Medicare and the Pharmaceutical Benefits Scheme

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Chapter 8 Medicare and the Pharmaceutical Benefits Scheme


The Australian health care system is the product of a diverse range of economic, social, technological, legal, constitutional and political factors, some of which are unique to Australia. However, many of the characteristics of the system have been derived from other countries. The inevitable British influence continued to be highly significant in determining many aspects of the way health services were organised post World War II, when there was considerable opposition from the medical profession and other groups to following the British in introducing a national health service. The voluntary health insurance arrangements introduced in 1953 were based, in part, on similar systems that had become the dominant method of paying for health care in the United States of America.

The Canadian model of universal, taxation-funded health insurance formed the core of the Medibank scheme that commenced in 1975. After an early demise of the system in the late 1970s it was subsequently resurrected in 1984 under the title of Medicare. The tendency to look to North America as the source of technology, funding and organisational initiatives, and the inspiration for new policies has continued up to the present time.

Any health care system will have an impact on the wider social system. Medicare, Australia’s national health insurance scheme, is designed to ensure that all persons have equal access to care in a public health system. This means that all Australians have a stake in ensuring that the public health system functions effectively and thus Medicare can be seen as contributing to social cohesion and solidarity.

The following are the main features of Australia’s health system:[1]

Medicare is designed to ensure that all Australians have equal access to care in a publicly funded system. Medicare Australia works in partnership with the Department of Health and Ageing to achieve the Australian Government’s health policy objectives. It is a prescribed agency under the Financial Management and Accountability Act 1997 (Cth) and is a statutory agency under the Public Service Act 1999 (Cth), within the Department of Human Services.


The PBS and the RPBS are key components of the Australian health system, facilitating access to a large number of prescribed medicines through government subsidy of the cost. They form an integral part of Australia’s National Medicines Policy 2000 and the implementation of quality use of medicines as discussed in Chapter 2.

The PBS provides Australian residents, and eligible overseas visitors from countries with whom Australia has a reciprocal health care agreement, with subsidised access to approved medicines at an affordable price. At the time of writing reciprocal agreements were in place with nine countries, namely: Finland; Italy; Malta; New Zealand; Norway; Republic of Ireland; Sweden; the Netherlands; and the United Kingdom. The medicines are funded, either partially or wholly, by the Commonwealth Government. The PBS is regulated by the National Health (Pharmaceutical Benefits) Regulations 1960 (Cth), under Part VII of the National Health Act 1953 (Cth). The National Health Act 1953 (Cth) applies to the provision of pharmaceutical, sickness and hospital benefits, and of medical and dental services in Australia. Ministerial determinations and rules that apply to the PBS are periodically released to address specific issues.

The RPBS is subsidised by the Department of Veterans’ Affairs (DVA) through the Veterans’ Entitlements Act 1986 (Cth). The RPBS provides pharmaceutical benefits for veterans and eligible dependants. The range of medicines and dressings available through the RPBS is more comprehensive than those available through the PBS.

Both the PBS and RPBS are administered by Medicare Australia.


The following is a very brief overview of the history of the PBS and RPBS, with more detailed information available through the Parliamentary library.[2] The RPBS was established in 1919 for war veterans. A similar scheme for non-veterans was proposed in 1944 through the passing of the Pharmaceutical Benefits Act 1944 (Cth). However, the Australian Branch of the British Medical Association challenged the Act and the High Court declared the Act unconstitutional as its provisions went beyond the powers of the Commonwealth.

A subsequent change to the Constitution in 1946 enabled the Commonwealth Government to provide pharmaceutical benefits. A new Pharmaceutical Benefits Act 1947 (Cth) was passed but was again declared unconstitutional and only a few doctors participated on a voluntary basis. In 1950 a scheme was introduced under the Act to provide a list of 139 ‘life saving and disease preventing drugs’ free of charge to the whole community. The PBS was introduced on 1 March 1960 following the promulgation of the National Health (Pharmaceutical Benefits) Regulations 1960 (Cth).

Listing steps

Once a medicine has been approved by the Therapeutic Goods Administration (TGA) to be included in the Australian Register of Therapeutic Goods, an application may be submitted to the Department of Health and Ageing for listing on the PBS. The Pharmaceutical Benefits Advisory Committee (PBAC), an independent statutory body under section 101 of the National Health Act 1953 (Cth), assesses applications for listing on the PBS based on comparative safety, efficacy, cost-effectiveness and clinical information. The membership of PBAC is prescribed in the National Health Act 1953 (Cth), with members being appointed by the Federal Minister for Health. In the case of RPBS items, the recommendations are made by the Repatriation Pharmaceutical Reference Committee (RPRC).

The PBAC considers submissions from industry sponsors, manufacturers, medical bodies, health professionals, private individuals and their representatives. The PBAC makes recommendations and gives advice to the Federal Minister for Health about which medicines should be made available as pharmaceutical benefits, the maximum quantities and repeats, and may also recommend restrictions. Box 8.1 lists the main roles of the PBAC.[3]

Under the National Health Act 1953 (Cth), the PBAC established two sub-committees to help perform its functions. These are the Drugs Utilisation Sub-Committee (DUSC) and the Economics Sub-Committee (ESC). The DUSC was formed by the PBAC in 1988 and monitors the patterns and trends of medicines used through the PBS. The ESC was formed by the PBAC in 1994 and advises on both cost-effective policies and evaluations of cost-effective aspects of major submissions.

Listed medicines are classified as either:

The PBAC makes recommendations about the maximum quantity and the number of repeats that should be available for each item. As a general rule, the maximum quantity to treat acute medical conditions is usually a single pack size (depending on the manufacturer’s packaging). For chronic medical conditions, the maximum quantity and repeats usually allows for up to 6 months’ therapy. As of 1 November 2008, this period has been extended to 12 months for the treatment of certain chronic conditions. An authority system makes provision for patients requiring some high cost drugs, higher than average doses for approved medicines, increases in the listed maximum quantities and/or additional repeats.

When recommending listings, the PBAC provides advice to the Pharmaceutical Benefits Pricing Authority (PBPA) comparing therapeutic outcomes and price considerations. The aim of these comparisons is to determine the cost-effectiveness of pharmaceutical benefits. In addition, the PBPA, following negotiations, makes recommendations as to a ceiling price or price range for an item.

Public Summary Documents (PSDs) are published following PBAC meetings to improve the transparency of the listing process. These documents provide information about recommendations so that stakeholders are aware of the rationale for specific recommendations and gain an improved understanding of the overall PBS listing process. The availability of PSDs is the result of initiatives under the Australian–United States Free Trade Agreement (AUSFTA). In a further attempt to increase transparency, the release of PBAC agendas in advance of meetings was introduced mid-2008.

The schedules

The PBS and RPBS Schedules list all medicines that are available to be dispensed by approved pharmacists or other eligible suppliers at a government-subsidised price. As of 1 December 2006, the Schedules are available online.

Three categories of benefits apply, namely:

Some items are listed for more than one condition and more than one type of benefit may apply.

A palliative care section provides for increased repeats of certain medicines for palliative care patients. A palliative care patient is defined as ‘A patient with an active, progressive, far-advanced disease for whom the prognosis is limited and the focus of care is the quality of life’.[4]

Section 100 programs

Section 100 of the National Health Act 1953 (Cth) provides for alternative supply arrangements when the supply through community pharmacies is unsuitable. Reasons for these alternative supply methods include the cost of storage, requirements for particular controls over dispensing, the need for medical supervision during administration/treatment or constraints on patient access to community pharmacies. These alternative supply arrangements include the following programs:

Also included under Section 100 programs are the:

The Support Allowance Program (negotiated under the Fourth Community Pharmacy Agreement) enables participating pharmacists with subsidised medicines to provide a range of services to support eligible remote area Aboriginal Health Services. (Community Pharmacy Agreements are covered later in this chapter.)


At the time of writing, pharmaceutical benefits may be prescribed by doctors, dentists and optometrists who are approved to prescribe within the PBS. However, discussions have been initiated to enable nurse practitioners and pharmacists to prescribe certain PBS items. Prescribers need a prescriber number, issued by Medicare Australia.

Dentists may prescribe from the Dental Schedule for dental treatment only. As of 1 January 2008, optometrists accredited to prescribe under state or territory legislation (authorised optometrists) can apply for approval as PBS prescribers. Authorised optometrists have a separate Optometrical Schedule from which they may prescribe eye care medicines.

Prescribers need to follow state and territory legislation when prescribing PBS medicines. The list of medicines that may be prescribed under state and territory drugs and poisons legislation may differ from the list of pharmaceutical benefits that may be claimed for under the PBS or RPBS. For example, in Queensland the list of medicines that approved optometrists may prescribe in terms of the Health (Drugs and Poisons) Regulation 1996 differs substantially from the PBS list for authorised optometrists. Similar differences apply to dentists and to a lesser extent doctors. It is therefore important that prescribers ensure that prescriptions written under the PBS fall within the limits of their respective state or territory legislative requirements.

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