Pharmaceutical benefits scheme policy: confused and tough on patients

The 2005–2006 Commonwealth Budget contained several measures that are likely to have an effect on the availability and affordability of prescription medicines. For the second time in 2005, patients were asked to pay more for the medicines that their doctors prescribe for them. In January 2005, the Federal Government, with the acquiescence of the Labour Party, increased prescription copayment for general users to a maximum of $28.60. The 2005–2006 budget raised the safety net eligibility threshold by an additional two prescriptions (52 to 54). General patients and/or their families have to spend $874.90 before becoming eligible for a lower copayment ($4.60) for the remainder of the calendar year. The increase in copayment in January 2005 contributed to a drop in prescription numbers with financial savings to the government. Data published by the Health Insurance Commission showed a fall in prescription numbers for general patients (who lack special entitlements) of 5.1%, contributing to slowed growth in Pharmaceutical Benefits Scheme (PBS) expenditure for 2004–2005 (6.1%), compared with 2003–2004 (9.3%). But increased cost sharing is a crude and inequitable means of constraining expenditure. Increased out-of-pocket costs hit hardest among the most vulnerable.1–4 In Australia, general patients, particularly those on low income and with dependent children, have been shown to be the group most at risk from cost hikes.5 For the second time in 3 years, an international comparative survey carried out by the Commonwealth Fund found that Australian participants reported difficulty in affording prescription medicines.6,7 In the latest survey, 22% of Australian respondents had not filled a prescription because of cost in the previous 2 years. This figure was higher than those for Canada, Germany, New Zealand or the UK. Only the USA, which has no system of universal health insurance, was worse than Australia. Research conducted in the Newcastle region of New South Wales documented similar levels of hardship and showed a range of inappropriate coping responses such as sharing medicines or reducing the dose.5 The financial difficulties being faced by many Australians have largely been ignored. This may be the result of a widely held conviction that rising PBS expenditure is related to overly generous insurance coverage. Policy-makers seem to believe that there is a form of ‘moral hazard’, whereby generous prescription subsidies will be misused by Australian patients. This was the basis of a campaign by the government against ‘PBS cheats’. Although aborted after strong public criticism, the campaign was designed to encourage the public to report persons thought to be ‘cheating’ the PBS. ‘Suspect it? Report it!’ was one proposed slogan.8 This is a recurring theme. In a 2003 government campaign (which cost approximately $27 million), a celebrity doctor exhorted Australians to avoid ‘wasting’ PBS medicines.9 The Federal Treasurer maintained this theme by alleging in his 2005–2006 budget speech that Australians ‘hoard’ medicines.10 The persistence and influence of this belief in moral hazard is at odds with the available evidence. Qualitative research data suggest that Australian patients view prescription medicines seriously, and they consider that gratuitous use is unlikely.11 But the notion of moral hazard is a powerful and pervasive enabling myth that, despite a lack of unambiguous empirical evidence, is repeatedly invoked to justify measures such as copayment increases.12,13 The untested belief in moral hazard rests on a combination of a (pejorative) intuition about patient motivations and a crude interpretation of ambiguous and indirect evidence (e.g. aggregated drug use data). Australian patients appear to be viewed by policy-makers as ever-willing to ‘take advantage’ of the system and ever in need of greater self-discipline and responsibility. Unfortunately for Australian patients, the measure added to this insult is usually a salutary increase in out-of-pocket cost. Although there are several contributing factors, high rates of consumption of new medicines are probably the result of the aggressive promotional practices of the pharmaceutical industry rather than ‘wastage’ or ‘cheating’. It is ironic that Australia, shown repeatedly to have a system that negotiates some of the lowest ex-manufacturer prices for medicines in countries that are members of the Organisation for Economic Cooperation and Development, repeatedly demands more from patients’ pockets.14,15 Competence in price control is not matched in other policy areas. Therefore, patients do not benefit fully from Australia's technical prowess and are sometimes asked to pay an unfair and burdensome share of the costs of medicines. In contrast to its tough approach with patients, the government's policy on pharmaceutical industry prices is unclear. The government quickly backed down in the face of company opposition to their plans to impose serial (cumulative) price reductions of 12.5% on each new generic drug being listed on the PBS.16 This was reduced to a single cut of 12.5% – substantially less than what the Pharmaceutical Benefits Pricing Authority had been able to negotiate in the past for new generic versions of important drugs, such as omeprazole and fluoxetine.10,16 The failure to deliver this reform as planned may be explained partly by the lack of coherence within the government on the future of the pharmaceutical sector. Government ambivalence about regulatory arrangements became apparent in the divergent views expressed by the Federal Treasurer and the Federal Health Minister. The treasurer, Peter Costello, appears to favour an aggressive push to encourage the use of generic medicines, which may involve a change to the current system of reference pricing, particularly if very cheap imported generic drugs become available on the Australian market. Health Minister Tony Abbot appears concerned about weakening patented manufacturers’ current market position and scaring off future investment. The May 2005 Federal Budget contained an additional revenue measure – a shift to fund the work of the Pharmaceutical Benefits Advisory Committee (PBAC) by cost recovery.17 There has been little debate of this issue in the press. The Pharmaceutical Benefits Branch will now finance its crucial evaluative activities, which sometimes lead to controversial and contested recommendations, by charging manufacturers a fee to process their applications for PBS listing. This move is surprising for a number of reasons. The projected cost savings will be modest – approximately $5 million/year in a programme that costs approximately $6 billion annually.17 The cost of introducing the bureaucracy needed to process the fees was estimated at approximately $1 million annually over 4 years.17 The argument typically offered for cost recovery, that it will remedy a slow and inefficient regulatory process, does not apply here. The Pharmaceutical Benefits Branch does not have a backlog of evaluations, and the PBAC clears its agenda at each meeting. The system received a generally favourable review by the Australian National Audit Office in 1997.18 The main concern with these new arrangements is that they could undermine the independence of the Pharmaceutical Benefits Branch. It can be hard to take a tough line with your clients when they fund the agency. There is extensive international experience with the effects of cost recovery on regulatory agencies and much of it has been negative.19,20 These policy decisions, viewed alongside the new obligations required under the Australia–United States Free Trade Agreement (AUSFTA), which was implemented in January 2005, show the progressive move away from the PBS as a classic, centrally funded welfare programme providing universal and affordable prescription access.21 Under the principles of the AUSFTA, Australia's national medicines policies must absorb and express the globalized interests of trade and industry as much as public health. The basic architecture of the PBS may not have been changed, but the regulatory conditions surrounding it have. The objectives of Australia's pharmaceutical policies, once dominated by the imperatives of equity and efficiency, must now seek to support innovation, economic opportunity and development. It is not certain to what extent a public scheme like the PBS can operate under such changed conditions. The PBS is very popular among the millions of Australian patients who benefit directly, and overt moves to dismantle it would meet massive opposition. But this popularity does not protect it from more subtle, incremental changes. Perhaps the most significant change has been the gradual ‘re-commodification’ of prescription medicines through increased use of copayments.22 Cost sharing is risk sharing – and this feeds into the conservative political notions of individual responsibility for risk and health. The continuous public linking of problems with PBS ‘sustainability’ and the ‘unnecessary’ use by patients with unrealistic expectations of affordable access also reflects a commonly held, although erroneous, view. Popular support for the PBS could eventually wither in the light of a debate that frames the issues in terms of waste and individual responsibility for risk. For 50 years, the PBS has equitably and efficiently distributed most pharmaceuticals at prices affordable to most Australians who need them. If this internationally lauded system is to continue to serve the national interest, then pharmaceutical policy needs to be respectful and responsive to the needs of patients as much as the demands of industry. This necessitates that all of those with the responsibility for policy draw on the available evidence of the effects of their policy decisions, and be prepared to challenge the currently untested assumptions and biases.

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