there isn’t enough evidence to know whether the committee is becoming more or less stringent in its recommendations about what drugs are worth subsidising – and what costs are worth the healthcare system bearing.
The total cost of the PBS remains uncapped, so the PBAC has to make careful assessments of the cost-effectiveness of each new medicine: that is, does the health benefit justify the cost of subsiding the medication, over and above what’s already available.
One way the PBS ensures subsidised drugs are paying health dividends is to restrict which conditions a medicine should be used for, and under what circumstances. Called an ‘indication,’ this informs doctors which patients should receive the subsidised medicine and reflects which people are most likely to benefit.
But health economists say more could be done to make sure life-changing medicines are actually reaching the people who need them most.
In September, the federal government announced it would be cutting the cost of co-payments – the maximum amount that people pay towards the cost of their medicines – from $42.50 to $30 for each prescription. Concession card holders will still pay up to $6.80.
However, reducing the co-payment of select medicines, such as those used to treat asthma, diabetes and major mental disorders, could have substantial health benefits in preventing severe illness and hospitalisations, University of Melbourne health economist Yuting Zhang writes in The Conversation.
So could furthering subsidies to people on low incomes or those with multiple, overlapping chronic health conditions, so they can be caught sooner by the PBS safety net. Adopting an international benchmark pricing strategy would also ensure Australians get access to cheaper generic drugs, Zhang writes.
Another strategy would be to reduce monopoly protection on biologic medicines. Patents on new drugs usually lapse after about 15 years. But if ‘biosimilar’ versions of these medicines are developed sooner, it could save hundreds of millions of dollars annually – money which could be spent on subsiding other medications or funding other health services.
But patents serve a purpose: they grant companies exclusive rights to sell their product, allowing them to recoup the costs of running clinical trials that generate the data which ultimately brings new drugs to market.
“Pharmaceutical companies also need to recover the cost of all the other medicines that they tried to develop and ultimately didn’t pass whatever hurdles and make it to the licensing stage in the first place,” says Associate Professor Bonny Parkinson, a health economist at Macquarie University who evaluates submissions to the PBAC.
Read more: Patent battles.
While reducing monopoly patents would encourage healthy competition, thereby reducing the price of medicines as generic medicines enter the market, health economists must also bear in mind that patents are designed to incentivise innovation – which benefits everyone in the long run, as new-fangled treatments are developed.
“As an economist, you think a lot about how you manage the incentives that you give these companies to remain innovative, to keep investing in research and development,” says Susan Mendez, an economist specialising in healthcare markets at the University of Melbourne.
But as evaluations of drug listings show, much of this innovation appears to be ‘me-too’ drugs – new formulations of old compounds marketed as new products that provide little advantage over existing drugs but which serve to prolong patent protection.
“There’s a real question of how much of a public benefit there is from that or whether we should be paying more for those drugs,” says Barbara Mintzes, a pharmacy policy researcher at the University of Sydney.
Clamping down on overprescribing could also go a long way to making sure the PBS can fund new medicines in years to come.
“Healthcare professionals are trying to do the best for their patients,” says Pont. But “if a medicine start being used for other indications, where there is less evidence that it works, that can really increase the drug budget without getting a lot of benefit for the population.”
Understanding how medicines are used – by looking at nationwide prescription and dispensing rates – would give health economists and the PBAC a better sense of what subsidising a drug actually costs, Pont adds.
A growing body of evidence also shows how prescribing practices – of common drugs including blood pressure medications, antidepressants and cholesterol-lowering statins – can be easily influenced by the way pharmaceutical companies promote their products.
“If this is an innovative drug, doctors should get informed about it,” says Mendez. “But there is this trade-off between information and persuasion, and it’s really hard to draw the line.”
Pont says reducing overprescribing will be a harder task now that NPS MedicineWise, a government-funded organisation tasked with improving the way medicines are prescribed and used, will cease to exist come 2023 after cuts to its funding.
“We’re left with nothing and no one to help guide our health professional around those prescribing and medicine use decisions, and I think that’s incredibly short-sighted,” says Pont.
Australia has long been highlighted around the world for its forward-thinking to create a government body whose job it was to use medicines wisely, she adds. But now, “at a time when the cost of medicines is going up, we’ve lost that body.”
Also in Cosmos Weekly Issue 78: Have a heart: is there a funding shortfall for cardio-vascular research in Australia?
Clare Watson is a freelance science journalist based in Wollongong, NSW, specialising in health, medicine and the environment.