Ms Liliana Bufonte from the Pharmaceutical Benefits Advisory Committee (PBAC), speaking at a recent Perth conference, applied her background in pharmacy and health economics to explain the process by which new drugs or formulations do or do not gain PBS acceptance. Cost-effective health outcomes needed to come out of any submission, she said. Innovation was not enough. New drug submissions were most often rejected due to inadequate evidence to support clinical and economic claims and unacceptable cost-effectiveness.

So when is a drug too expensive, given that resources are limited and value-for-money is a primary concern? This all comes down to an economic analysis that takes into account:

  • Cost offsets of forgone treatments,
  • The targeted patient groups or clinical settings, with altered success rates, and initiating or continuation criteria,
  • Estimate reduction in use of substituted drugs and associated resources,
  • Estimated extent of use of proposed drug and associated resources.

The PBAC was keen to measure cost-effectiveness in terms of patient quality life years (QALYs) gained. Although there was no nominated threshold, a retrospective review of PBAC decisions indicated that incremental cost of $50 000 per QALY was generally acceptable. This equates fairly closely to a per capita increase in GDP of $55,000. If treatment gives someone back a productive year, then this sort of threshold makes sense.

However, a host of non-financial factors are considered as well. They include a systematic review of the totality of all efficacy evidence, how research translates into clinical practice, as well as political and social considerations.

Since early 2010 the federal government has applied cost recovery to the PBS assessment process. Drug companies seeking to list their drugs on the PBS must pay upon lodgement of their application and at the pricing stage. Any company that fails to get a PBS listing and wants an independent review of a PBAC recommendation faces a fee of id=”mce_marker”19,500. The Australian Government spent $7.68b on pharmaceutical benefits in 2008-09.

No more articles