Pharmaceutical Benefits Scheme — not always cost effective for the chronically ill

Chronically ill patients without concession cards may save money through non-PBS bulk prescriptions

The Pharmaceutical Benefits Scheme (PBS) has been in operation for almost 60 years, with some benefits first being made available in 1948. It has evolved from supplying a limited number of “life-saving and disease-preventing drugs” free of charge to the community, into a broader, subsidised scheme. In its current form, the PBS was introduced in 1960 and included the introduction of a patient contribution (or co-payment) of 5 shillings to provide some control on volumes and expenditure.1

Government PBS expenditure on an accrual accounting basis for the year ending 30 June 2014 totalled $9148.5 million. The total PBS volume was 209.8 million prescriptions. Government expenditure amounted to 82.5% of the total cost of PBS prescriptions. The remainder comprised patient contributions that amounted to $1545.1 million. Most government expenditure on PBS prescriptions was directed towards concessional cardholders ($5708.0 million, 78.1% of the total).2

Australia has an ageing population. Many of the post-War baby boomers, born between 1946 and 1961, are either already, or soon will be, self-funded retirees. From the point of view of the PBS, this could mean a growing percentage of the population that will be classified as non-concessional despite often experiencing a large reduction in income once retired.

As a member of this generation who is approaching retirement and also has a chronic illness, I am very much aware of the amount I spend on medication and what percentage of my retirement income this will represent. In my experience, as a long term, corticosteroid-dependent patient with chronic asthma, I have found that it is more cost effective to purchase many of my medications using non-PBS (private) prescriptions.

In the main, PBS prescriptions cover a one-month supply of medication while non-PBS prescriptions can be for any quantity. This limitation to one month’s supply can result in additional direct and indirect cost to the patient.

The four medications I take long term are prednisone (tablets), beclomethasone dipropionate (inhaler), salbutamol (inhaler) and pantoprazole (tablets). As I still earn a full-time income, I fall under the general (non-concessional) PBS classification with a current patient co-payment of $38.30 (as from 1 January 2016). The prices of the pharmaceuticals I used in this analysis were bulk purchase prices using a non-PBS (private) prescription or, in the case of the salbutamol inhaler, the over-the-counter price at my local non-discount pharmacy. I compared these prices with the “maximum price to consumer” PBS supply price.

In the case of prednisone (5 mg tablets), my standard daily dose is 7.5 mg. Based on the current PBS maximum price to consumer of $18.26 for 60 tablets, the weekly cost would be $3.20. In comparison, a bulk purchase of 1000 tablets on a non-PBS prescription costs $53.80 — a weekly cost of $0.57. The annual saving resulting from not using the PBS is $137.17.

For the beclomethasone dipropionate inhaler (100 μg per dose; two puffs twice daily), based on the current PBS maximum price to consumer of $38.26, the weekly cost would be $5.36. In comparison, a bulk purchase of six inhalers using a non-PBS prescription costs $168.00 — a weekly cost of $3.92. The annual saving resulting from not using the PBS is $74.90.

The over-the-counter price for one salbutamol inhaler (200 doses taken when required) is $6.10. In comparison, the current PBS maximum price to consumer is $22.35 for two inhalers. Because this medication is only taken when required, it is difficult to calculate an annual saving. As my asthma is well controlled, I tend to require around six inhalers per year. On this basis, my annual saving is $30.45.

Finally, for pantoprazole (20 mg tablets; one per day), based on the current PBS maximum price to consumer of $17.62 for 30 tablets, the weekly cost would be $4.11. In comparison, a bulk purchase of six packets of 30 tablets (total, 180 tablets) on a non-PBS prescription costs $29.95 — a weekly cost of $1.16. The annual saving resulting from not using the PBS is $153.65.

By not using the PBS, my annual saving is $396.17, more than a dollar a day. This does not include the savings from unnecessary trips to the pharmacy. Although this annual saving is based only on my own medication regimen, any patient who is on any long term medication that has a maximum price to consumer below the current safety net can also save by using bulk non-PBS prescriptions.

Cost saving from the use of bulk non-PBS prescriptions as an alternative to PBS prescriptions is, of course, subject to a number of caveats.

Patients must have a well-established, ongoing and long term clinical need for the medication to avoid wasting both money and medication. Also, the expiry date on the medications needs to allow for the time required to use up the supply.

Additionally, the PBS dispensed price for maximum quantity (DPMQ) needs to be either less than or not much higher than the maximum general (non-concessional) patient co-payment amount, currently $38.30. A pharmaceutical such as the beclomethasone dipropionate inhaler, with a DPMQ of $38.26 (virtually the same as the maximum patient co-payment amount), has a minimal price advantage with a bulk non-PBS prescription because of the higher dispensing fee for non-PBS prescriptions.

Finally, non-PBS prescriptions do not qualify for the safety net. My current safety net threshold, as a non-concessional patient, is $1475.70. For the four medications that I take on a permanent basis, I would have only reached $727.35 in one year, virtually half of the threshold.

I am aware that it is not the responsibility of prescribers or pharmacists to give cost-saving advice when prescribing or dispensing medications. However, considering the growing number of self-funded retirees, perhaps chronically ill patients could be made aware of the potential to mitigate some of the financial burden of their prescription medications by using bulk non-PBS prescriptions. It may also be time for a review of PBS prescriptions for pharmaceuticals used by the chronically ill to allow these drugs to be dispensed in amounts covering more than a single month’s supply.

Health Care Home success depends on GP goodwill

General practice is the corner stone of primary care. I am sure you will all agree with this. General practice in Australia has an exemplary record compared with many other countries around the world. It is efficient and extremely low cost, especially compared with an uncomplicated ED presentation.

The public, and the public purse, is extremely well served by general practice. The cost of MBS expenditure on general practice is just 6 per cent of total Government spending on health. Fee for service (FFS) has been the predominant funding model of general practice over that time.

The Government’s Health Care Home (HCH) is a model of care for patients with chronic disease. It is also known as the Medical Home. Under the model, patients have a continuing relationship with a particular GP to coordinate the care delivered by all members of the patient’s care team.

Do we need it? Especially when we consider the exceptional current performance and achievements of GP in Australia?

The significant twin burdens of burgeoning chronic disease and advancing age presentations are challenging the economic resources for delivering primary care. In an environment where fiscal resources are tight, the FFS model’s ability to cope with the pressure on the public purse is under the microscope.

Superimpose this on years of cuts to GPs – years of continued underfunding and non-investment by successive governments in general practice has brought GPs to the brink.

BEACH data shows that GPs are managing more chronic disease than ever before. GPs are already under substantial financial pressure due to the Medicare freeze and a range of other funding cuts. The HCH model is certainly not a way for the Government to arrange funding to general practice in the current Medicare rebate freeze environment.

The Medical Home is fundamental to the concept of the family doctor who can provide holistic and longitudinal care and, in leading the multidisciplinary care team, safeguard the appropriateness and continuity of care.

All this is academic if the funding for HCH is not appropriate, and not simply at the expense of FFS. Which brings us to the trial (or as the Health Department wishes to view it, as phase one of the implementation).

In March, the Government committed $21 million to allow about 65,000 Australians to participate in an initial two-year trial involving up to 200 medical practices from 1 July 2017. This funding is not for services, just for the infrastructure required to support the trial, as well as its evaluation.

The Health Department is busily preparing for this implementation. There is a hive of activity as it seeks to implement this key part of the Government’s strategy for reform. The overarching implementation advisory group will liaise to ensure that best practice and appropriate strategies are followed in the trial. AMA is on both the implementation group and underpinning subgroups involved in the mechanics of selecting patients and the economics of payment mechanisms.

The next few months will see many announcements, including the identification of the Primary Health Network (PHN) regions and an invitation for expressions of interest from practices in those regions to be part of the trials. The success of this policy initative will also depend on developments and further progress on the MyHealth Record and the PHNs (not without their challenges also).

The Department rightly understands that the goodwill of GPs is crucial for the success of the trial.

That goodwill will evaporate significantly if there is not the appropriate funding. However, I have made it clear that with additional funding support, GPs can provide more preventive care services and greater management and coordination of care. More important still, they can keep patients healthier and out of hospital, saving unnecessary and more expensive presentations and hospital admissions down the track – a measure which will form a key part of the evaluation of the success of the trial.

Member expertise informs AMA policy

One query often received in the secretariat of the AMA is about how AMA policy is formulated. This question has arisen recently following the change in the leadership of the AMA with the election of Dr Gannon as President and Dr Bartone as Vice President, prompting people to ask whether the leadership change affects AMA policies.

There is a substantial process to the development of AMA policy which evolves within the councils, committees and working groups of the AMA Federal Council, often in response to current issues.

The deliberations of the councils, committees and working groups are informed by background research and advice from the secretariat and, increasingly, from expert advice available from AMA members.

Under the AMA’s Constitution, the Federal Council is vested with responsibility for the organisation’s medico-political policy. It is the Position Statements and policies approved by Federal Council that inform the public comments of elected AMA leaders.

The work of Federal Council is far-reaching, covering policies as diverse as health financing and economics; medical workforce; medical practice; and training. This is in addition to the specific agendas of the five major councils of Federal Council.

The policy considerations reflect the objects of the AMA as set out in its Constitution – to look after the interests of the members of the AMA across all facets of their lives, to promote the wellbeing of patients, take an active part in the promotion of health care programs for the benefit of the community, and participate in the resolution of major social and community health issues.

The second objective, in particular, ensures that the AMA addresses many public health issues that affect patients and the communities in which they live.

Public health issues currently under review by working groups of Federal Council cover a wide range of subject areas including addiction, firearms, obesity, foetal alcohol syndrome disorder, blood borne viruses, and rheumatic heart disease.

The Position Statements that are developed by the working groups and finalised by Federal Council serve to inform members and the public at large, as well as to guide the AMA’s advocacy.

From time to time Federal Council also considers policies developed by the World Medical Association, of which the AMA is a member. WMA considers its policies at the twice-yearly meetings of its Council and annual meeting of its General Assembly.

Among current areas of work are consideration of medical tourism, the use of bio-banks, obesity in children, boxing, and medical cannabis.

The AMA draws on its own policies and Position Statements to inform its input into WMA policies.

With increased use of working groups, the Federal Council has been able to draw on the expertise of members who may not sit on the Council, but who have substantial specialised knowledge to contribute. Over coming months, members will be invited to indicate areas of special interest which will be recorded in the member database. This will assist to identify members with interests in specific areas of AMA advocacy for future communications.

Evaluation of the performance and outcomes for the first year of a diabetes rapid access clinic

Diabetes rapid access clinics (DRACs) have been identified by the New South Wales Agency for Clinical Innovation as a key component of an integrated diabetes model of care.1 This cost-effective model provides fast and comprehensive outpatient review and has been shown to circumvent hospital admission, decrease hospital length of stay and improve patient outcomes.2–5 Based on this approach, a nurse practitioner-led DRAC was established in February 2015 at Royal North Shore Hospital (RNSH) in Sydney as a pilot program to assess the suitability of the DRAC for scalability across the Northern Sydney Local Health District (NSLHD).

The DRAC is an outpatient clinic, operating on weekdays, which adopts the principle that high-risk patients who present to the emergency department (ED) could be diverted from hospitalisation if they were well enough for outpatient management of their condition (Appendix). Patients are referred from general practice, the ED or the endocrinologist on call and require rapid review (within 72 hours) of complex diabetes problems, such as an episode (or episodes) of severe hypoglycaemia, recurring mild hypoglycaemia or hyperglycaemia not needing hospitalisation.

We prospectively collected data during the first year since inception of the DRAC, with a particular focus on reasons for referral and cost evaluation. The study was approved by the NSLHD Human Research Ethics Committee (RESP/16/62).

Within the first year of the DRAC pilot program at RNSH, 61 patients attended the clinic. About a quarter of these patients (n = 15) would have been hospitalised had they not been reviewed at the DRAC and they were successfully managed as outpatients. Although these patients met the criteria for admission, they were deemed appropriate for the DRAC by the endocrinologist on call. In addition, 26% of the patients were referred back to general practice, while the remainder required ongoing endocrinologist review. Most patients presented with hyperglycaemia-related problems (n = 40; 66%; Box), including 15 patients with newly diagnosed diabetes. A further 11 patients presented with severe hypoglycaemia. Within 30 days of review at the DRAC, one patient presented to the ED and required hospitalisation.

Using a conservative costing approach, whereby patients were assumed to be uncomplicated with an average length of stay of 2.5 days (based on data from the NSLHD Performance Unit), the cost analysis demonstrated that for 15 patients for whom hospitalisation was avoided, about $46 700 would have been incurred in their inpatient stay. The DRAC was established through a restructure of existing services; however, if nursing costs associated with running the DRAC were included (about $23 400), the analysis showed that the cost of management in the clinic was half the cost of an inpatient stay (Box).

A nurse practitioner-led DRAC was successfully established at a tertiary referral hospital in NSW. Our preliminary evaluation has demonstrated improved patient outcomes and assistance for general practice in managing ongoing outpatient diabetes-related problems. In addition, for a quarter of patients presenting to the DRAC, hospitalisation was prevented. Future directions include the expansion of the DRAC across the local health district and the incorporation of a “hotline” to assist general practitioners with urgent and complex diabetes management.

Box –
Royal North Shore Hospital Diabetes Rapid Access Clinic (DRAC) evaluation: overview of patient demographics and cost analysis data

Patient demographic

No. of patients*

Patients seen (February – December 2015)

Male

Mean age, years (SD)

56 ± 16

Mean glycated haemoglobin value (SD)

9.7% ± 2.5%

Mean duration of diabetes, years (SD)

13 ± 13

Type 1 diabetes

14 (23%)

Type 2 diabetes

47 (77%)

Reason for referral to DRAC

Newly diagnosed type 1 diabetes

Newly diagnosed type 2 diabetes

Hyperglycaemia

Hypoglycaemia (severe)

Other

Cost analysis

No. of hospitalisations prevented^†

15 (25%)

Hospitalisation cost per day

$1245

Average length of stay, days

2.5

Total hospitalisation cost that would have been incurred

$46 687.50

Cost of nursing at DRAC

$23 339.52

Cost management difference

$23 347.98

* Data are number of patients unless otherwise indicated. † One patient sent to the emergency department via DRAC — not diabetes related.

Your Family Doctor: Invaluable to your health

AMA Family Doctor Week, 24 – 30 July 2016

The AMA used this year’s Family Doctor Week to not only celebrate the hard work and dedication of Australia’s 30,000 GPs, but to put the re-elected Coalition Government on notice that changes in health care policy are urgently needed.

The traditional National Press Club address has been moved to August to allow for continued campaigning against the Medicare rebate freeze, cuts to public hospital funding, and cuts to bulk billing incentives for pathology and radiology.

Media outlets around the country, including the national WIN network of regional television stations, picked up on the message that GPs are the most cost-effective sector of the health system and need support.

AMA President, Dr Michael Gannon, said that the personalised care and preventive health advice provided by family doctors helps to keep people out of hospitals, and keep health costs down.

“Australian GPs provide the community with more than 137 million consultations, treat more than 11 million people with chronic disease, and dedicate more than 33 million hours tending to patients each year,” Dr Gannon said.

“Nearly 90 per cent of Australians have a regular GP, and enjoy better health because of that ongoing trusted relationship.”

The AMA used the week to outline a series of proposals for improving the health of Australians while also delivering savings to the Government.

The Pharmacist in General Practice Incentive Program (PGPIP) proposal would integrate non-dispensing pharmacists into GP-led primary care teams, allowing pharmacists to assist with medication management, provide patient education on their medications, and support GP prescribing with advice on medication interactions and newly available medications.

“Evidence shows that the AMA plan would reduce unnecessary hospitalisations from adverse drug events, improve prescribing and use of medicine, and governments would save more than $500 million,” Dr Gannon said.

“When the Government is looking to make significant savings to the Budget bottom line, the AMA’s proposal delivers value without compromising patient care or harming the health sector.”

Independent analysis from Deloitte Access Economics identified that the proposal would deliver $1.56 in savings for every dollar invested in it.

The AMA also stepped up the pressure for more appropriate funding for the Government’s trial of the Health Care Home model of care for patients with chronic disease.

In March, the Government committed $21 million to allow about 65,000 Australians to participate in initial two-year trials in up to 200 medical practices from 1 July 2017. However, the funding is not directed at services for patients.

“GPs are managing more chronic disease, but they are under substantial financial pressure due to the Medicare freeze and a range of other funding cuts,” Dr Gannon said.

“GPs cannot afford to deliver enhanced care to patients with no extra support. If the funding model is not right, GPs will not engage with the trial, and the model will struggle to succeed.”

With chronic conditions accounting for approximately 85 per cent of the total burden of disease in Australasia and 83 per cent of premature deaths in Australia, it was vital that Australians could turn to their family doctor for advice, Dr Gannon said.

“The Government uses concerns about the sustainability of the health system to justify funding cuts, but instead of making short-sighted and short-term savings, it should invest in preventing disease in the first place,” he said.

Family doctors in rural and regional communities, in particular, needed more support.

The AMA called on the Government to rethink its approach to prevocational training in general practice, and to revamp and expand its infrastructure grants program for rural and regional practices.

Maria Hawthorne

Stewardship and the road ahead for health financing

As the new Chair of Health Financing and Economics Committee (HFE), I am looking forward to the challenges ahead for health financing and how HFE’s work can assist the AMA to advocate and achieve the best outcomes for AMA members and our patients.

The dust has yet to settle on the outcomes of the 2016 Federal Election, but it is clear that the campaign focus on health, Medicare and affordability resonated with the Australian public.

There has never been a more important opportunity to have a national discussion about the future of the Australian health care system. As both consumers and providers, we know that our health care system needs strategic, systematic reform. We understand that it must be efficient, equitable and sustainable. We also understand that Australians see access to ‘Medicare’ (a universal public health insurance scheme) as being non-negotiable. With major reviews underway into the Medicare Benefits Schedule and private health insurance, and calls to reform private health insurance and limit excessive fees to patients, it is imperative that health reform is coordinated, integrated and not victim to short term political expediency or reactiveness.

There will be a continuing, even increasing, pressure to constrain growth in health expenditure. Changing health demographics and an increased burden of complex and chronic disease strain existing systems and resources. Emerging technologies threaten to further increase health care costs unless new technologies and information systems can be used to support primary health care and preventive health care measures and streamline accessible, affordable and appropriate specialist care.

There are cost savings to be had within the system, but these must not be generated by simply ‘shifting’ costs within the system or passing these costs onto consumers.

HFE has recognised that ‘stewardship’ is an important and useful approach for clinicians to take an influential role in these issues and decisions.

Earlier this year, HFE developed an AMA position statement on Doctors’ role in stewardship of healthcare financing and funding arrangements 2016. This complements the AMA position statement developed through Ethics and Medico-Legal Committee on The Doctor’s role in Stewardship of Health Care Resources 2016, which focuses on the role of the individual doctor in stewardship of health care resources in the clinical setting.

Stewardship in relation to health financing and funding means ensuring health funding is directed to achieving health outcomes, does not have adverse impacts or involve wasteful expenditure, and is sustainable and able to meet future needs.

Why do doctors have a role in stewardship of heath financing?

Health care financing and funding arrangements and decisions need to be appropriately managed to ensure health funding enables all patients to continue to receive the best quality care, now and in the future.

As individual doctors we affect health care expenditure through our clinical recommendations and decisions regarding patient treatment. As doctors we also bring a practical and informed perspective from the real world of our clinical practice to health financing and funding decisions.

When major decisions affecting health care are taken without such clinical involvement, the results are often sub-optimal and unsustainable. Recent examples include GP co-payments, MBS indexation freeze, fee reductions, and public hospital funding.

We have yet to see how the post-election health policy and health financing climate unfolds. The AMA must develop its own credible health economic narrative and contribute to collaborative processes where the input of the medical profession is both sought after and listened to in the development of health policy. The alternative clearly hasn’t worked.

Australia has an enviable health care system. Reform is required to ensure that, in the face of changing health demographics and new health care developments, it remains ‘fit for purpose’ and meets the needs of all Australians.

Where decisions involving the allocation of health care resources are being made, doctors have a responsibility to advocate for the best interests of patients, the improvement of health outcomes, and the sustainable use of resources.

Financial toxicity in clinical care today: a “menu without prices”

Out-of-pocket costs are rising rapidly and can influence treatment decisions and health outcomes

Australia delivers health outcomes that rank well internationally, with per capita spending demonstrably less than that of the United States. Of concern, Australia’s out-of-pocket costs for health care are sixth highest among Organisation for Economic Co-operation and Development countries,2 despite universal health insurance. These out-of-pocket expenses accounted for 57% of non-government health expenditure in 2011–12, or over 17% of all health care expenditure.3 Health care costs in Australia continue to rise well above the consumer price index. The net burden of costs are reported by clinicians to influence some decisions that patients make, with the potential for detrimental health outcomes for individuals and for Australia’s health as a whole.

The average equivalised weekly disposable household income in 2013–14 was $998, with a median of $844.4 About half of all households therefore have a weekly net income of less than $844, yet that income has to support out-of-pocket health expenses. There are also limits to what is covered under different aspects of the safety net. Further, many aspects of community-based care are associated with part or all of the cost being borne by the patient, in many cases with no safety net provisions (wound dressings, incontinence pads, community nursing and allied health visits).

In cancer care, patients often face tough decisions as new unsubsidised therapies become available. An ageing population, innovations (some with very marginal benefits) and the risk that some procedures are overused or harmful all contribute to unnecessary financial (and emotional) pressure on patients and their families. Procedures and interventions, at times with marginal health gains, are being promoted actively, frequently with high costs and little meaningful benefit in terms of quality of life or survival. In the context of ongoing outcome disparities based on socio-economic status, our aim must be timely access to world class care for all Australians, regardless of financial circumstances.

In the Australian context, financial disclosure is not only how much a procedure will cost but, crucially, whether there are alternatives that offer similar benefits at less cost to the patient. This may be as important to the patient as the side effects or risks of an intervention. Most starkly, the omission of information from a private clinician regarding options in the public sector reduces informed financial choice and increases the potential for significant financial and health disadvantages.

Failing to inform patients about comparative waiting times in public and private systems falls short of fully informed (financial) consent. Indeed, national data demonstrate that public surgical waiting times for a sample of cancers are very short.5 Publicly available data on waiting times and service quality are critical for supporting informed treatment decisions, especially when out-of-pocket expenses can vary from zero to tens of thousands of dollars for the same procedure.

Value in health care is defined as outcomes relative to cost.6 In considering this from a patient’s perspective, it is imperative to not only question outcomes but to understand the true cost for the whole episode of care — the out-of-pocket expenses, the contribution made by the community through Medicare, and any supplementary private insurance. Informed choice should be based on more than the costs charged by an individual practitioner and those incurred by related pathology, imaging and anaesthetics. Informed choice now needs also to account for the extreme variations in the prices charged by identically credentialed practitioners within Australia undertaking the identical procedure.7

International data suggest that the consequences of high out-of-pocket costs include the potential for poorer compliance with ideal care, including prescribed medications that are necessary for best outcomes.8,9 To make decisions about what is often a long treatment pathway across multiple modalities, patients need a comprehensive and early understanding of the financial impacts of treatment, time away from work and other costs, and the opportunity to seek financial advice and assistance early as needed. Indeed, in one survey, people only sought help when the financial burden was starting to cause significant difficulties.9

Arguably, failure by medical practitioners to disclose all of the financial costs affecting patients’ decisions is a cause of avoidable suffering for tens of thousands of households across Australia each year.10 A new standard for financial disclosure is required — a standard that moves beyond disclosure of the costs of a single procedure to one that accounts for the costs of a full pathway of treatment and all the alternatives open to the patient. The issue of financial toxicity in Australian health care requires open debate supported by population- and individual-level data on rapidly rising out-of-pocket costs, and advocacy that places patients’ outcomes at the centre of any debate about the profession’s increasing demands on patients’ wallets.

Public hospitals – $2.9 billion just a down-payment – AMA

The almost $2.9 billion restoration in funding for public hospitals goes nowhere near meeting growing demand, AMA President Professor Brian Owler said.

In what one health academic described as a “pea and thimble” Federal Budget, Treasurer Scott Morrison delivered no surprises in public hospitals funding.

There was no increase to the agreement negotiated at the 1 April Council of Australian Governments meeting to restore almost $2.9 billion over three years, from the billions cut in the 2014 and 2015 Budgets.

“The AMA welcomes confirmation of the almost $2.9 billion in COAG funding for public hospitals, but we see this as a down-payment only,” Professor Owler said.

“The States and Territories will need significant extra funding if they are to build hospital capacity to meet growing demand.”

Mike Woods, Professor of Health Economics at the University of Technology Sydney, agreed, noting that growth in total Commonwealth funding will be capped at 6.5 per cent a year for three years from 2017-18 – at a time when expenditure is forecast to rise by 9.9 per cent.

“This is very much a stop-gap measure to get the federal government through the upcoming election,” Professor Woods wrote in The Conversation.

“The underlying problem for the states is the escalating cost of delivering public hospital care. The issue may have been deferred, but it hasn’t gone away.

“Health is the single largest expenditure item in all of their budgets. And expenditure has been growing at around 5 per cent in real terms over the past decade. This isn’t sustainable.

“Over the next three years the incoming federal government, of whatever political persuasion, will need to sit down with the states and territories and agree on reforms to reduce the rate of growth of health expenditure.”

Stephen Duckett, the director of the Grattan Institute’s health program, described it as a “pea and thimble” budget which attempted to erase memories of previous cuts under the Abbott and Hockey administration.

“The most significant apparent budget spend is on public hospitals. The deal reached with the Premiers on April Fool’s day is costed at almost $2.9 billion,” Dr Duckett said.

“This can be spun two ways: that it is almost a $3 billion injection into the public hospital system or that it is still an effective cut on what was promised by both Labor and Liberal prior to the 2013 election.”

The Australian Healthcare and Hospitals Association (AHHA) welcomed the Government’s shift away from its previous stance on funding based only on population and CPI growth.

While the return to activity-based funding based on a national efficient price was sensible, further work was needed with a focus on safety, quality and reducing preventable hospitalisations.

“While the improved support for hospital funding until 2020 has provided some relief for the hospitals sector, concerted efforts will be required to reduce the increasing demand for hospital services,” AHHA chief executive Alison Verhoeven said.

“Savings flagged in the aged care provider funding of $1.2 billion over four years will also potentially impact on hospitals who traditionally pick up complex care when the aged and community care sector cannot deliver appropriate support to elderly people.

“Unfortunately for the states and territories, and for Australians who rely on public hospitals, hospital funding remains a hole that is only partly plugged.”

Maria Hawthorne

Private Health Insurance – no reforms in Budget

Health Minister Sussan Ley has deferred action on private health insurance (PHI) reform until after the Federal Election, instead announcing a new committee to advise her on the path forward.

Despite already undertaking a review of PHI, and setting up a working party on the cost of prostheses, the Government has now committed $2.2 million over three years to establish an expert group – the Private Health Sector Committee (PHSC) – to provide technical and specialist advice on designing and implementing the reforms.

The Prostheses List Advisory Committee (PLAC) will be reconstituted and enhanced to include additional expertise, as recommended by the Industry Working Group on PHI Prostheses Reform.

With PHI rebates budgeted to cost $6.5 billion in 2016-17, the Government has also continued the freeze on rebate thresholds, saving more than $370 million.

“The 2016–17 Budget puts in place key building blocks to reform the private health insurance system for the long-term benefit of consumers,” Ms Ley said.

“This will include a consumer-focused expert Private Health Sector Committee, as well as a revamp of the current Prostheses Listing Advisory Committee to make medical devices more affordable and available to Australians faster, without compromising safety.”

Commentators were not convinced.

“In October last year, the federal minister for health launched a series of national consultations focused on the consumer value of private health insurance and the long-term sustainability of current arrangements,” Mike Woods, Professor of Health Economics at University of Technology Sydney, wrote in The Conversation.

“A Department of Health online survey elicited over 40,000 responses. In something of an understatement, the minister reported that, ‘… consumers are frustrated with their Private Health.’

“The immediate response was to set up a working party on the cost of prostheses. The budget is also funding a private health sector committee to provide advice on private health insurance reforms – an issue for some time after the election.

“In the meantime, the government is making more savings by continuing to “pause” the indexation of the private health insurance income tiers.”

News Ltd’s national health reporter Sue Dunlevy wrote that “despite talking up the need for health fund reform and undertaking a review, Ms Ley has refused to act on the advice she received”.

“Instead, she has set up another committee – the Private Health Sector Reform (sic) Committee – to spend three years advising her on private health insurance reforms,” Ms Dunlevy wrote.

“Health fund members who faced a 5.59 per cent premium rise last month will have to spend another $2.2 million through their taxes to fund this committee.”

The private health sector, predictably, was more generous.

The Australian Private Hospitals Association (APHA) said the Government was taking the right approach: “Rather than ripping money out of the system and causing chaos it will allow managed reform to a sustainable system.”

Private Healthcare Australia (PHA) said the PHSC would oversee the implementation of measures that would eventually save more than $800 million a year and keep premiums lower.

The AMA’s submission to the PHI Review last December predicted the review would find what medical practitioners see daily: that people often only discover they are not covered for common procedures when they need treatment.

Maria Hawthorne

Affordable access to innovative cancer medicines — don’t forget the prices

Efforts to improve access to cancer medicines should not overlook exorbitant prices

On 17 September 2015, the much anticipated Senate report on the Availability of new, innovative and specialist cancer drugs in Australia was released.1 The inquiry preceding the report, which was triggered by concerns about inadequate and inequitable access to cancer medicines, had attracted over 200 submissions from doctors, patients, patient advocacy groups and government decision makers.

The report addressed the health burden of cancer on our society; the impact on patients of delayed access to cancer medicines; and the challenges of assessing cost-effectiveness, particularly for rare cancers. It also focused on ways of improving Australia’s processes of health technology assessment (HTA), by which we determine whether medicines are safe, effective and cost-effective.

Australia’s health technology assessment processes

In Australia, HTAs for medicines are carried out in two phases. First, a pharmaceutical company makes a submission to the Therapeutic Goods Administration, which assesses a medicine’s efficacy and safety. If the medicine is approved, an application can be made to the Pharmaceutical Benefits Advisory Committee (PBAC) to have the medicine subsidised by the Pharmaceutical Benefits Scheme (PBS). The PBAC assesses whether the medicine is cost-effective in comparison with existing therapies. For targeted therapies, approval may also be sought from the Medical Services Advisory Committee for “companion diagnostics” that determine whether patients are likely to respond to the treatment. If medicines are not subsidised by the PBS, patients and their doctors have to find other means to gain access to them, which may include enrolling in clinical trials, seeking treatment through public hospitals or appealing to pharmaceutical companies for free or subsidised access. If unsuccessful, patients are left with the pressure of raising the money themselves or having to forgo treatment.

Those advocating in the Senate report for reform argued that patients are forced into these situations far too often because Australia’s HTA processes are antiquated, inflexible, unpredictable and inequitable — particularly for those with rare cancers, young people with cancer, and cancer patients located in rural and remote regions.

Proposed solutions to these problems included:

providing multiple HTA pathways;
prioritising the resources of regulators and payers so that the most important and complex medicine applications are given the most attention;
enabling better coordination between decision-making bodies to speed up decisions;
enabling better communication with pharmaceutical companies to set expectations early and thereby reduce failures;
leveraging off decisions made by overseas regulators with comparable evidence standards;
taking greater account of indirect economic benefits and outcomes, such as improvements in productivity; and
having greater focus on outcomes important to patients and doctors.

It was also suggested that because companies may not be commercially motivated to seek approval for non-commercially attractive uses of their products, it should be made easier for physicians, patient advocates and other stakeholders to make applications. To help regulators and payers make timely decisions, often in the midst of great uncertainty about real benefits, harms and costs, it was also proposed that there should be broader use of “managed entry” schemes in Australia — that is, schemes in which further evidence is generated after approval by the regulator or payer.

Cost of new cancer drugs

While it is important for Australia to refine its HTA principles and processes, what was notably absent from the Senate report was an in-depth consideration of why new cancer medicines cost so much, and what can be done about it. Many new cancer drugs cost more than $100 000 per treatment,2,3 and it has been shown that in the United States the launch price of cancer medicines has increased by 10% per annum over almost 20 years.4 These prices mean that unsubsidised medicines are well out of the reach of all but the wealthiest individuals, and they place intense political pressure on governments to subsidise medicines that would otherwise have been considered too expensive or supported by insufficient evidence.

The report’s overlooking of drug prices is significant because adjusting HTA processes to provide earlier access to more drugs without reforming the way we price cancer drugs will mean an increasingly large proportion of our health budget will be directed to medicines in general, and cancer medicines in particular. This has the potential to create enormous opportunity costs and inequities elsewhere in the system.

In this regard, there are lessons to be learned from other jurisdictions. In its submission, the Society of Hospital Pharmacists of Australia poignantly notes that the United Kingdom’s Cancer Drugs Fund, which was set up to provide access to cancer drugs not approved by the National Institute for Health and Care Excellence, has inadvertently resulted in the UK paying more for cancer drugs than most other European countries, and ultimately resulted in 25 of the 84 previously listed cancer medicines not being funded in 2015–16.

The pressure on governments is likely to get worse. According to the Pharmaceutical Research and Manufacturers of America, there are almost 800 drugs in development for cancer, of which 98 are for lung cancer, 87 for leukaemia, 78 for lymphoma, 73 for breast cancer, 56 for skin cancer and 48 for ovarian cancer.5 A recent report by the IMS Institute predicts that 225 new medicines will enter the market over the next 5 years, and that cancer treatments represent the highest proportion of these drugs.6 Of the cancer medicines being developed, 91% will be targeted therapies, which is likely to make these medicines more expensive. Pressure on budgets will therefore only increase if something is not done now about cancer drug prices.

Perhaps one reason the Senate report focused so much on HTA, and not on drug prices, is that price and profit expectations for pharmaceutical markets are set internationally, and Australia is a small player in this market. Part of the pharmaceutical industry’s global strategy includes setting high pricing precedents, typically in the US market. Although companies do negotiate different prices elsewhere in the world, there is a limit to their willingness to do so.

It is interesting, however, to observe that the US — traditionally the bastion of medicine price deregulation — now recognises that high drug prices are the biggest barrier to patient access, and questions are beginning to emerge about the legitimacy of the prices being charged. A new Bill has recently been submitted to the US Congress seeking to empower the nation’s Medicare system (which provides public health care primarily to people aged 65 years and older) to drive down prices, and to demand reports about expenditure and profits for each drug listed with the US Food and Drug Administration, including overseas sales.7 No doubt, recent scandals relating to unjustifiable price hikes — most notably the more than 5000% increase for 60-year-old drug pyrimethamine (Daraprim), used to treat infections such as malaria8 — has contributed to the recent spike in unease about medicine pricing.

A few submissions to the Senate report did make mention of the need for new approaches to purchasing medicines. Rare Cancers Australia, for example, recommended treating medicines as a service, wherein licences to use medicines, rather than the medicines themselves, are bought and sold. The advantage of this approach is that regardless of how much of a medicine is used, the licensing fee remains fixed, removing any incentive to overprescribe or aggressively promote use of a medicine. If such licences are not linked to specific indications, this model may also provide subsidised access to off-label drugs to treat patients with rare cancers.

Social impact bonds are another possible approach that was recommended by the Cancer Drugs Alliance. A social impact bond is a means to attract non-government investment into projects that resolve social problems that have traditionally relied on relatively small-scale support from trusts and foundations. The premise is that dealing with acute social problems early (eg, severe suffering from cancer) will lead to less expensive interventions and therefore savings for governments, of which a proportion is provided to investors as reward.9

Where to from here?

Such dramatic changes to how we procure medicines will need to be considered carefully and adopted gradually, and perhaps all Australia can do for now is wait for global drug pricing trends to adjust. Meanwhile, we need to be cautious about demands to radically overhaul HTA processes that might actually be working quite well. For example, when it comes to managed entry programs, it has to be recognised that current evidence standards have evolved for a reason, and it is extremely difficult to disinvest if a medicine subsequently proves to be ineffective, unsafe, poor value for money or simply unaffordable. It is therefore crucial for decision makers to separate the real value of cancer medicines from the hype that often surrounds them — using, for example, a tool developed by the European Society for Medical Oncology that ranks the “clinically meaningful benefit” that can be expected from new cancer treatments.10

One change that we can safely make now is to advocate for greater transparency surrounding both HTA and price negotiations. At present, decisions about access to cancer medicines are made behind closed doors, largely because of the perceived need to maintain commercial confidentiality. It is understandable that companies would not want to completely reveal their commercial interests, but without greater openness about how funding decisions are made, and how medicine prices are linked to underlying research and development, manufacturing and operational costs, we will remain unable to optimise the utilisation of our health resources in a way that works for both society and the pharmaceutical industry.