PBS reform

The Government needs to ensure that consumers can afford to fill their prescriptions
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  • Updated:20 Aug 2009

01.PBS reform

Open box of medicine

The issue

The PBS is a Government scheme which provides Australians with access to affordable medicines. Regardless of the price of a drug, if it is one of the 2600 items listed on the PBS, general patients pay no more than $30.70 and concession card holders $4.90 (this is called the ‘co-payment’, or ‘patient contribution’).

Consumers pay about 15% of the total cost of medicines through the co-payment. The Government pays the other 85%. In the 2005/06 financial year, the PBS cost the Government (or taxpayers) $6 billion. The growth of the PBS slowed in the last financial year and was 2.7%, which is in line with the inflation rate.

The Minister for Health and Ageing, Tony Abbott, announced reforms to the PBS in November 2006. The reforms will be introduced gradually from August 2007. The main aim of the reforms is to introduce competition in the medicines industry. The Government aims to achieve this by increasing the use of generics as opposed to brand name drugs. 
Find out more about the changes.

The reform measures were announced because of the fear that the PBS was growing too quickly and that the cost to the Government was spiralling out of control.

Pharmacists are the big winners from the reforms. They already benefit from the Pharmacy Agreement, which costs taxpayers $11.1 billion. From August 2007 pharmacists will receive an extra 40 cents for each prescription they process online. From August 2008, they will be paid more than the current $5.15 per prescription, for dispensing medicines. It has not yet been revealed how much more they will receive.

What we want

  1. reduced co-payments to increase access to medicines and
  2. allocation of PBS savings to new drugs.

The move to encourage the use of generic medicines is a positive one. CHOICE has long supported the use of generics. There are, however, few direct benefits to consumers from the proposed reforms as the savings are not passed on to them.

A 2002 study showed that 21% of Australians did not fill their scripts because of high costs. Australia ranks third out of five countries (Canada, New Zealand, UK and US) in terms of lack of access to affordable drugs. Working families are particularly disadvantaged as they are generally not eligible for concession cards. More needs to be done to ensure that consumers have access to the drugs they need at a price they can afford.

Co-payments (by consumers) have been increasing steadily since they were first introduced in 1960 at 50 cents. The largest increase was in 2005 when the co-payment increased by $5 from the previous year. The co-payment increased again on the 1 January 2007 to $30.70 from $29.50 for general patients and to $4.90 from $4.70 for concession card holders. This is despite the Government’s announced reforms.

The Government needs to ensure that consumers can afford to fill their prescriptions. One way to achieve this is would be to pass on to consumers the savings from the increased use of generics medicines. Lower co-payments would increase access to drugs.

The savings from the reforms, which the Government estimates will total $3 billion over 10 years, should also be used to list more drugs on the PBS.

What we’re doing

CHOICE is stimulating public discussion about access to affordable medicines. Consumers need to be involved because they are directly affected by policy changes.


  • Wrote to the Minister for Health and Ageing, Tony Abbott in July 2006.
  • Invited renowned economist, James Love to give the 2006 Ruby Hutchison Memorial Address on the topic of ‘Patent or Perish: how to stimulate drug innovation without blowing the health budget’.
  • Facilitated a workshop about increasing innovation in the pharmaceutical industry and thereby improving access to affordable essential drugs.
  • publishes articles in CHOICE magazine and on CHOICE Online about how to get the most out of the health system. In December 2006 CHOICE exposed how some pharmacists are overcharging on essential drugs.


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