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PBAC Processes

Country: 
Australia
Partner Institute: 
Centre for Health, Economics Research and Evaluation (CHERE), University of Technology, Sydney
Survey no: 
(5)2005
Author(s): 
Kees van Gool
Health Policy Issues: 
Pharmaceutical Policy
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no no yes no no
Featured in half-yearly report: Health Policy Developments Issue 5

Abstract

As part of the Australia - United States Free Trade Agreement (AUSFTA), the Australian Government committed itself to reforming the decision-making processes of the Pharmaceutical Benefits Scheme (PBS). As part of this commitment, the Government is currently establishing a formal process whereby pharmaceutical companies can ask for their application to be reviewed if the Pharmaceutical Benefits Advisory Committee (PBAC) has recommended against subsidising the drug in question.

Recent developments

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Characteristics of this policy

Degree of Innovation traditional rather innovative innovative
Degree of Controversy consensual controversial highly controversial
Structural or Systemic Impact marginal rather marginal fundamental
Public Visibility very low low very high
Transferability strongly system-dependent system-neutral system-neutral
current current   previous previous

A Parliamentary Committee examined the AUSFTA which included public hearings and consideration of stakeholder submissions. The Parliamentary Committee recognised the contentious nature of the proposed review mechanism (Joint Parliamentary Committee on Treaties, 2004). Some submissions to the committee were concerned about the possibility that the review process would act as a threat to PBAC's authority. 

Some stakeholders were concerned with the emphasis given in the AUSFTA to the need to recognize pharmaceutical R&D (Joint Parliamentary Committee on Treaties, 2004). PBAC's assessment of applications considered the effectiveness and cost-effectiveness of new drugs. This assessment incorporates notions of innovation if the new drug produces additional health benefits. Whilst the text of the AUSFTA is rather ambiguous, one interpretation is that PBAC could be required to now consider the cost of innovation (rather than the outcome of innovation). It remains unclear how the AUSFTA text will affect, if at all, the decision making criteria of PBAC. The Australian Government has argued that the essential elements of the PBS architecture remain intact (Abbott, 2005).

Increased transparency should make the decision-making process more legitimate and robust. However, the process as it now stands has created an imbalance in that pharmaceutical companies can publicly argue their case but PBAC has very llimited scope to defend their decision.

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no no yes no no

Initiators of idea/main actors

  • Government
  • Parliament
  • Private Sector or Industry
  • Others

Stakeholder positions

The processes for listing a drug onto the Pharmaceutical Benefit Scheme (PBS) are summarised in the attached figure, and highlight the changes brought about by the Australia - United States Free Trade Agreement (AUSFTA). In brief, following marketing approval by the Therapeutic Goods Administration (TGA), drug companies can choose to market their drug with or without PBS public subsidies. If an application for PBS listing is made, the Pharmaceutical Benefits Advisory Committee (PBAC) evaluates the effectiveness and cost-effectiveness of the drug. The evaluations are based on submissions by the drug's manufacturers, which include the price they would like to be paid. If approved for PBS listing, the Pharmaceutical Benefits Pricing Authority recommends to the Department of Health what price to offer the drug's manufacturer. If the drug's sponsor agrees on the government's price, the drug is added to the PBS. If not, the sponsor can return to the Committee or the Authority with further information (Burton and Varghese, 2004).

As part of the AUSFTA, which came into effect on 1 January 2005, the Australian Government is required to establish a review mechanism within the PBS process as well undertake for regular revisions of the schedule (DFAT 2004, and Burton and Varghese, 2004).

Using the principles set out in the AUSFTA, a working group comprising representatives from PBAC and Medicines Australia (the peak Australian pharma industry group) developed the review mechanism in more detail. In February 2005, the Government released the details of the independent review process (Abbott 2005).

An independent review can only be instigated by the applicant (the pharmaceutical company) when PBAC has recommended not to list the new drug on the PBS.  A convenor will manage the review and will appoint a reviewer from a panel of identified experts.  The applicant will identify the issues that are in dispute and the review will focus on these issues.  The reviewer will have access to all the information placed before the PBAC and may seek clarifying information from the applicant, the PBAC or the Department and other relevant experts but no new information is to be provided to the reviewer (Abbott 2005).

The outcomes of the independent review will be made public and the findings will be reported to the PBAC. PBAC will then assess whether or not the review findings warrants a change in the original decision. The review findings and the outcome of the PBAC's reconsideration will then be reported to the Minister for Health and Ageing (Abbott 2005).

Applicants will retain the option to resubmit their application to the PBAC if additional data or information subsequently becomes available.

The Pharmaceutical Benefit listing process Source: Burton, K. and Varghese, J (2004).,

Actors and positions

Description of actors and their positions
Government
Cabinetvery supportivevery supportive strongly opposed
Parliament
Joint Committee on Treatiesvery supportivesupportive strongly opposed
Private Sector or Industry
Medicines Australiavery supportivesupportive strongly opposed
Others
US Governmentvery supportivevery supportive strongly opposed
PBACvery supportivesupportive strongly opposed
current current   previous previous

Influences in policy making and legislation

The new review process does not require legislative amendments, and therefore its design and implementation are the responsibility of the executive arm of government.

It is noteworthy that no legislative amendments have been made. Under the National Health Act 1953, the Pharmaceutical Benefits Advisory Committee (PBAC) is an independent statutory body that gives advice to the Minister about which drugs should be made available as pharmaceutical benefits. No new drug may be made available as a pharmaceutical benefit unless the Committee has recommended it.

This legislation protects PBAC as the body that acts as the gatekeeper to publicly subsidised medicines under the PBS.

Legislative outcome

n/a

Actors and influence

Description of actors and their influence

Government
Cabinetvery strongvery strong none
Parliament
Joint Committee on Treatiesvery strongstrong none
Private Sector or Industry
Medicines Australiavery strongstrong none
Others
US Governmentvery strongvery strong none
PBACvery strongstrong none
current current   previous previous
Cabinet, US GovernmentJoint Committee on Treaties, Medicines Australia, PBAC

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

In February 2005, the Australian Government released details of the review mechanisms and at the same time invited nominations for the role of review process convener and panel experts. The outcome of the selection process is, as at 11 April 2005,  yet to be released.

Monitoring and evaluation

The Australian Government has committed to review these processes 12 months following their implementation to ensure that the AUSFTA provisions, as well as the objectives of accountaibility and transparancy for all stakeholders, are being met.

Expected outcome

The stated objectives of this policy are to improve accountability and transparancy of the decsion making process. The review process, as well as the publication of the review and PBAC decision (covered in an earlier survey) is likely to achieve this.

As the review process is yet to fully established, it is too early to say what the actual outcome will be.

Impact of this policy

Quality of Health Care Services marginal marginal fundamental
Level of Equity system less equitable neutral system more equitable
Cost Efficiency very low neutral very high
current current   previous previous

Under current legislation, the Minister for Health, must act upon the recommendations of PBAC for the listing of new drugs on the PBS. It is for this reason that a number of commentators have suggested that the powers of the review process are unlikely to have a real bearing on the outcome of pharmaceutical policy decisions. However, one of the political unknowns of this policy is what happens if the review findings and the final PBAC decision are at odds. Such a situation would leave the Minister for Health with two conflicting pieces of advice that may require a political solution.

Whilst the Minister for Health must follow PBAC recommendations for PBS listings, there is a precedent in Australia to fund a pharmaceutical outside of the PBS program. In 2001, following a recommendation by PBAC against listing, the then Minister for Health went outside the PBS program and established a separate funding mechanism to publicly subsidise Herceptin (a drug used for late stage breast cancer). It is therefore possible for a Minister to fund new drugs outside of the PBS program (see HIC 2005).

References

Sources of Information

Abbott, Tony (2005)., Minister for Health Ageing, Statement on the Implementation of Australia's AUSFTA Commitments., Statement available at www.health.gov.au/internet/wcms/publishing.nsf/Content/health-mediarel-yr2005-ta-abb008.htm accessed at 31 March 2005.

Burton, K. and Varghese, J (2004.)., The PBS and the Australia-US Free Trade Agreement., Research Note 2004-05 No. 3 21 July 2004, Parliamentary Library,  available at http://www.aph.gov.au/library/pubs/rn/2004-05/05rn03.pdf accessed at 31 March 2005.

DFAT (2005a), Australia-United States Free Trade Agreement - fact sheets, Department of Foreign Affairs and Trade, available at http://www.dfat.gov.au/trade/negotiations/us_fta/outcomes/index.html, accessed 1 April 2005.

DFAT (2005b), Australia-United States Free Trade Agreement Chapter 2 - Annex 2C, Department of Foreign Affairs and Trade, available at http://www.dfat.gov.au/trade/negotiations/us_fta/final-text/chapter_2.html, accessed at 1 April 2005.

HIC (2005), About Herceptin, Health Insurance Commission, information available at http://www.hic.gov.au/providers/programs_services/herceptin.htm, accessed 4 April 2005.

Joint Parliamentary Committee on Treaties (2004), Report Number 61 - Australia-United States Free Trade Agreement, Report available at www.aph.gov.au/house/committee/jsct/usafta/report.htm  accessed at 31 March 2005.

Author/s and/or contributors to this survey

Kees van Gool

Suggested citation for this online article

Kees van Gool. "PBAC Processes". Health Policy Monitor, April 2005. Available at http://www.hpm.org/survey/au/a5/4