Grattan Institute admission shows PBS savings proposal was wrong

The Grattan Institute’s PBS savings proposal has been proven wrong after their admission this week that the savings figure was artificially inflated by (at least) $165 million, or almost 40%.

Appearing before the Senate Community Affairs Committee this week, the Institute acknowledged that the proposed annual savings from benchmarking 20 commonly-used drugs against UK prices was not $580 million, as originally claimed, but actually closer to $415 million.

Medicines Australia Chief Executive, Dr Brendan Shaw, said the figures put forward by the Grattan Institute and its savings proposal based on those figures were incorrect.

“This is what Medicines Australia has been arguing for quite some time. We agree with other commentary that such forecast savings were only possible if you ignored the upcoming 1 October price cuts, and included a medicine still listed in the F1 formulary,” Dr Shaw said.

“The fact is 160 PBS-listed medicines have experienced price cuts under the Expanded and Accelerated Price Disclosure regime, with the average price cut reaching 42.5 per cent and 10 drugs experiencing price cuts over 80 per cent.

“These ongoing price reductions translate to almost $20 billion in ongoing savings by 2017-18, which makes the Institute’s $415 million proposal almost look like a rounding error.

“Turning to the PBS for further savings on top of these massive price cuts, to counteract expenditure increases in other areas of health, will ultimately be counterproductive.

“The Grattan Institute assumes that the pharmaceutical sector can continue to take hits, year after year, and keep researching, developing, trialling and rolling out new medicines. But lump on further cost-cutting reforms, as proposed by the Institute and sooner rather than later the system will break.

“We know that any further cuts to the PBS will reduce access to medicines, leading to heavier reliance on the wider health system to care for patients.”

The lowered estimate also now falls below the Government’s forecast of co-payment savings in the final year of the forward estimates – putting in serious doubt the Institute’s claim that benchmarking instead of co-payment changes would be a ‘win-win’ for patients and Government.

“The issue now is making sure these savings deliver what was intended – getting new medicines to Australians,” Dr Shaw said.

See chart of PBS price disclosure cuts 

Contact Person:

Alexia Vlahos
Phone: (02) 6122 8503