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Annual Report - Strategic Directions
Outcome Performance ReportAchievements & ChallengesStrategic DirectionsPerformance InformationResources

Key Strategic Directions for 2005-06

Improved Access and Affordability of Medical Services through Medicare

On 1 November 2005 and 1 May 2006, the Department amended existing items and introduced new items onto the MBS in several specialities to better reflect and provide for current clinical practice. Fees for certain consultant psychiatrist attendances were increased and these will encourage more psychiatrists to engage with carers of patients. Fees for emergency medicine services were increased to align emergency physicians’ attendance items with the specialist item structure and provide higher rebates for patients.

Following recommendations of the Medical Services Advisory Committee, the Department implemented the Australian Government’s decision to introduce new services under Medicare to provide treatment for cancer, including of the breast, prostate and liver, cardiovascular disease and incontinence.

The Department also implemented a new MBS item to provide comprehensive eye examination, by an ophthalmologist, of children aged 0-8 years inclusive, and of developmentally delayed children aged 0-14 years inclusive, where the examination involves an additional level of complexity. The Department implemented a comparable item for optometric examination of children where specific eye health conditions are present.

Recognition of pain medicine and palliative medicine as medical specialties has resulted in the inclusion of MBS items for attendance and case conference services when performed by a consultant physician and appropriately recognised specialists.

Increased Value from Generic Versions of Medicines on the PBS

In 2005-06, the Department applied the 12.5 per cent policy to new generic brands of drugs listed on the PBS. In August and December 2005 and April 2006, 42 new generic brands triggered a 12.5 per cent price reduction, affecting 264 brands.

The Department expects that savings of just under $800 million over four years will be achieved from the 12.5 per cent generics policy. This figure has been revised down from the original estimate of $1.035 billion as a result of a recommendation of the Pharmaceutical Benefits Advisory Committee (PBAC) to retain a higher price for one of the drugs (atorvastatin) in the group of lipid lowering drugs (footnote).

The level of savings achieved by the policy since 1 August 2005 will be assessed by the Department as part of a review of savings.

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Pharmacist explaining medicine to customer

Increased Transparency and Efficiency of the Listing Process for the PBS

The Department made significant progress in streamlining PBS processes to reduce the time taken to list approved drugs on the PBS. Feedback from Medicines Australia and industry representatives was very positive.

A three tiered process that recognises differing complexities in drug submissions was agreed between the Department and the pharmaceutical industry. The Department is meeting the needs of the community by developing and managing new processes that will reduce the time it takes to list a medicine on the PBS, to the benefit of patients.

Trial of Tier 1 (a fast track process) was positively received by all parties and is expected to be incorporated into the listing process in early 2007. This will apply to about 25 per cent of drug submissions. When combined with monthly electronic PBS listings, it is expected that many of these drugs will be listed on the PBS within 6-8 weeks of a positive PBAC recommendation.

The Department made significant changes to its information systems, with the key goal of reducing PBS listing times by producing a comprehensive online PBS Schedule each month. Work is continuing with key stakeholders to ensure a smooth transition to the new on-line schedule, to be implemented by December 2006. This will ensure easier listings of new measures.

The Department’s implementation of the pharmaceutical provisions of the Australia-United States Free Trade Agreement progressed during 2005-06 and delivered a number of improvements in the transparency of the PBS listing process. From October 2005, Public Summary Documents (PSDs) detailing the PBAC consideration of applications for the listing of medicines on the PBS were placed on the Department of Health and Ageing web site. Each PSD contains clinical, economic and utilisation data to help stakeholders and the public to understand submissions and the recommendations made by the PBAC.

From July 2005, sponsors of applications to the PBAC have been able to seek a short hearing before the committee while it is considering their application. In consultation with industry, the Department developed guidelines and procedures to support the establishment of an independent review process which is available to applicants whose application for the listing of a medicine was not recommended by the PBAC. A convenor was appointed to manage the independent review process. One request for independent review was received in 2005-06 and is currently being progressed by the reviewer.

Consultation on Cost Recovery Commenced

In the 2005-06 Budget, the Australian Government announced that from 1 July 2007, full cost recovery will be introduced for the listing of medicines on the PBS.

During 2005-06, the Department held meetings with the peak industry bodies, the Generic Medicines Industry Association and Medicines Australia. Discussions were of a general nature to allow industry input at the initial phase of the project. An activity based costing was conducted by an experienced independent consultant to assess all costs in the listing process.

The Department will keep the Generic Medicines Industry Association and Medicines Australia informed of progress. Further formal and informal consultations will occur at appropriate points in the development and implementation phases.

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Long Term Financial Stability in Health Care Programs

In November 2005, the Australian Government and the Pharmacy Guild of Australia reached agreement about the remuneration pharmacists will receive for dispensing PBS medicines. Under the Fourth Community Pharmacy Agreement, the Department - in conjunction with Medicare Australia - will manage the provision of funding for the distribution and supply of PBS medicines over the period 1 December 2005 to 30 June 2010. The new payments came into effect from 1 July 2006 with an increased dispensing fee, cap on the retail mark-up for high cost medicines and reduced wholesale mark-up. The introduction of caps on the wholesale and retail mark-ups for more expensive PBS medicines, and the establishment of the Community Service Obligation (CSO) funding pool, will assist in reducing long term growth in the PBS, as payments will be based on flat fees, rather than being linked to the price of the medicine (which is expected to increase, over time).

The prevalence of type 2 diabetes is expected to impact on the number of products supplied through the National Diabetes Services Scheme (NDSS). The NDSS is an Australian Government scheme which provides financial assistance for the provision of subsidies for diabetic aids and appliances. The NDSS is administered on behalf of the Australian Government by Diabetes Australia. The growth rate of people with type 2 diabetes registering with the NDSS over the last three years has averaged 12 per cent. The number of people with type 1 diabetes has grown at an annual rate of two per cent over the same period. Although a large number of people will be diagnosed with diabetes, many will be able to effectively monitor their condition through diet and exercise.

Ongoing consultation by the Department with the Australian Medical Association and relevant medical colleges and associations ensures that Medicare continues to evolve in line with evidence-based policy, providing safe, effective and cost-effective health care for all Australians.

Improved Access to Services

As part of the Fourth Community Pharmacy Agreement, the Australian Government and the Pharmacy Guild of Australia agreed to introduce new arrangements for the location of pharmacies approved to supply PBS medicines. These new arrangements were implemented by the Department and commenced on 1 July 2006. They aim to improve community access to pharmacy services.

The new rules assist pharmacies to relocate to large medical centres and small shopping centres and for a second pharmacy to be relocated to rural towns where there is a large population. The new arrangements introduce a discretionary power to allow the Minister for Health and Ageing to approve a pharmacy where there is an unmet community need for pharmacy services, and it is in the public interest to approve the pharmacy.

The Fourth Agreement also introduces a new CSO funding pool of $150 million per annum in recognition of the costs faced by pharmaceutical wholesalers in providing the full range of PBS medicines to all community pharmacies. The objective of the CSO funding pool is to ensure that arrangements are in place to provide all Australians with ongoing, timely access, via their community pharmacy, to all PBS medicines.

The Department managed a process to determine eligibility for participation in the CSO funding pool. The Pharmacy Guild of Australia worked closely with the Department in finalising these arrangements. An invitation to apply was released in May 2006. Eligible CSO distributors commenced receiving payments by the end of August 2006, with respect to medicines supplied from 1 July 2006.

The Department is also conducting a procurement process to engage an agency outside government to administer the CSO funding pool.

The administration of the funding pool requires highly specialised expertise, including expert knowledge of the PBS and pharmaceutical wholesaling practices, the capacity to receive, analyse and store large volumes of data, and the ability to undertake complex data interrogations and calculations to determine payments.

In April 2006, the Department released a request for Expressions of Interest from organisations interested in performing the role of CSO Administration Agency. The appointment of a suitable organisation is expected to be finalised later in the year.

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Figure 2.1: Distribution of Australian Pharmacies by Urban and Rural Areas 2006

Map of Australia showing Distribution of Australian Pharmacies by Urban and Rural Areas 2006
Text description for Figure 2.1

Sources: Medcare Australia data at 30 June 2006; Census 2001 data; PhARIA 2004-05.

The Department, through recognition of pain and palliative medicine as specialist services under Medicare, will support patients with complex needs that require care from a multidisciplinary team, to access appropriate attendance and case conference services.

The introduction, in May 2006, of targeted health check services, and items for services performed by a registered Aboriginal health worker, will improve access to primary health case services for Aboriginal and Torres Strait Islanders in rural and regional areas, and in particular will encourage earlier intervention for children. Further discussion of this initiative can be found in the Outcome 4 chapter.

Better Integrated Health Care Programs

Increasing focus by the Department on the recognition of new specialties during 2005-06 further supported evolution towards a multidisciplinary approach to managing patients with complex conditions and care requirements. This recognition will strengthen already existing attendance and case-conferencing items, encouraging increased uptake of Medicare services performed by consultant physicians and appropriately recognised specialists.

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The table below lists the distribution of Australian Pharmacies by Urban and Rural Areas 2006




New South Wales    
Number of Pharmacies 1,445 269
People per Pharmacy 3,667 3,984
Number of Pharmacies 1,016 155
People per Pharmacy 3,865 4,631
Number of Pharmacies 796 173
People per Pharmacy 3,558 4,745
South Australia    
Number of Pharmacies 312 86
People per Pharmacy 3,678 3,710
Western Australia    
Number of Pharmacies 414 89
People per Pharmacy 3, 479 4,597
Number of Pharmacies 82 50
People per Pharmacy 3,371 3,586
Northern Territory    
Number of Pharmacies 18 9
People per Pharmacy 5,151 12,850
Australian Capital Territory    
Number of Pharmacies 59  
People per Pharmacy 5,287  
Number of Pharmacies 4,142 831
People per Pharmacy 3,700 4,376

Return to map of Australia Pharmacies


The PBAC is a statutory body that advises the Minister on the listing of medicines on the PBS. (return to text)

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Produced by the Portfolio Strategies Division, Australian Government Department of Health and Ageing.
URL: http://www.health.gov.au/internet/annrpt/publishing.nsf/Content/strategic-directions-0506-2
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