Will reimbursement authorities make Real World Evidence (RWE) mandatory?

Since 1990, members of the ICH [1] have co-operated to develop guidelines and standards for demonstration of the efficacy, safety and quality of new products. As membership has grown, the guidance documents have been increasingly adopted as the international standard. Consistently satisfying the data needs of reimbursement agencies is yet to reach this level of uniformity. Will authorities agree on, and even mandate, inclusion of RWE into reimbursement submissions?

Reimbursement guidelines ensure that all relevant evidence published in the medical and grey literature is identified and presented systematically for evaluation. In the case of a new medicine, this usually is comprised of the clinical trial data generated for regulatory purposes. HTA landscape reviews across a number of therapeutic areas demonstrate that positive reimbursement decisions continue to rely almost exclusively on direct randomised controlled trials (RCTs) [2]. Exceptions are rare disorders and conditions of high clinical need when decisions are pragmatically made on the available data. Compromised reimbursement decisions may also occur when regulatory approval is given on the basis of single arm studies; and ethics approval for an RCT requires cross-over to be permitted after the primary endpoint.

The landscape reviews also show that the inclusion of analyses based on real-world data (RWD) definitely aid in reducing uncertainty around a decision. The price decrease required from what is “cost-effective” for listing being inversely proportional to the size of the arc of uncertainty. Uncertainty is significantly reduced when an included analysis demonstrates clinical effectiveness [3]; estimates local usage parameters and/or supports applicability of RCT results to the proposed patient population. However, this importance only applies only once a “yes” funding decision has been made.

This is why development of the reimbursement strategy for a new product must start early. In concert with regulatory plans, it is critical to identify the limitations/gaps in the clinical development program relative to the competitive landscape; to determine which type of data will most strengthen the evidence base; and to seek out alternate sources of data to generate this evidence in a timely manner.

The context for inclusion of real-world evidence (RWE) includes initial reimbursement discussions, pharmacoeconomic analyses, and conditional reimbursement schemes [4]. The right RWE can optimise restrictions or conditions associated with a listing, as well as the price achieved. This occurs at both a global and local level from data collection during early access programs, commissioning a clinical audit of hospital records, to requesting ad hoc analyses of a disease registry.

A snapshot of the status of RWE in reimbursement authorities:


Dr Hwee-Lin Wee from the National University of Singapore, presented a session on Real-World Data/Evidence use by Asia’s developing HTA systems during the ISPOR Asia Pacific 2020 Conference. The results of a 2019 survey confirmed that HTA agencies accept clinical effectiveness data from real-world sources as supplementary evidence to RCTs or where RCTs are lacking. Specifically, China, Indonesia, Japan, Malaysia, Singapore, South Korea and Thailand accept pragmatic clinical trials. China, Philippines, Singapore and South Korea publish specific guidance documents on use of RWD/RWE in HTA reviews [5].

This work contributed to the REAL World Data In ASia for HEalth Technology Assessment in Reimbursement (REALISE) working group. This is a collaboration between global experts and 11 Asian health systems. The group has developed non-binding guidance to provide a framework to generate and use real-world data (RWD) / real-world evidence (RWE) in a consistent and efficient manner for drug reimbursement decision-making in Asia [6].


During 2016, the Karolinska Institute, CHE York, University Departments from Argentina, Brazil, Columbia and Chile, ICON and Novartis collaborated to systematically evaluate the sources, characteristics and uses of RWE in South America. Following comprehensive literature and database searches and validation workshops during 2016, Justo and colleagues (2019) found that RWE was being utilised for pharmacovigilance and academic research purposes; little for HTA decision making and pricing negotiations and not at all to inform early access schemes [7].

North America

The FDA has published guidance on the use of RWE to support regulatory decision-making for medicines and medical devices. These data may also support coverage decisions and to develop guidelines and decision support tools for use in clinical practice [8, 9, 10].

Lee et al. (2021) [11] conducted a retrospective analysis of the use of RWE in the cost-effectiveness analysis and budget impact analysis sections of final evidence reports published in the database of the Institute for Clinical and Economic Review (ICER). They identified 33 reports, all of which used RWE, most commonly for disease progression inputs (28.7%) and health care resource utilization and costs (21.1%). In 57% of cases, a retrospective cohort study design was used to collect the data, registry data was the most frequent (41%) data source, and 30% of RWE was industry-sponsored. RWE was rarely used for drug-specific clinical outcomes such as effectiveness (1.5%), adverse drug event rates (0.5%), and discontinuation rates (1.2%).

Malone et al. (2018) [12] interviewed 20 healthcare professionals from 18 different US health organisations about the use of RWE to inform Pharmacy and Therapeutic Committee decisions. Overall, RWE was considered useful, in particular to inform safety monitoring, utilization management, and cost analysis, but less so to guide coverage decisions. When it was used in decision making, pharmacy claims data was referred to by 100% of committees represented; medical claims (80%), Electronic Health Records (27%); Consumer surveys (20%) and Patient registries (13%). The usefulness of published RWE depended on the relevance and applicability, transparency of methods, study design and quality, and timing of any results. Perceived organizational barriers to the use of published RWE included lack of skill, training, and timely study results.

The FDA has also produced a number of guidance documents on communication with payors around RWE [13, 14] and between manufacturers and payors such as formulary committees [15].


In response to the need for consistency and integration of RWE efforts, a 4-year collaboration between researchers, payers, and patients known as the Canadian Real-world Evidence for Value of Cancer Drugs (CanREValue [16], https://cc-arcc.ca/canrevalue ) kicked off in 2017. Five working groups are developing and testing a framework for Canadian provinces to harmonise the generation and use of RWE for cancer drug funding. The aim is to build consistency in the use of RWE at a national level, which will lead to a robust pan-Canadian system supporting sustainability, value for money and improved patient care.

As part of this project Clausen and colleagues (2020) [17] conducted a qualitative descriptive study to understand current issues with the use of RWE in cancer drug funding decisions. The findings suggest that if RWE is to be used in drug funding decisions, there is a need for a cultural shift, improved data infrastructure, committed investment in capacity building and increased stakeholder collaboration.


The value of using RWE in regulatory decision making by the European Medicines Agency (EMA) is well established [18]. The inclusion of RWE in benefit-assessment/HTA evaluations continues to be the subject of numerous initiatives.

The LSE conducted a series of roundtable meetings in 2018 [19] to gain an understanding of the use of RWE across Europe and to assist the pharmaceutical industry to enhance their use of RWE. Three ways to advance were identified:

(a) prioritising the use of RWE by focusing on quality, including credibility of sources, design and methodologies,

(b) by identifying key areas or regions to pilot the use of RWE, and identifying supporting stakeholders, and

(c) by securing a consistent approach by developing an action bias, building best practice case studies, and demonstrating the value of RWE in contributing to decision making.

In a review of RWE policies of the HTA agencies of Sweden, UK, Germany, France, Italy and The Netherlands, Malady et al (2017) [4] found a lack of alignment in request for and acceptance of RWD in contexts of initial reimbursement discussions, pharmacoeconomic analysis and conditional listing schemes. Bullement et al. (2020) [20] found that the use of RWE in NICE submissions of cancer drugs was extensive, and appeared to have provided a valuable source of information to aid the decision making.  NICE continues to proactively develop its use and acceptance of RWE. In 2019, a ‘Widening the evidence base’ statement set out NICE’s ambition to use broader sources of data and analytic methods to enhance existing methods and processes. Last year, NICE announced a collaboration with US based Flatiron [21] to explore how RWE can inform the clinical and cost effectiveness of health technologies. 


The value of data collected outside of the clinical trial environment is clearly accepted by both payers and manufacturers with potential for use in evaluation and decision-making at all stages of the life cycle of a new medicine.

Representative bodies such as ISPOR and the International Society for Pharmacoepidemiology (ISPE) are collaborating to address the common issues noted as barriers to use of RWE. For example, recommending establishment of a register for RWE study protocols to improve transparency in research methods and analyses use. [22, 23] Numerous others continue to make valuable recommendations on how to move forward. [24, 25]

Policy consistency across organisations and jurisdictions is evitable. However, this will require moving beyond the established principles of evidence-based medicine into HTA 2.0, made possible by “big data” (see separate box). Additionally, new definitions of privacy and data security are required in an era where a search engine can know more about your health than your doctor.

Predictions are for a global market for sourcing, generating and providing RWD in a usable format of US$1.64 billion by 2024 [26]. As reimbursement authorities continue to receive more RWE of increasingly higher quality and value, it will become expected.

  1. The International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use.
  2. Data on file
  3. The observed discrepancy between the effects of a health intervention in routine clinical practice (effectiveness) and the effects demonstrated in RCTs (efficacy) is known as the ‘efficacy effectiveness gap’. NICE Statement of Intent. Widening the evidence base: use of broader data and applied analytics in NICE’s work. https://www.nice.org.uk/Media/Default/About/what-we-do/NICE-guidance/NICE-guidelines/how-we-develop-nice-guidelines/statement-of-intent.docx Page 9.
  4. Makady A et al. Policies for Use of Real-World Data in Health Technology Assessment (HTA): A Comparative Study of Six HTA Agencies. Value Health. 2017 Apr;20(4):520-532. doi: 10.1016/j.jval.2016.12.003
  5. Lou et al. Real-world data for health technology assessment for reimbursement decisions in Asia: current landscape and a way forward. International Journal of Technology Assessment in Health Care 2020  https://doi.org/10.1017/S0266462320000628 
  6. REAL World Data In ASia for HEalth Technology Assessment in Reimbursement (REALISE) working group. For Doers of HTA: HTA Agencies and HTA Researchers. Use of Real-World Data and Real-World Evidence to Support Drug Reimbursement Decision-Making in Asia. Full Version 01.11.2020.  https://hiper.nus.edu.sg/wp-content/uploads/2020/12/REALISE-Full-guidance_updated-20201101.pdf
  7. Justo et al. (2019) Real-World Evidence in Healthcare Decision Making: Global Trends and Case Studies from Latin America. Value Health 2019;22(6):739-749.
  8. US FDA. Real-world data (RWD) and real-world evidence (RWE) are playing an increasing role in health care decisions. 30/11/2020.  www.fda.gov/science-research/science-and-research-special-topics/real-world-evidence, accessed 11 Feb 2021.
  9. US FDA. Guidance Document. Submitting Documents Using Real-World Data and Real-World Evidence to FDA for Drugs and Biologics Guidance for Industry, May 2019. https://www.fda.gov/regulatory-information/search-fda-guidance-documents/submitting-documents-using-real-world-data-and-real-world-evidence-fda-drugs-and-biologics-guidance
  10. US FDA. Use of Real-World Evidence to Support Regulatory Decision-Making for Medical Devices, issued 31/08/2017 https://www.fda.gov/files/medical%20devices/published/Use-of-Real-World-Evidence-to-Support-Regulatory-Decision-Making-for-Medical-Devices—Guidance-for-Industry-and-Food-and-Drug-Administration-Staff.pdf
  11. Lee Wj et al. Use of real-world evidence in economic assessments of pharmaceuticals in the United States. J Manag Care Spec Pharm. 2021;27(1):5-14. Thanks to Neil Grubert for sharing this article on the “Future of Pharmaceutical Market Access” LinkedIn group, see  https://www.linkedin.com/posts/neil-grubert_use-of-rwe-in-economic-assessments-of-drugs-activity-6768935679868055552-pq87
  12. Malone et al. Real-World Evidence: Useful in the Real World of US Payer Decision Making? How? When? And What Studies? Value In Health 2018;21(3):326–333. https://doi.org/10.1016/j.jval.2017.08.3013
  13. Neumann PJ, Elle P. Cures Act, FDA draft guidance suggest flexibility on communication of real-world drug impacts, though questions remain. 2017. Accessed December 13, 2020. https:// www.healthaffairs.org/do/10.1377/ hblog20170202.058584/full/
  14. Neumann PJ, Weissman H. The FDA’s new guidance on payer communications: implications for real-world data and value-based contracts. 2018. Accessed December 13, 2020. https:// www.healthaffairs.org/do/10.1377/ hblog20180712.816686/full/
  15. U.S. Food and Drug Administration. Drug and device manufacturer communications with payors, formulary committees, and similar entities— questions and answers: guidance for industry and review staff. 2018. Accessed December 13, 2020. https:// www.fda.gov/regulatory-information/ search-fda-guidance-documents/ drug-and-device-manufacturer-communications-payors-formulary-committeesand-similar-entities
  16. Chan K et al.  Developing a framework to incorporate real-world evidence in cancer drug funding decisions: the Canadian Real-world Evidence for Value of Cancer Drugs (CanREValue) collaboration. BMJ Open. 2020 Jan 7;10(1):e032884. DOI: 10.1136/bmjopen-2019-032884
  17. Clausen M. Use of real-world evidence in cancer drug funding decisions in Canada: a qualitative study of stakeholders’ perspectives. CMAJ Open. 2020 Nov 24;8(4):E772-E778. doi: 10.9778/cmajo.20200118.
  18. EU Framework for RWE Real World Evidence and Regulatory Decision Making Joint CSPS and Health Canada Workshop Presented by Dr Peter Arlett 3 December 2019 Head of Pharmacovigilance and Epidemiology, EMA (http://www.cspscanada.org/wp-content/uploads/ARLETT-Peter-Session-1-European-Medicines-Framework-for-RWE.pdf )
  19. LSE. RWE in Europe Paper V Policy challenges around Real World Evidence adoption in Europe. Dec 2018 (https://www.lse.ac.uk/business-and-consultancy/consulting/assets/documents/rwe-in-europe-paper-v.pdf )
  20. Bullement A, Podkonjak T, Robinson MJ, Benson E. Real-World Evidence Use in Assessments of Cancer Drugs by NICE. Int J Technol Assess Health Care. 2020; doi:10.1017/S0266462320000434
  21. Flatiron press release 14 July 2020. NICE Partners with Flatiron Health to Develop Real-World Evidence Research Methodologies. https://flatiron.com/press/press-release/nice-partnership-2020/ accessed 13 Feb 2021.
  22. Berger ML et al. Good practices for real-world data studies of treatment and/or comparative effectiveness: Recommendations from the joint ISPOR-ISPE Special Task Force on real-world evidence in health care decision making. Value Health. 2017 Sep;20(8):1003-1008.  doi: 10.1016/j.jval.2017.08.3019. 
  23. Orsini LS et al. Improving Transparency to Build Trust in Real-World Secondary Data Studies for Hypothesis Testing-Why, What, and How: Recommendations and a Road Map from the Real-World Evidence Transparency Initiative. Value Health. 2020 Sep;23(9):1128-1136. doi: 10.1016/j.jval.2020.04.002.
  24. Roberts MH and Ferguson GT. Real‑World Evidence: Bridging Gaps in Evidence to Guide Payer Decisions. PharmacoEconomics Open 2021;5:3-11 https://doi.org/10.1007/s41669-020-00221-y
  25. Oortwijn W et al. How to Deal with the Inevitable: Generating Real-World Data and Using Real-World Evidence for HTA Purposes – From Theory to Action. Int J Technol Assess Health Care. 2019;35(4):346-350. doi: 10.1017/S0266462319000400. 
  26. “There is a difference” from Big data in healthcare (2018), available at: catalyst.nejm.org/doi/full/10.1056/CAT.18.0290
  27. Dash et al. Big data in healthcare: management, analysis and future prospects. Journal of Big Data 2019;6:54. journalofbigdata.springeropen.com/articles/10.1186/s40537-019-0217-0

Image by Erika Varga from Pixabay

The transparency conundrum

True transparency requires more than making information available.

According to Rio Tinto, it was a ‘misunderstanding’ with the local Indigenous community that resulted in the destruction of 46,000 year-old sacred sites in May this year. The company had Government approval and stakeholders had been informed. All boxes checked. Obviously, that was not enough.

Since 2015, the Australian Government has been a member of the Open Government Partnership (OGP), committing to support the goals of increasing the transparency and accountability of government. The first OGP Global Report (May 2019, page 20), identifies these as generally lacking in health procurement decision-making in the 78 nations involved. In this article, I assume procurement includes the registration and reimbursement of therapeutic interventions by the Government on behalf of Australian taxpayers. My thesis being that openness may not necessarily be transparent, using two examples to illustrate.

Example 1. The presentation of options by the Therapeutic Goods Administration (TGA) for which type of medicines would have evaluation status made public.

Option 1: maintain TGA’s current publication arrangements [to not make public]

Option 2: list all applications accepted for evaluation

Option 3: list all applications at two different time points

Option 4: list applications of innovator medicines of highest public interest, but not generic or biosimilar medicines

The explanations given for providing Options 3 and 4 include: ‘Generally, there is less public interest in whether a generic or biosimilar medicine is under evaluation by TGA in Australia’, and ‘Earlier publication of generic or biosimilar approvals prior to ARTG entry allows more transparency of forthcoming competition to sponsors of originator medicines and potentially, purchasers of biosimilar and generic products.’

The TGA has been in the unenviable situation of neither being able to confirm nor deny whether a particular medicine is currently in the evaluation process. Other similar jurisdictions, such as Europe and Canada publish this information. It is a good initiative. The particular drivers of this 2019 consultation on transparency were: from the TGA side, inconsistencies with other agencies, especially evident during joint evaluations of new molecules; from the innovator sponsor side, more time to initiate legal proceedings against potential patent infringing generics/biosimilars and avoidance of liability for damages by the Commonwealth; and from generic/biosimilar applicants, maintain the status quo.

The inclusion of Options 3 and 4 show that there is an awareness of the potential negative commercial/financial implications to applicants and the Government of originator sponsors knowing the timing of registration of a generic or biosimilar. Is this made clear? Does ‘less public interest’ justify being selectively transparent?

Example 2. Measures associated with the ongoing Medicines Australia-Commonwealth Strategic Agreement PBS process improvements include the PBAC preference for greater transparency to be introduced in Public Summary Documents (PSDs) through a standardised approach to redactions.

Objectives of proposed PSD Changes – PBAC (Medicines Australia, Feb 2020)
•Increase transparency of PBAC’s decision-making processes.
•Publish PSDs in an efficient and consistent manner through establishment of a standardised approach to redacting information.
•Provide consumers with access to information to assist with making decisions about their individual health needs.
•Increase the public’s understanding about PBAC decisions.
•Align Australia’s practices with leading international jurisdiction approaches*.

*This refers specifically to the additional, and unexpected, push for PSD inclusion of all clinical data provided in PBAC submissions, irrespective of the publication status nor commercial impact. While no other jurisdiction currently requires it, other countries are considering in response to calls for increased pricing transparency (WHO, WHA, 2019).

While appropriate that the PBAC want to clearly indicate how each recommendation was reached, what is the point of providing even more information in PSDs when the existing format is, realistically, inaccessible to anyone without disease and technical knowledge and an appreciation of the meaning of uncertainty in this context? Inclusion of a summary in lay-man’s language in PSDs would go much further towards openness. It is like providing a patient with a copy of his/her CT scan and the report without an explanation as to what it means.

Pew Research Center, August 2019,
“Trust and Mistrust in Americans’ Views of Scientific Experts, Page 24

Do we want people to be able to understand the information OR is the fact that it is openly available more important?

According to a 2019 Pew Research survey, it is the later. Americans confidence in scientific findings are most influenced by open public access to data and independent committee reviews. There appears to be no similar survey providing Australian opinions.

Scientific journals are strongly encouraging authors to make datasets open source at the time of study publication with the intent of it becoming a mandatory requirement. Should sponsors of reimbursement submissions expect anything different? It is notable that journals target technical audiences, while PSDs are ostensibly for consumers (patients, healthcare professionals, competitors).

Before public release of information, consideration should be given as to who will use it, for what purpose(s), and the most appropriate release format, which is what the TGA and PBAC have undertaken via consultation in the examples provided. Is it enough?

Note: There is an opportunity to voice your opinion on ‘What does open government mean to you’ as input to the Third National OGP Australian Action Plan 2020-2022.

Image source: Jim Pavlidis

Who should input to HTA decision-making?

Patient engagement

Figure 1: Based on Gagnon 2011 search strategy

Patient input to HTA decision-making as a subject in the literature has peaked and plateaued in recent years (Figure 1). As a consequence of research and initiatives, such as those noted at the end of this article, the rationale for patient involvement in HTA is now well understood.

However, there is still a way to go in implementation.

Wale and Sullivan (2020) explore how patient input was reflected in the final documentation of HTA decisions by NICE, SMC and CADTH for a chronic disease and a cancer treatment considered during 2016-17. They discuss the influence of where in the process input is sought; how it is communicated (directly or written); by whom (individual patients or patient advocacy group); as well as the content of (clinical or realities of the disease beyond data); on the level of impact achieved. These and other opportunities to better involve patients in the HTA process were identified by Biointelect during research and interviews with NICE, SMC and CADTH, as well as PBAC stakeholders, for the BMS commissioned ‘Broadening the Evidence Report‘ (June 2019) (Figure 2).

In terms of the PBAC, Public Summary Documents (PSDs) currently include ‘Consumer comments’ in the Section titled ‘Consideration of the evidence’. The number and source of submissions received are noted, usually along with a summary of key points and a comment on usefulness to the Committee. No direct feedback is given to those who provide input. This may change with the most recent PBS Listing Procedure Guidance (V 1.7, April 2020) noting that the Consumer Input process is ‘under review’. The 2019 establishment of a designated ‘Consumer Evidence and Engagement Unit‘ in the Department of Health to ‘focus on expanding opportunities for consumers and patients to be central to ensuring that robust decision making can also support better transparency and understanding of HTA decision making processes‘, is likely involved in such changes. The recently launched Medicine Status Website was the product of considerable collaboration within and outside the Department.

Figure 2: taken from Broadening the Evidence Report (June 2019)

Time for the public voice?

Street and colleagues (2020) say the terminology used to describe community participation in HTA, ‘is contested and frequently confusing‘. Depending on the jurisdiction, the terms: patients and consumers (with and without the advocate suffix), public, lay members, customers, clients, and citizens are used, often interchangeably. The article identifies the lack of a specific definition of the ‘public’ in the context of HTA, and propose the following:

‘A community member who holds the public interest and has no commercial, personal, or professional interest in the HTA process.’

This leads to the question, are ‘public’ and ‘patient’ engagement currently being viewed as the same thing during HTA processes? The patient perspective is lauded as it provides insights that clinical data often does not. That is invaluable to decision makers. However, where is the public voice, or more importantly, public values in the decision? Street (2020) notes that there is little empirical evidence on which to determine how different patient and public values are in this context. Patients may have a higher tolerance of risk, and, understandably an interest limited to a specific population and treatment. The public preference is towards equitable distribution amongst all patient groups, and the utilitarianism aim to maximise the well being of all.

In acknowledging this potential difference, UK’s NICE has established a Citizens Council. The Council is made up of 30 members of the public representative of UK demographics. It meets once a year and provides a perspective on relevant moral and ethical issues. The Council’s recommendations are incorporated into NICE principles and, where appropriate, into NICE’s methodology.

In the absence of the public perspective, do we assume that consideration of public values in HTA-based decision-making is the role of elected officials, in this case, the Minister of Health and Cabinet, who are the ultimate arbitrators of how to spend taxpayers funds? This will become increasingly important to understand as the pressure of unsustainable demands, driven by an ageing population and new technologies, require further rationing of healthcare costs.

  • Wale JL, Sullivan M. Exploration of the visibility of patient input in final recommendation documentation for three health technology assessment bodies. International Journal of Technology Assessment in Health Care. 2020:1-7. https://doi.org/10.1017/S0266462320000240.
  • Street J, Stafinski T, Lopes E, Menon D (2020). Defining the role of the public in Health Technology Assessment (HTA) and HTA-informed decision-making processes. International Journal of Technology Assessment in Health Care. 2020;36:87–95. https://doi.org/10.1017/S0266462320000094. Note: The Supplement provides a country-by-country summary of public and patient involvement in HTA and HTA-decision making and provides an excellent overview.
  • Gagnon MP, Desmartis M, Lepage-Savary D, et al. Introducing patients’ and public’s perspectives to health technology assessment: A systematic review of international experiences. International Journal of Technology Assessment in Health Care. 2011;27:31-42.
  • Hunter A, Facey K, Thomas V, et al. EUPATI Guidance for Patient Involvement in Medicines Research and Development: Health Technology Assessment. Front. Med. 2018;5:231. doi: 10.3389/fmed.2018.00231
Patient engagement initiatives
  • Values and Standards for Patient Involvement in HTA (HTAi 2014);
  • European Patients’ Academy on Therapeutic Innovation (EUPATI). A public-private partnership of industry, academia, not-for-profit, and patient organisations published guidance (Hunter 2016);
  • the PREFER partnership guidelines for industry, Regulatory Authorities and HTA bodies on how and when to include patient perspectives on benefits and risks of medicinal products; and
  • US National Health Council‘s focus on ensuring the voice of the patient and patient organizations are an integral part of the value discussion.
  • the Patient Voice Initiative, established in 2015 (link to 2017 Report);
  • Medicines Australia commenced a Patient Advocacy Working Group in 2019;
  • Tip sheet for consumers to make comments to the PBAC.


The current review of NICE is a useful foil upon which to consider the announced refresh of the Australian National Medicines Policy. Both are being driven by concern that access processes are not keeping pace with biomedical innovation.

The table below provides a side by side comparison of the two appraisal systems and HTA reimbursement environments. Of interest is the relatively recent increase in NHS responsibility and focus on overall budget impact of reimbursing a new technology.

The need to effectively manage uncertainty whilst still making decisions is a key challenge of providing timely access, especially as patient populations are becoming smaller and more targeted.

EstablishedNICE became a legal entity in April 1999.
First guidance published was an assessment of zanamivir for flu.
The PBAC evolved from the Formulary Committee and became an independent statutory body under s 101 of the National Health Act (NHA) in 1953.
Cost-effectiveness was introduced into the NHA in 1998, with the first PBAC Guidelines published in 1992.
Responsible forTechnology appraisals (TAs) that assess the clinical and cost effectiveness of health technologies (pharmaceuticals, biopharmaceuticals, procedures, devices, diagnostic agents) and highly specialised technologies (HST). The primary role of the PBAC is to recommend new medicines for listing on the Pharmaceutical Benefits Scheme (PBS), taking into account the medicine registration, its clinical effectiveness, safety and cost-effectiveness compared with other treatments.
Cost Recovery FeesNew regulations came into effect 1 April 2019 allowing NICE to charge for appraisals. A single TA costs approximately US$ 156 K for large, and US $40 K for small companies.Significant increases from 1 July 2019, with the full process to listing, including one major submission, costing approximately US$ 300 K. A second stage is to be implemented from July 2020 but may be delayed.
Current review Review of Methods and Processes
Announced July 2019
Federal Government review of the National Medicines Policy. Formerly announced October 2019
Review ScopeEvaluation methods of technology appraisals and highly specialised technologies (HST).   The QALY as a decision tool is not included with NICE indicating that changes to methods will only occur if there is a compelling case.Consider whether the policy in its current form continues to meet the needs of Australians.  
Task force established, Terms of Reference pending. On-hold as resources directed to COVID-19.
StakeholdersSubstantial interest from external stakeholders and interest groups.    Wide-spread interest and involvement of health stakeholders, patient and consumer groups.
Review Concerns – access and impact on patients
-affordability in the NHS
-clearer criteria for HST
-improved representation of the patient view
-inclusion of non-health benefits
-success of the life sciences sector
-timely and equitable access to new, innovative therapies
-affordability (Govt, community, patient)
-supply chain (shortages, rebates)
-integration of patient voice
-viable medicines sector
Average evaluation16.0 months (2009 – 2016)4.5-month cycle from submission to PBAC consideration
Average time registration to reimburse (2012-2017)*4.2 months13.8 months
% NCEs registered, subsequently reimbursed (2012-2017)* 84.3%
(29% not funded for full licence, and 5% only recommended for the Cancer Drugs Fund).
PricingVoluntary Pricing and Access Scheme (VPAS) came into effect in January 2019, replacing the Pharmaceutical Price Regulation Scheme (PPRS). VPAS promises more and faster NICE appraisals for NCEs and speed up of appraisals for non-cancer medicines to be in line with cancer medicine timelines. Following loss of the Pharmaceutical Benefits Pricing Authority (PBPA) in 2014, the Department of Health has become the sole arbitrator of pricing. Reforms in 2015 introduced statutory price cuts at 5, 10 and 15-year anniversaries from PBS listing targeting patented medicines.
Last major reviewIntroduction of end-of-life criteria and formation of the Cancer Drugs Fund (CDF) that relaunched under NICE in 2016.Strategic Agreement 2017-2022 – Streamlining PBS Processes in progress.
PBAC Guidelines Version 5.0 published September 2016.
Parliamentary level reviewsAn inquiry by the All-Party Parliamentary Group (APPG) on Access to Medicines highlighted demand for wider value thresholds and modifiers, better management of uncertainty and improvements in the use of data and real-world evidence be brought into the methods. Senate Inquiries into the Supply of Chemotherapy Drugs (2013); Availability of New, Innovative and Specialist Cancer Drugs in Australia (2015) and Funding for Research into Cancers with Low Survival Rates (2017). Recommendations accepted and implemented by Goverment to varying degrees.
US trade dealsUK-US post-Brexit trade agreement under negotiation.
While US propose to redesign the NICE process, NHS England has been taking steps to increase its role in affordability and to effectively bypass NICE when appraising innovative medicines.
NHS will play a key role in applying pressure on drug prices irrespective of any trade deal.
2005 AUSFTA was instrumental in introducing major reforms to PBS listing process.
Many, such as Independent Reviews and Public Summary Documents have been diluted, or configured to suit DoH purposes. For example, recent call for 100% transparency of clinical data. Others, such as PBAC hearings, continue to be invaluable.
Budget impact
(Ghabri and Mauskopf 2018).
NHS Commercial Medicines Unit responsible for Patient Access Schemes and negotiation of outcomes-based pricing agreements. Introduction of the budget impact test makes a high budgetary impact the reason for manufacturers to reduce their price, either directly or indirectly, by lowering the cost-effectiveness threshold.Since 2010–2011, any recommendation by PBAC that has a financial impact for the Federal Government is considered by the cabinet. The estimated financial impact of a drug on the Australian drug budget is a significant predictor of the PBAC recommendation for reimbursement
Managed EntryReview will consider how to better managing uncertainty around early data and surrogate endpoints, such as collecting RWE while trials pending.Process available since February 2011. Infrequently utilised following outcomes of initial agreements, .
Political InterferenceHealth Secretary Matt Hancock’s recent intervention in funding decisions around cystic fibrosis drugs, Orkambi and Trikafta, shows that NICE’s independence can be compromised.Parliamentarians exert pressure on the Minister of Health (MoH) to enact listings once a positive PBAC recommendation has been made. However, MoH can deflect back onto Sponsor for not meeting the advice (conditions) of the PBAC recommendation. Strong commitment to this ‘independence’ of the PBAC.
Role of consumer and patient advocacy groupsThe Review proposes new responsibilities for external stakeholders, such as delivering quantitative evidence of disease modifiers to be used in assessments and decision making. Disparity of resource and HTA skills within the patient group community to address these issues could risk furthering the inequality and lead to a misrepresentation of some therapy areas.Increasing call, and opportunities for patient voice to be heard during evaluation of new medicines.
Pilot initiative whereby patient groups meet with PBAC members prior to consideration of a relevant submission, is to be formalised. Industry increasingly engage with patient groups, especially around relevance of clinical endpoints and capturing real impact of disease. Government focus on transparency has lead to development and launch of a publicly accessible Medicines Status Website.

References and Notes:

Lanning R. Does NICE hold the cards to drug pricing and reimbursement? PharmaField 30 March 2020.

Boyd N. A NICE Transformation? PharmaTimes Magazine, April 2020, p. 25-26.

*Medicines Australia 2018 COMPARE 4 Report


Health Care Systems 2.0

Add periodic pandemics to the ageing populations, accelerating rates of chronic disease, innovative technologies and price increases that are already challenging the durability of healthcare systems and the phrase, ‘a perfect storm’ comes to mind.


Prior to this recent challenge*, many countries have managed their health care system budgets by using a variety of prioritisation methods:

  • In the case of newer therapies, health technology assessment (HTA) conducted in an environment of accountability and transparency, uses technical judgements of clinical and cost effectiveness to determine the most appropriate use of taxpayers’ money.
  • For existing services, a value-based approach, i.e. stop using resources on items that contribute little patient outcomes, has become popular. Unfortunately, even if conducted systematically this is not so straight-forward. As noted by Professor Vlado Perkovic during a 2014 panel discussion, a survey carried out by the ANZ Intensive Care Society found only 5% of treatments given to an intensive care patient were supported by reasonable evidence. Similarly, in primary care, Mark Ebell and colleagues (2017) identified that just 18% of clinical recommendations in the literature were based on consistent, high-quality patient-orientated evidence.
  • A similar focus on system and process inefficiencies and waste have been successful. For example, the UK ‘Sustainable Development Unit’ measured an 11% reduction in greenhouse gas emissions attributable to the NHS between 2007 and 2015 (in line with targets) while the level of health care activity rose by 18%. By 2017, the financial savings associated with this environmental sustainability (mainly energy, waste and water) rose to £90 (AU$182) million annually (Pencheon 2018). There are no shortage of ideas on ways to tackle inefficiencies and waste (see Bennett 2013), however in healthcare systems under strain, who has the time?
  • In an effort to tackle ‘the crisis of medical excess’, Cochrane Collaboration launched a new field, Cochrane Sustainable Health last year. The aim is to engage its global network to focus on highlighting the overuse of medical diagnostics and treatments which harm people and also consume scarce resources leading to underdiagnosis and underuse in other areas.

Prioritisation decisions will face legal, political, commercial and ethical challenges

The pressure on budgets will escalate prioritisation decisions and as the impact is felt by more people, there will be public concern. Governments must proactively engage patients and the general public in the process. To date, those directly affected by access decisions become involved. This base of public participation needs to broaden to ensure continuing societal agreement with how decisions on spending finite resources are made. Understanding this, Littlejohn and colleagues (2019) have developed an online decision-making audit tool as a way to interact with stakeholders and help generate acceptance for the need for health prioritisation and the resulting decisions.

Get some patients - Yes, Minister - BBC - YouTube

As parodied in the episode of ‘Yes Minister’, The empty hospital (BBC 2007), a hospital with no patients is extremely efficient to run. However, placing a greater focus on preventative health is a better way to reduce demand on health care systems. This could include initiatives to provide education to improve population health literacy combined with Government services focused on the social and environmental determinants of health and incentives for individuals to make responsible health choices .

Health care is big business. There are many vested interests who will lobby hard to maintain or improve their position. Incentives will also be needed to encourage identifying opportunities to improve efficiency and eliminate waste, a priority for those currently in the system. The poor take-up of Health Care Homes is an example of how a good idea can be derailed.

Crunch time?

At that same breakfast, Professor Andrew Wilson ‘said the crunch point that would finally prompt action on health care reform would come when it was recognised that Australia’s states, which have very limited revenue raising capacity, could no longer afford to run hospitals. He was also concerned he said, about the affordability of healthcare for consumers, with rising out-of-pocket expenses, and a two-tiered health system that saw insured consumers able to access more extensive health care through the private system than those who used the public health system, even though 60+% of private health care costs were funded directly or indirectly by the public purse.’

Notes & References

*A prophetic report published last January by the World Economic Forum and Harvard Global Health Institute calculated that the annualised costs of flu pandemics alone are similar to those predicted to be caused by climate change. It recommends businesses (and Governments) to prepare to mitigate the impact of pandemics with the same urgency as they are for climate change.

Cartoon source

Globalisation and the pricing of biopharmaceuticals

As the Sponsor of a new medicine seeking listing on the national Pharmaceutical Benefits Scheme (PBS), pricing used to be relatively straightforward once a positive Pharmaceutical Benefits Advisory Committee (PBAC) recommendation had been received.

The Pharmaceutical Benefits Pricing Authority (PBPA), defunct as of 1 April 2014, would determine the price based on: (1) PBAC advice accompanying the recommendation and, (2) the Sponsor’s pricing submission. Calculation methods were explained in the PBPA Manual (last edition 2009) and, sometimes further discussion with the Pricing Section of the Department of Health (DoH) was required to finalise, for example, exact amount of cost offsets etc. From a company perspective, as long as you stayed above the specified ‘global floor’, the local price was a matter for the local affiliate.

Prior to August 2007 reforms, when the PBS was split into two formularies (F1, F2) based on the availability of a generic brand following lost of exclusivity, the ‘reference pricing method’, was most commonly used. This is where drugs are priced based on their relative safety and efficacy, as determined by the PBAC and documented in Therapeutic Relativity Sheets. Where drugs are considered to be of similar efficacy and safety, the lowest priced brand or drug sets the benchmark price (‘cost-minimised’).

The ‘cost plus method’, where a gross margin of 30% is considered reasonable based on costs declared by the Sponsor in the PB11b form, became applicable to a larger range of drugs (F2, multiple brands) after the reforms, with reference pricing only applying to F1 (single brand, on patent) drugs.

A Price Disclosure policy was introduced for F2 medicines. This was necessary for the Government to realise the savings when generic brands cost-minimised to originator brand prices. Generic companies were using the excess margin above cost, due to lower development investment, to incentivise prescribers and pharmacists. Various iterations to price disclosure processes have been extremely effective in finding the lowest viable price. This policy is almost wholly responsible for over 30% of PBS services currently being below the general patient co-payment ($40) and in no need of Government subsidy.

Continuing adjustments to policies and Health Technology Assessment (HTA) evaluation guidelines maintained Government pressure on prices and risk mitigation. This resulted in the need for Special Pricing Arrangements (SPAs) and Risk Share Agreements (RSAs), respectively. Rebates of 100 % are now the norm. When ‘effective’ (i.e. real) prices being paid for new medicines are lower than the global floor these must be confidential otherwise long delays to PBS listing are likely. This is because of the increasing number of countries who base their local drug prices on those paid by a basket of countries (international reference pricing). This approach is proposed in the USA as part of the Pelosi bill.

Where a comparator is listed under a SPA, preparing an economic evaluation has become a guessing game as to the effective price. Needing to use the published list price disadvantages a new medicine in the evaluation process.

Things became more complicated when the PBS Access and Sustainability Package, introduced in mid-2015, included a 5% price cut to all F1 brands listed for five or more years. As the Table shows, F2 is a smaller source of potential savings for the Government. Anniversary cuts were extended to include 10 and 15 year listing marks as part of the 2017 Commonwealth-Medicines Australia Strategic Agreement.

Affiliate pricing of a new medicine is increasingly centralised by companies as Government payers push to use taxpayers’ money wisely. In both situations, prices expected, based on perceived and relative value, may be very different to those modelled on the available clinical evidence.

Collaboration between payers and pressure for reform (2), including transparency of real prices, may result in pricing becoming very simple if companies choose to set only one global price.

(1) Impact of introduction of value-based pricing in Germany (2) See articles by Neil Gubert on cross-border collaboration and the Commonwealth Fund on drug pricing reform.

Photo source: BIG Maze, National Building Museum, Washington DC, 2014

Surviving Community Pharmacy

As the purchasing of medicines moves towards a commodity model in Australia, with off-patent (F2) molecules a marketplace, and ‘me too’ R&D programs and associated payer behaviour creating as much in the patent (F1) space, providers all along the supply chain are being impacted.

What are Community Pharmacists, as one of the key groups affected by stagnation of the PBS, doing to remain viable?

Community Pharmacy Programs and Services

The first Community Pharmacy Agreement (CPA) in 1990 between the Commonwealth and the Pharmacy Guild, representing pharmacy owners, introduced a new remuneration framework for pharmacies supplying PBS medicines and created incentives to optimise the distribution of pharmacy services around the country.

Specific programs and services appeared in the third CPA from 2000, and subsequent CPAs have included an ever-increasing number of remunerated clinical activities. These still represent a small proportion of the overall value of the agreement, but offer more revenue with no increase in costs. Hence, in addition to retaining existing components, such as 30-day dispensing, expansion of service programs are a key feature of negotiations of future agreements. Figure 1 shows the average annual dollar amount a pharmacy can expect to generate from the components of each CPA.

Figure 1. Actual Expenditure minus CSO from 3CPA onwards, divided by number of approved pharmacies. Note: Pharmacies purchase PBS items as stock and only claim this cost back from the Government following dispensing. # not including additional $600 million committed as part of Pharmacy Compact 2017. Sources: AIHW, DoH, ANAO, Pharmacy Guild.

This is despite continuation of Government payment for programs being contingent on demonstrating clinical and cost-effectiveness. A 2017 evaluation by HealthConsult was unable to make conclusive assessments on the benefit of Dose Administration Aids, Staged Supply, MedsCheck, Diabetes MedsCheck and Home Medicines Reviews conducted by pharmacists due to a lack of robust data. Further research is required in this, currently, evidence free zone.

The Pharmacy Guild and Instigo initiated the Health Advice Plus program in 2016 to assist pharmacies to maximise the opportunities and revenue afforded by the CPA programs. Based on 1,000 pharmacies, they recently reported that, of those pharmacies : 87 % have a private consultation room; 44 % are maximising their clinical Intervention potential; only 28 % are maximising MedsChecks with an average of 12 a month (up to 20 permitted); 56 % have not reached their DAA cap level (individually calculated based on previous 12 months); and 72 % are currently providing vaccination services.

The Aged Care Royal Commission Interim Report prompted this month’s decision by the COAG Health Council to name “Medicine Safety” as Australia’s 10th National Health Priority Area. The report also notes the need for the Federal Government, Pharmacy Guild and Pharmaceutical Society of Australia (PSA) to consider the effectiveness of the Residential Medication Management Review program and make it stronger and more accessible. A timely opportunity for pharmacy as the 7CPA negotiations continue.

From supply function to pre-primary healthcare

The Guild and PSA have recognised the need to broaden the role of community pharmacy and are actively working to expand the sectors offerings for treatment of minor aliments and preventative health (vaccinations, health checks, risk assessments, self-care, lifestyle issues).

Source: https://www.tga.gov.au/scheduling-news (accessed 301119)

From a policy and revenue perspective, this is also a sweet spot that the Government is prepared to support in the face of a healthcare system showing the strains of an ageing population, increasing prevalence of chronic diseases, higher public expectations and rising costs of new technologies. According to a RACGP report, General Practitioner workloads, inadequate Medicare rebates and decreasing numbers of graduates choosing the speciality, with numbers in training dropping by 20% year on year since 2016, will not see an improvement in the foreseeable future.

This is a gap that community pharmacy is driving to step into. One means is via down scheduling of Prescription Only medicines to Pharmacist Only (a process managed by the TGA) which has the added value to Government of reducing visits to the GP (capacity and expenditure benefit) but also the cost of these medicines moves to the patient’s pocket from the PBS (if listed). Table 1 shows the products most likely to be re-scheduled in the near future.

Meanwhile the debate about extending pharmacists’ scope of practice to include prescribing of Prescription Only medicines continues.

Figure 2. Pharmacy Mark-up: the increase in the pharmacy mark up between 2014-15 and 2015-16 is a result of the introduction of the Administration Handling and Infrastructure fee, replacing the previous percentage based mark-up. Source: https://www.pbs.gov.au/statistics/expenditure-prescriptions/2015-2016/cpa-exp-rpt-2015-16.xlsx (accessed 301119)

De-linking dispensing fee from medicine price

As successive Price Disclosure policies dropped the average price of many frequently dispensed former block buster molecules for chronic conditions, community pharmacies watched their revenue similarly plummet. Coupling payment for completing the same dispensing process to the price of a product was no longer such a good idea. The 6CPA moved compensation for dispensing from a percentage of product value to a flat fee. The Administration, Handling and Infrastructure (AHI) fee has stabilised the impact of price disclosure. Figure 2 shows the impact of this changeover comparing Government payment in the last year of the 5CPA with that in the first of the 6CPA when the AHI was introduced. Unlike PBS listed medicine prices, the AHI is indexed annually.

The 7CPA is due to commence in July 2020. Negotiations continue between the Australian Government, Pharmacy Guild and PSA.

Image source

3 Reasons why Medicines Shortages will continue

Mandatory reporting of medicine shortages† from 1 January this year has seen new notifications to the Australian Therapeutic Goods Administration (TGA) increase by over 400% (n=1,455 for 2018-19) compared to the previous period (n=274).  Currently, over 10% of the drugs on the TGA ‘list’ are classified as critical with the potential to have a life-threatening or serious impact on patients. 

Miljkovic N et al. Results of EAHP's 2018 Survey on Medicines Shortages. Eur J Hosp Pharm 2019;26:60-65.
Miljkovic N et al. Results of EAHP’s 2018 Survey on Medicines Shortages. Eur J Hosp Pharm 2019;26:60-65.

The FDA Drug Shortages Task Force Report, released today, compared drugs that went into shortage from 2013 to 2017 to similar drugs that did not go into shortage. Drugs in shortage were more likely to be relatively low-price, in particular genericised sterile injectables, including anaesthetics, chemotherapy and pain treatments. Australian hospital (2017) and European Association of Hospital Pharmacists (EAHP) 2018 Medicines Shortages surveys reported similar groups of drugs most often impacted (Figure 2 from the report shown).

Shortages can and do have a significant impact on patient care, especially when there is little or no notice. Required reporting provides authorities, health care professionals and patients time to prepare. Unfortunately, this measure, like those taken elsewhere in the world will not reduce the problem because:

(1) Commodity pricing policies

Treating drugs as commodities exposes them to the rigours of supply and demand.

Although demand is increasing globally, due to ageing populations and availability of more effective medicines, the FDA Task Force found ‘prices rarely rose after shortages began, and during shortages, production typically did not increase enough to restore supply to pre-shortage levels.’ This points to a ‘broken marketplace‘, where scarcity does not result in the price increases predicted by basic economic principles.

RELATION BETWEEN PRICING POLICY AND MEDICINE SHORTAGES. From https://publicaties.vereniginginnovatievegeneesmiddelen.nl/magazine/mm2019uk/medicines-for-tomorrow/
RELATION BETWEEN PRICING POLICY AND MEDICINE SHORTAGES. From https://publicaties.vereniginginnovatievegeneesmiddelen.nl/magazine/mm2019uk/medicines-for-tomorrow/

As the graph shows the relationship between introduction of a preference policy in the Netherlands, where only the cheapest medicine for a specific disorder is reimbursed, has resulted in a greater proportion of these medicines being in shortage.

Companies seeking to enter the generic marketplace may not have the manufacturing history and quality safeguards in place to ensure sustainable supply. This is despite providing guarantees to Governments who preference suppliers based on price.

The production and supply of pharmaceuticals is regulated by Good Manufacturing Practice (GMP), as prices decrease, companies may consolidate manufacturing facilities to maintain profitability. Hence, those medicines with the most competition will be the most vulnerable to shortages.

(2) Expansion of reference pricing

As more Governments, including the US (see Pelosi Lower Drug Costs Act 2019) introduce reference pricing into their drug procurement policy mix, others are losing their appetite for the quid pro quo of access to new products at ‘hidden’ prices. The Dutch Health Minister has recently called to ignore the confidentiality of pricing agreements, while the Australian pharmaceutical industry was rocked last year by the presentation of a poster listing rebates by ATC code at an international conference. In addition, changes to supply chain rebate arrangements continue to be progressed by the Australian Government despite concerns around the impact on availability of new drugs.

There is a real possibility that companies will set a price for a product and that will be the price, irrespective of country. This will restore the marketplace but patients in countries that have come to expect, and demand, substantial discounts on new medicines will be left waiting for access.

(3) Solutions to date have been ineffective

TGA Annual Performance Statistics. Table 80. https://www.tga.gov.au/book-page/15-reporting-medicine-shortages
TGA Annual Performance Statistics, 2018-19, Table 80.

The EAHP 2018 survey found that medicines shortages have become more troublesome since the last survey in 2014, with 91.8% respondents reporting shortages impacting patient care. The FDA Task force found that the number of ongoing drug shortages has been rising, and that their impact is likely underappreciated. Note: the FDA infographic shows shortages averted, the how likely includes requested intervention by other suppliers.

Manufacturing issues continue to be the most common reason for supply shortages. As reported in 47% of cases to the TGA in 2018-19; and 37%, plus 27% other quality issues, to FDA in 2012. Medicines are not commodities.

The FDA conclude that: ‘The root causes of shortages involve economic factors that are driven by both private- and public-sector decision-making.’

Private sector decisions serve business interests. While public sector decisions aim to benefit societal, and political, interests. The Task Force suggests quality ratings of manufacturing facilities and new contracting approaches with incentives as possible levers.

In the meantime, there will always be someone seizing the day, in this case, a plethora of global wholesalers!

Notes: † Defined as when supply of a medicine in Australia will not, or will not be likely to, meet the demand for that product in Australia any time within the next 6 months; *Reportable medicines are Registered Schedule 4 (Prescription Medicine) or Schedule 8 (Controlled Drug) products, and certain non-prescription medicines considered critical and listed in the relevant legislative instrument. Chain photo from Google Images

The PBS goes to Canada

Taxpayer funded national programs providing universal access to prescription drugs are longstanding policy in Australia, NZ and UK.

Considering the establishment of a similar program in Canada, where largely private province-based schemes* currently operate, presents an opportunity to consider what is lost when these programs are the sole focus of pharmaceutical policy.

Advocates of such schemes point to cost-effective product selection and savings generated by lower and reducing generic and brand name prices. The principles of universality, equity of access, safe & appropriate prescribing, and value for money are paramount.

The Minister of Health, the Hon Greg Hunt MP, regularly commends the foundation role that the PBS plays in the Australian health system. While such programs have reduced both overall expenditures and the average price paid per drug, like all policies, they often have unforeseen repercussions.

In her recent essay, Kristina Acri examined the potential unintended consequences of a publicly-funded national Pharmacare program in Canada. She reviewed the experience of New Zealand, Australia and United Kingdom to identify those aspects where reality has not matched the promise:

  • Drug supply is put at risk by sole tendering & reference-based pricing policies, as well as use of cost-effectiveness analysis. For off-patent medicines, seeking the lowest price within a guaranteed supply framework should protect against shortages. However, whether appropriate or not, global factors and profit seeking influence where available drug supplies are sent. Dealing with drug shortages are an increasing occurrence for pharmacists, clinicians and patients;
  • The scheme may not be universal. In Australia, 50 % of total drug expenditure is directly borne by patients, one of the highest cost-sharing rates in OECD countries after the far Northern European countries (ranging from Sweden 48 % to Iceland 58%) (OECD, 2015). Before introducing the scheme, how medications will be selected and what the costs will be to patients and taxpayers must be fully understood; and
  • The likely impacts on access, health outcomes, costs, and innovation for patients, physicians, the market and the economy should be examined.
Infographic, Globerman & Barua (2019)
The Patented Medicine Prices Review Board (PMPRB) is an independent quasi-judicial Federal agency established in 1987 under the Patent Act. The PMPRB ensures prices of patented medicines sold in Canada are not excessive.

In a similar review, Crosby et al. (2016) discuss that to control spending on universal schemes, access to new drugs is rationed, downward pressure is imposed on prices, and costs are pushed to individuals. They conclude that introducing a universal scheme to Canada would increase public spending, reduce patient choice to only subsidised medicines, delay access to new drugs and lead to inequities in coverage compared to the existing situation.

Globerman and Barua (2019) discuss the impact of the Health Canada proposed amendments to the Patented Medicine Prices Review Board (PMPRB) procedures which will include the evaluation of the cost effectiveness of drugs by CADTH, into the determination of maximum allowable prices for patented drugs. They note that that these changes ‘seem to be focusing more on controlling expenditures on pharmaceuticals than on ensuring that Canadians have access to new therapies’. They advocate for an efficient level of expenditures on pharmaceutical drugs, not simply containing expenditures on those drugs.

‘In principle, cost-efficiency analysis is a technique for comparing the social benefits of a drug relative to its cost.

In practice, the conventional application of the technique arguably leads to an underestimation of the social benefits of new drugs.’

Despite these concerns, last month legislation introduced by Health Canada was passed and paves the way towards a PBS Canadian-style! ‘Government of Canada Announces Changes to Lower Drug Prices and Lay the Foundation for National Pharmacare.’ News Release, August 2019.

*A third of Canadians are covered by public drug plans which vary from province to province. Most are covered through their workplace by private insurance plans. Another 10% of Canadians have no coverage at all (Canadian Health Coalition, 2017).

References: (1) Kristina M. L. Acri (née Lybecker) The Unintended Consequences of National Pharmacare Programs. The Experiences of Australia, New Zealand, and the UK. The Fraser Institute, December 2018. Vancouver BC, Canada. (2) Steven Globerman and Bacchus Barua. Pharmaceutical Regulation, Innovation, and Access to New Drugs. An International Perspective. The Fraser Institute, January 2019. Vancouver BC, Canada. (3) Crosby L, Lefebvre C, Kovacs-Litman A. Is pharmacare the prescription Canada needs?. UWOMJ Drugs 2016;85(1):23-5.

Image source

The fate of ‘fee for service’ GP visits

Without structural change to the way in which health care is delivered and financed, the Australian health care system will continue to struggle to meet contemporary needs and expectations of its citizens.

Mitchell Institute Policy Issues Paper ‘Australian Health Services: Too complex to navigate’ February 2019


An analysis of previous reviews of Australia’s health service was undertaken by the Mitchell Institute early this year. The authors report successive reviews concluded that existing funding arrangements impede the delivery of clinically effective and efficient health care, in particular for chronic diseases.

Consequently, the report, as those that have come before, recommends restructuring of current health financing arrangements to move the focus, and incentives, from high cost reactive healthcare towards investment in prevention services to reduce disease, as well as management of chronic health conditions.

A publicly funded universal insurance system in concert with private health insurance should be retained. However, the basis for remuneration of providers must ‘encourage sustained prevention, early detection and management of chronic disease and coordination of services to reduce duplication and more effective use of information’.


It was on the basis of one such report (Dec 2015) that the Primary Health Care Advisory Group# recommended implementation of a Health Care Home model of care. The intent being provision of a ‘home-base’ (GP practice) for patients with complex and chronic conditions, where the care needed would be coordinated on an ongoing basis.

Stage 1 of the HCH program was to be trialled in 200 GP practices and enrol up to 65,000 patients (later modified to a cap of 12,000) by 30 June 2019. However, at this time only approximately 99 of the 175 registered practices were active with a total of 2,075 enrolled patients. The implementation of the pilot has been roundly criticised, with even the Royal Australian College of GPs withdrawing their support for the scheme (see August 2018 Medical Republic article).

In December 2018, the Government extended the HCH trial for an additional eighteen months to 30 June 2021. At the same time, it was announced that Health Policy Analysis (HPA), an independent organisation had been contracted by the Department of Health to undertake an evaluation of the implementation of Stage 1 in collaboration with experts from the University of NSW and the University of Technology.

Zong et al. 2019, Figure 2

In response to an enquiry, the Department of Health confirmed that this evaluation ‘is progressing well, with the second round of data collection and analysis under way‘. They also noted that ‘the evaluation has been extended to 2021, in line with the extension of the program. HPA will now deliver the final evaluation report to government late 2021. It will be a decision for government on whether to release the findings of the evaluation to a wider audience.’


In 2012, the US State of Massachusetts enacted a law to control health care spending. This was in response to increases such that by 2010, costs of Medicaid and private health insurance for state employees accounted for almost 40% of the state’s annual budget. Key elements of the law include:

  • limiting the growth of health care spending to growth in Massachusetts’ economy as measured by the gross state product (GSP);
  • shifting from fee-for-service care to global payment models;
  • supporting the formation of Accountable Care Organisations and patient-centred medical homes to improve quality and control costs; and
  • promoting greater transparency through expanded public reporting of health care providers’ quality and cost data.

Eight-year results were reported in the NEJM in July (4), and demonstrate that global budgets and financial incentives for improving quality and controlling costs work. On a range of measures those patients treated under terms of the new law (labelled as 2009 Cohort) received better quality care compared to patients in surrounding States (in New England region), and the rest of the US (National). The graph shows the proportion of patients meeting quality standards for preventative care over time between these three groups. The grey vertical line is the introduction of the new law. Overall on the range of measures followed, patients experienced better health outcomes for less cost which must catch the attention of Ministers of Health!

# The Healthier Medicare initiative of the Abbott Government included establishment, by the then Health Minister Susan Ley, of the Primary Health Care Advisory Group to investigate options for the reform of primary health care to support patients with chronic and complex illness, including mental health conditions.

1. Hayes P, Lynch A & Stiffe J. Moving into the ‘patient-centred medical home’: reforming Australian general practice. Journal of Education for Primary Care  2016;27(5):413-15.

2. Song Z and Landon BE. Controlling Health Care Spending — The Massachusetts Experiment. N Engl J Med 2012; 366:1560-1561.

3. Ayanian JZ and Van der Wees PJ. Tackling Rising Health Care Costs in Massachusetts. N Engl J Med 2012; 367:790-793.

4. Song Z, Ji Y, Safran DG and Chernew ME. Health Care Spending, Utilization, and Quality 8 Years into Global Payment. N Engl J Med 2019; 381:252-263.

Image source