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1996-1997

2.2: Pharmaceutical Benefits

The 1996-97 Portfolio Budget Statements, informs Senators and Members of Parliament of the proposed allocation of resources to portfolios outcomes and their objectives and targets including the agencies within the Health and Family Services portfolio.

Objective

• Timely, reliable and affordable access for the Australian community to necessary and cost effective medicines.

Goals

• Ensure Pharmaceutical Benefits Schedule includes all necessary medicines, reflecting modern and appropriate treatment.
• Efficiency of the Pharmaceutical Benefits Scheme (PBS), including listing processes and containment of the cost of the Scheme.
• Quality and cost-effective use of medicines.

Strategies

• Management of the schedule, including timely adoption of new drugs which are properly evaluated, cost-effective and appropriately priced.
• Targeted applications of co-payments which ensure greatest subsidy for those in most financial need, while discouraging excessive demand.
• Maintenance of the community pharmacy network as the main distribution system for pharmaceuticals.
• Improve quality use of medicines through community and professional education
• Encouraging cost consciousness in prescribing decisions (e.g. general practice reforms), while not compromising clinical decisions.

Performance Indicators and Targets

Effectiveness

• Number of persons per pharmacy in rural and remote areas compared with urban areas.

  Target: Number of persons per pharmacy in rural and remote areas equal to or fewer than the number in urban and regional centres in each State and Territory.

• Number of PBS prescriptions per capita.

Efficiency

• PBS expenditure as a percentage of Gross Domestic Product.
• Average PBS dispensed price as a percentage of Average Weekly Earnings (AWE).

Quality

• Complaints about the operation of the Pharmaceutical Benefit Schedule, including listing processes.

Equity

• Percentage of outlays for concessional compared to general patients.
• Evidence that community education on the quality use of medicines has had a positive effect on target groups.
• Average and above-average out of pocket expenditure as a percentage of income for concessionals and general patients.

The Summary of Outlays for Sub-Programme and The Significant Variations to Sub-Programme Outlays 1995-96 to 1996-97 tables (Excel 30Kb)
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Budget Measures

Savings

Deletion of Topical Anti-fungals from the Pharmaceutical Benefits Scheme

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-1.6	-4.3	-4.9	-5.5

Savings will accrue from the deletion of these drugs from the Schedule of Pharmaceutical Benefits, with savings in out years proportionate to the growth of the PBS.

Purpose of Measure

Generate savings by deletion of topical antifungals from the Schedule of Pharmaceutical Benefits.

Expected Implementation Strategies for Measure

Request the Pharmaceutical Benefits Advisory Committee to implement its previous identification of this drug group as one of low priority and recommend delisting.

Intended Impacts of Measure

All PBS claims for these items will be eliminated resulting in a net saving. These drugs are for the treatment of relatively minor clinical conditions and are mostly available as over-the-counter products. All patients will now have to meet the full cost of the drug.

Increase the Pharmaceutical Benefits Scheme Concessional Patient Contribution to $3.20 per Script - Department

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-40.7	-82.1	-89.0	-96.2

Savings will accrue from concessional patients meeting a higher proportion of the total cost of Pharmaceutical Benefits Scheme drugs plus a disincentive from the price increase to reduce unnecessary drug use.
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Purpose of Measure

Generate savings from the Pharmaceutical Benefits Scheme through increasing the copayment for concessional and general safety net patients by $0.50 to $3.20 and increase the concessional safety net to $166.40.

Expected Implementation Strategies for Measure

The new copayment and safety net will be implemented 1 January 1997. Additional costs for implementing an information campaign will be agreed between the Department of Finance and the Department of Health and Family Services.

Intended Impacts of Measure

As the Pharmaceutical Allowance paid by the Department of Social Security to pensioners and certain other welfare recipients will not be increased, this measure will break the nexus between the Pharmaceutical Allowance and the Concessional Copayment. The increase in copayment will result in a net saving to government. The common copayment structure for general safety net and concessional patients will result in savings from both patient groups.

Increase the Pharmaceutical Benefits Scheme Concessional Patient Contribution to $3.20 per Script - Health Insurance Commission

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
0.4	-	-	-

For a description of this measure see the Increase the PBS Concessional Copayment to $3.20 - Department measure above.

Changes to Pharmaceutical Benefits Scheme Rounding Rules

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-	-5.4	-18.0	-32.8

Savings will increase in proportion to growth of the Pharmaceutical Benefits Scheme and as the difference between the copayments indexed by the old and new rounding rules widens.

Purpose of Measure

To ensure that copayments and Safety Net Limits maintain their real value by rounding the CPI indexation up to the nearest 10 cents rather than rounding down to the nearest 10 cents as under current rounding rules.
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Expected Implementation Strategies for Measure

General and concessional safety nets and copayments will be indexed according to the new rules annually commencing 1 January 1998.

Intended Impacts of Measure

Patients' contributions will be maintained.

Increase the Pharmaceutical Benefits Scheme General Patient Contribution to $20 per Script

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-28.2	-51.6	-49.2	-50.9

Savings will commence with the increase in general copayment from $17.40 to $20.00 in January 1997 with subsequent indexation increases in each following January. It is assumed that increased consumer price would cause decreases in script volumes of 2 per cent in 1996-97, 1 per cent in 1999-98 and 0 per cent in 1998-99 onwards with additional consequent savings.

Purpose of Measure

Generate savings by requiring general patients to make a greater contribution towards the cost of drugs under the PBS.

Expected Implementation Strategies for Measure

Increase the general copayment effective from 1 January 1997.

Intended Impacts of Measure

Savings to government will be generated both from the greater proportion of the cost of general scripts being met by the patient, and the disincentive arising from the increased cost for the acquisition of unnecessary scripts. The safety net for general prescriptions will remain at $600 providing protection against financial hardship for those requiring expensive or extended medication.

Remove Pharmaceutical Benefits Scheme Eligibility for Visitors from Countries for which Australia has No Reciprocal Health Care Agreement - Department

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-9.1	-17.4	-20.4	-24.0

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Some 3.5 million people visit Australia each year staying on average one month. For foreign visitors this access is estimated to cost the programme $10 million a year, a figure that will potentially move to beyond $25 million in the year 2000.

Purpose of Measure

To restrict PBS eligibility so that it mirrors Medicare eligibility and no longer subsidises the supply of pharmaceutical benefits to visitors from countries with which Australia has no reciprocal Health Care Agreement

Expected Implementation Strategies for Measure

Details relating to the presentation and possible recording of Medicare card numbers for PBS purposes and related systems implications will be discussed with the Pharmacy Guild.

Intended Impacts of Measure

Currently all persons whether resident in Australia or not, receive pharmaceutical benefits at least at the General level. This means that their purchase cost is capped at $16.80, providing many foreign visitors with medicines subsidised by the Australian taxpayer. Under this measure these people will have to meet the full cost of pharmaceuticals.

Remove Pharmaceutical Benefits Scheme Eligibility for Visitors from Countries for which Australia has No Reciprocal Health Care Agreement - Health Insurance Commission

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
3.4	1.5	0.5	0.5

For a description of this measure see 'Remove PBS Eligibility for Visitors from Countries for which Australia has No Reciprocal Health Care Agreement - Department' measure above.

Review Significant High Cost Pharmaceutical Benefits Scheme Listings

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
0.1	0.3	-46.6	-51.9

Costs in the first two years are associated with the consultation process with leading clinicians and assessment of cost effectiveness. The measure will be targeted at high cost drugs used in the treatment of hypertension with expected savings in the final two out years. The estimate is based on a 10 per cent price reduction.
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Purpose of Measure

To ensure that appropriate prices are being paid for drugs accounting for high levels of expenditure.

Expected Implementation Strategies for Measure

A formal consultation process with leading clinical decision makers in the area of hypertension and associated cardiovascular diseases prior to the receipt of the submissions will be implemented in 1996-97.
An expected 20 submissions from the 20 company-drug combinations with PBS-listed ACE inhibitors and calcium channel blockers will then be assessed for cost effectiveness based on these conditions in 1997-98. Listing changes or price changes will follow in 1998-99 resulting in savings.

Intended Impacts of Measure

It is expected that prices will be set based on the evidence.

Measures to Restrict "Doctor Shopping" - Department

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-1.4	-2.9	-3.1	-3.3

Outlays to the HIC will be required to achieve a level of 2,240 interventions per year. It is assumed that this number of interventions will yield $2.8 million in savings plus prosecutions.

Purpose of Measure

To reduce the incidence of persons visiting a number of doctors to obtain large quantities of drugs.

Expected Implementation Strategies for Measure

The HIC to be provided with additional resources to:

• provide counselling of high users of particular concern where an educational intervention might remedy the problem;
• notification of high users to the Australian Federal Police for possible investigation where there is prima facie evidence of illicit use of prescription drugs under the Crimes Act;
• implementation of a doctor notification system to advise doctors when a patient is using many doctors.

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Intended Impacts of Measure

It is estimated that the main impact will be on users accessing large numbers of doctors. For example in 1994 about 1,000 people were identified under the PBS safety net as having prescriptions from more than 30 practitioners in that year. Those seeing more than 50 doctors average 235 consultations per year.
Outlays to the HIC will be required to achieve a level of 2,240 interventions per year. It is assumed that this number of interventions will yield $2.8 million in savings plus prosecutions.

Measures to Restrict "Doctor Shopping" - Health Insurance Commission

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
0.8	1.5	1.5	1.6

For a description of this measure see the Measures to Restrict "Doctor Shopping" - Department measure above.

Reduction in Migrant Places under the Humanitarian Programme

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-0.2	-0.8	-1.9	-3.2

This measure recognises the savings to the Pharmaceutical Benefits Scheme which follow the reduction in the number of places in the Humanitarian Programme in 1996-97 and thereafter.
See also the description of the Reduction in Migrant Places under the Humanitarian Programme measure under sub-programme 2.1.

Rationalise Concession Card Arrangements for Pensioners and Allowees

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-	-8.8	-9.4	-10.0

Calculated on an agreed formula between the Department of Finance and the Department of Social Security on the basis of $374.52 per cardholder.

Purpose of Measure

DSS measure to streamline administration of cards and improve targeting of concessions to low income earners and income support recipients.

Expected Implementation Strategies for Measure:

• Abolish modified income test and system rules allowing pensioners to receive concession cards after cancellation.
• Health Care Card (HCC) grandfathering provisions.

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Intended Impacts of Measure

Impact on Pensioner Concession Card and HCC cardholders.
Migrant Two Year Waiting Period for Social Security Payments

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-2.3	-11.2	-15.6	-16.6

The measure requires that newly arrived migrants do not obtain access to benefits deriving from a number of DSS cards. This includes concessional entitlements under the PBS. Consequently, migrants previously accessing the PBS at the concessional rate will now be required to make copayments at the general level.

Changes to the Migration Programme - Tightening of Family Reunion Requirements and Processes, and Expansion of Skilled Migration

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-0.6	-2.0	-3.8	-5.9

The measure provides for PBS savings deriving from a reduction of 8891 migrants per year. Savings are based on the assumption that these migrants would have had the same proportional entitlement to general and concessional PBS benefits as the Australian population at large.

Limited Medicare Access for New Doctors Without Post-Graduate Qualifications

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-2.2	-6.2	-10.2	-14.6

See description of the Limited Medicare Access for New Doctors Without Post-Graduate Qualifications measure under sub-programme 2.1.
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New Directions in Public Health - Continue Funding of the National Childhood Immunisation Programme

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-	-2.7	-2.9	-

The amounts shown reflect estimated reductions in the use of vaccines under the Pharmaceutical Benefits Scheme as a result of continued funding of the National Childhood Immunisation Programme.
See the description of the New Directions in Public Health - Continue Funding of National Childhood Immunisation Programme measure under sub-programme 1.1.

Replace Rent Assistance with Higher Residential Aged Care Subsidies

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-	-	-0.3	-0.5

The amounts shown reflect estimated savings from the Pharmaceutical Benefits Scheme through removing the entitlement of part-pensioner residents of nursing homes to concessional pharmaceutical benefits.
See the description of the Replace Rent Assistance with Higher Residential Aged Care Subsidies measure under sub-programme 5.4.

Reduction in Better Practice Programme Funds

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
0.50	0.49	0.03	-

The amounts shown reflect estimated changes in prescription activity among doctors affected by reductions in funding for the Better Practice Programme.
See the description of the Reduction in Better Practice Programme Funds measure under sub-programme 2.1.

Savings from Reduced Cash Balances Held by Statutory Bodies

Financial Implications

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-57.1	-	-	-

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Purpose of Measure

Improved cash management of HIC pharmaceutical benefit payments.
See the description of the Savings from Reduced Cash Balances Held by Statutory Bodies measure under sub-programme 2.1.

Application of Efficiency Dividend to Commonwealth Own Purpose Outlays and Specific Purpose Payments of a Running Costs Nature

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
0.04	0.05	0.06	0.08

See section in Portfolio Overview on Variations Affecting Most Programmes.

Across-the-Board Reduction of 2% in Running Costs - Health Insurance Commission

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-0.7	-0.7	-0.7	-0.7

See section in Portfolio Overview on Variations Affecting Most Programmes.

Across-the-Board Reduction of 2% in Running Costs - Department

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-0.1	-0.1	-0.1	-0.1

See section in Portfolio Overview on Variations Affecting Most Programmes.
[h4>]Whole of Government Telecommunications Savings Initiatives - Health Insurance Commission

1996-97 $m	1997-98 $m	1998-99 $m	1999-00 $m
-0.03	-0.06	-0.07	-0.07

See section in Portfolio Overview on Variations Affecting Most Programmes.

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