Australia: PBS Deferrals - Where To Now?

Life Sciences Update
Last Updated: 10 October 2011
Article by Amanda Turnill

In February 2011, the Minister for Health and Ageing Nicola Roxon announced a deferral to the listing of seven Pharmaceutical Benefits Advisory Committee (PBAC) recommended medicines on the Pharmaceutical Benefits Scheme (PBS). The medicines that were deferred are designed to treat a number of medical conditions, including enlarged prostate gland, blood clots, deep vein thrombosis and asthma. The result is that patients need to pay more for medicines that PBAC has recommended be subsidised by the PBS.

Following consideration of this issue by the Senate Finance and Public Administration References Committee (committee), the Prime Minister intervened in order to resolve this issue for the industry; however it has taken some time to reach this point.

Back in June2011, the Senate referred a number of related matters to the committee, including in relation to:

  • the deferral of listing seven medicines on the PBS previously recommended by PBAC
  • the Federal Government's compliance with the intent of the Memorandum of Understanding (MOU) signed with Medicines Australia in May and September 2010.1

The committee's report was published on 17 August 2011 and provides an interesting viewpoint on the PBS listing process. In short, the committee recommended that the Government should:

  • withdraw the statement made on 25 February 2011 regarding the deferral of the listing of new medicines and the new rules applying to listings from that point (ie that the Government would defer all medicines recommended by the PBAC for listing with financial details to Cabinet for consideration)
  • retract the statement that PBAC listing recommendations will not proceed until savings are found to offset the costs of listing those medicines under the PBS
  • explicitly state that it rejects any implication that the listing of new medicines requires savings to be made elsewhere in the health portfolio
  • restate its commitment to making an explicit decision regarding the listing of new medicines on the PBS within the terms and intent of the MOU signed with Medicines Australia on 6 May 2010 and resigned on 28 September 2010
  • reinstate the '$10 million rule' so that medicines that have a financial impact of less than $10 million in each year over the forward estimates can be listed on the PBS schedule by the Minister without waiting for Cabinet approval.2

While it is well understood within the industry that financial pressures constrain the operation of the PBS, the recommendations made by the committee are sensible.

The picture painted by the deferrals is not a pretty one. The Portfolio Budget Statements 2011-12 noted that 'the listing of some medicines would be deferred until fiscal circumstances permit', with the comment that all changes to the PBS would now be considered by Cabinet.3

In light of:

  • PBAC's role and expertise in recommending drugs for listing, including its consideration of cost effectiveness
  • the Government's previous policy that only drugs with a greater impact on the PBS of $10 million or more would be reviewed and approved by the Cabinet
  • the medicinal significance of the seven medicines considered by the committee designed to treat a number of indications, including enlarged prostate gland (Duodart, GlaskoSmithKline), blood clots and deep vein thrombosis (Fragamin, Pfizer) and severe asthma and chronic obstructive pulmonary disease (Symbicort, AstraZeneca)
  • the signed MOU between the Commonwealth Government and Medicines Australia

the decision not to list the medicines recommended by PBAC was met with outcry in the pharmaceutical industry and by professional health groups.

Though deferrals have occurred in the past, these cases are few and far between. In fact, until this year, only two PBAC recommended items (Viagra and nicotine patches) have been deferred since the PBS' inception in 1948.4 While the Government accepted to the committee (through David Learmonth, Department of Health and Ageing) that the deferrals represented some change, Mr Learmonth also submitted that this was not a breach of the MOU.5

In Clause 29, the MOU provides the following:

For those submissions required tobe approved by Cabinet, the Commonwealth will use its best endeavours to implement a maximum time frame of six months for consideration and decision by Cabinet.

Respectfully, the announcement of the indefinite deferral until 'fiscal circumstances permit' in the current economic climate signifies a breach of this provision. Further, while most of the deferrals have now been resolved following Prime Minister Julia Gillard's intervention, the fact that some drugs will still not be listed until 1 December highlights an 11 month delay. It is difficult to reconcile this with Mr Learmonth's suggestion that the MOU has not been breached. Even without this delay, it does not seem farfetched to suggest that the decision to defer the seven medicines was not in compliance with the spirit and intention of the MOU in the first place.

While it is true that the purpose of the MOU was to 'promote the efficiency and sustainability of the PBS and support by the provision of a stable pricing policy environment, a viable and responsible medicines industry in Australia...',6 it is also within the Minister's portfolio to have specific administrative responsibility for, among other things, population health, national health priorities and, interestingly given the deferral of Symbicort, asthma.

Beyond consumer health, predictability is a key issue for big pharma in Australia. As the Chairman and Director of Pfizer Australia, John Latham said to the committee on 21 July 2011, 'the MOU was the result of the medicines industry and the Government working hand-in-hand to solve PBS funding issues caused then by the GFC. By working collaboratively, we produced a sensible and well-thought-out agreement.... the industry was assured that it would receive a predictable business environment in which it could make decisions about investment and employment.'7

The intervention of Prime Minister Julia Gillard imposing the 30 September deadline was a welcome relief to the industry, health groups and patients alike and it is fantastic to see that some of these medicines will now be listed on the PBS. However, while the Government has suggested that it will now revert back to the $10 million rule, Medicines Australia CEO, Dr Brendan Shaw has been the first to admit that this is just one step.

An agreement has now been reached between the Government, Medicines Australia, the Generic Medicines Industry of Australia and the Consumer Health Forum that there will be no deferral of the listing of any medicine on the PBS or price increase where that will cost less than $10 million, however such an agreement will only operate until 1 October 2012. It remains to be seen what will happen after this date or, in a similar fashion to the MOU, whether the spirit and intention of this agreement will be complied with. Finally, it seems there is yet to be a solution found for those drugs that will exceed the $10 million rule. We will continue to provide you updates as this issue progresses.


1 Journals of the Senate, 23 June 2011, p. 1102; Terms of Reference, Finance and Public Administration References Committee, The Government's administration of the Pharmaceutical Benefits Scheme, available at:

2 Finance and Public Administration References Committee, The Government's administration of the Pharmaceutical Benefits Scheme, August 2011, p. xi.

3 Commonwealth Government, Portfolio Budget Statements 2011-12: Budget Related Paper NO. 1.100: Health and Ageing Portfolio, Commonwealth of Australia, Canberra, 2011, p.121 referred to in Finance and Public Administration References Committee, The Government's administration of the Pharmaceutical Benefits Scheme, August 2011, p.10.

4 Ms C Bennett, CEO, Consumer Health Forum of Australia, Committee Hansard, 25 July 2011, p. 40.

5 Finance and Public Administration References Committee, The Government's administration of the Pharmaceutical Benefits Scheme, August 2011, p.34.

6 Memorandum of Understanding, Clause 4.

7 Mr John Latham, Chairman and Managing Director, Pfizer Australia, Committee Hansard, 21 July 2011, p.27.

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