Exploring the implications of a fixed budget for new medicines: a study of reimbursement of new medicines in Australia and New Zealand
Authors: Taylor Colman , Wonder Michael 
Published: March 2015

Objective
Spending on medicines under the Pharmaceutical Benefits Scheme (PBS) represents the ninth largest expense to the Federal Government. A recent report by the Commission of Audit to the Federal Government suggested spending on the PBS is unsustainable and a capped budget, similar to New Zealand’s PHARMAC model, may be required to contain costs. The objective of the present study was to compare listing outcomes between Australia and New Zealand, thereby exploring the opportunity cost of a capped budget for new medicines.

Methods
Listing outcomes in Australia and New Zealand were compared through published research and an updated search of listing outcomes from publicly available information.

Results
Previous research has demonstrated that New Zealand listed less than half of the new medicines listed in Australia over a 10-year period (2000–09). Our research shows that most of the new medicines not listed in New Zealand during this period remain unlisted today. In the previous 12 months, Australia listed 17 new medicines on the PBS, whereas New Zealand listed only one new medicine that was not already listed in Australia.

Conclusion
The discrepancy in the number of new medicines listed in New Zealand compared with Australia raises questions regarding the consequences of implementing a capped budget for new medicines. However, further research is needed to understand the relationship between listing outcomes, access to medicines and health benefits for the community.

What is known about this topic?
Due to factors such as an aging population and longer life expectancy, total government health expenditure as a proportion of gross domestic product (GDP) is expected to rise. Consequently, many commentators have suggested current expenditure patterns are unsustainable. The PBS represents a significant expense to the government and recent reports suggest the PBS should be reformed to align with New Zealand’s PHARMAC model, where an independent entity manages access to subsidised medicines under a capped budget. However, little information exists regarding access indices for new medicines in New Zealand compared with Australia.

What does this paper add?
This paper builds on previously published research comparing listing outcomes for new medicines in Australia and New Zealand. The results highlight a discrepancy in listing new medicines in New Zealand compared with Australia that has not improved in recent years. Consequently, the results question the notion that a capped budget for new medicines is a good policy choice for Australia.

What are the implications for practitioners?
This paper reviews the current reimbursement system in Australia and compares it with New Zealand’s PHARMAC model. In addition, this paper compares listing outcomes for new medicines in Australia and New Zealand. In doing so, the results of this paper have implications for practitioners who are concerned about continued subsidised access to new medicines via the PBS, and for policy makers in relation to proposed PBS reforms. Further, our paper provides insights into PBS policy reform that may assist practitioners who are interested in commenting on any proposed reform.