Using a pie analogy for Australia Federal Government spend on the Pharmaceutical and Repatriation Benefits Schemes in 2017-18, the impact of rebates is clear with approximately $1 in 5 paid out as benefits for medicines, ultimately returning to Treasury.
The total $2.36 billion in rebates was repaid wholly by innovator manufacturers on the basis of Deeds of Agreement with the Commonwealth. Such arrangements are necessary to enable PBS listing with a published price that globally protects the return of investment for capital risked while a new product is still in patent.
The size of the proportion is an indication of the negotiating power of the Department of Health on behalf of Australian taxpayers following a positive PBAC recommendation. It could also be considered a measure of why Australia is perceived as a ‘free rider’ in terms of investment in development. It may be a reflection of a distorted Health Technology Assessment process, with policies such as lowest cost comparator that often bear no semblance to clinical practice.
Graph Source: PBS expenditure prescription report, 2017-18. Image source.