1

The Pharmaceutical Benefits Scheme

and the Australian Guidelines;Implications for the United

StatesDeborah A. Freund, Ph.D., MPH

Vice Chancellor and Provost Office of Academic Affairs

Professor of Public AdministrationSyracuse University

June 10, 2003

2

Plan

The Australian Health Care System and Coverage of Pharmaceuticals in Australia.

The Regulatory Structure for Pharmaceuticals in Australia and the use of Pharmacoeconomics.

What is the Pharmaceutical Benefits Scheme?

The Australian Guidelines. Implications of Pharmacoeconomics for

the U.S.

3

The Australian Health Care System in Brief

Medicare: Natural Health InsuranceUniversal Coverage.Comprehensive Benefit Package.General Practitioners refer to

Specialists.Public Hospitals financed by State;

access to Private Hospitals is through purchase of Private Insurance.

4

Financed through income taxes and state general revenues.

Covers all drugs listed on PBS: outpatient drugs on PBS; inpatient drugs are reimbursed by states; $20 per prescription for workers until

threshold is reached, then free; pensioners, unemployed, social security

beneficiaries pay $2.60 per prescription until threshold is reached, then free.

Medicare: Continued

5

Regulatory Environment

5 Steps for Licensing Drugs and Listing

Them:TGAADECPBSPBACPBPA

6

Pharmaceutical Benefits Scheme (PBS)

A comprehensive, publicly funded insurance program that reimburses pharmacists for the costs of a selected range of prescription drugs. There is a system of co-payments, and drugs are placed in different categories of access, based on evidence of their comparative effective and cost-effectiveness in defined patient groups. Decisions to place new drugs in the PBS are made by the federal health minister on the advice of a statutory committee, the PBAC.

Hill, Suzanne R., Mitchell, Andrew S., Henry, David A. “Problems With the Interpretation of Pharmacoeconomic Analyses: A Review of Submissions to the Australian Pharmaceutical Benefits Scheme.” JAMA 2000 283: pp. 2116-2121.

7

Pharmaceutical BenefitsAdvisory Committee (PBAC)

Makes independent judgement on what drugs to include on PBS.

Comprised of clinicians, pharmacologists and pharmacists.

Reviews company application and ADEC recommendation.

Application to PBAC must include price suggested to Pharmaceutical Benefit Pricing Authority (PBPA).

8

The PBAC receives advice from a technical economics subcommittee comprising individuals with expertise in the fields of health economics, decision analysis, clinical epidemiology, and biostatistics.

The economics subcommittee reviews applications of the “Australian” Guidelines. The methodology underlying the Australian Guidelines is Pharmacoeconomics.

Hill, Suzanne R., Mitchell, Andrew S., Henry, David A. “Problems With the Interpretation of Pharmacoeconomic Analyses: A Review of Submissions to the Australian Pharmaceutical Benefits Scheme.” JAMA 2000 283: pp. 2116-2121.

Pharmaceutical BenefitsAdvisory Committee (cont’d)

9

The Australian Guidelines

The requirement that in addition to companies providing that drugs are safe and efficacious, they also prove the drugs are cost-effective at the suggested reimbursement price [nicknamed the Fourth Hurdle].

Thus, all drugs that are licensed are not listed with the PBS.

Non-listing means drugs are not prescribed.

10

The Australian Guidelines: Purpose

Rationalize use.Contain cost (not at first).Provide a vehicle for arguing for

higher prices: focus on benefits and not just on

“launch price”; results in greater Health Outcomes.

11

Australian Guidelines: Criteria

Adequate Direction but Preserve Flexibility:

generalizable but detailed;permits all forms of economic

evaluation as clinical trials are more prevalent for some areas than others.

12

Australian Guidelines: Key Provisions

Justify Technique:cost minimization;cost-effectiveness;cost utility;cost-benefit not recommended.

13

Include All Direct Benefits and Costs.

Analyze Indirect Costs Separately.Societal and Governmental

Perspective.

Australian Guidelines: KeyProvisions (cont’d)

14

Subcommittee of PBAC Reviews: Pharmacoeconomic analysis.

Comparator: market leader (version 1); replaced in practice (version 2).

Data: clinical trials preferred; other countries permitted; retrospective permitted; modeling, administrative data permitted.

Australian Guidelines: KeyProvisions (cont’d)

15

Final Outcomes preferred, Intermediate permitted.

Open Door to Discuss Listing Decisions.

Burden of Proof is on Company not Government.

Australian Guidelines: KeyProvisions (cont’d)

16

Approval only for restricted indications for which cost effectiveness can be demonstrated: Theory: greater benefits for a smaller

group justify higher price; Example: Norfloxacin for Urinary Tract

Infection. PBAC required authority and use went down; relaxed authority and use went up.

Australian Guidelines: Experience

17

Experience: Review Time

No Delays because PBAC meets 4 instead of 3 times per year.

ADEC and PBS submissions can be made simultaneously.

PBAC decisions in 13 weeks.Deferrals or rejections on some

uncertain drugs.Delays come with marketing

decision not listing decision.

18

Problems

Relationship Between Cases and Effectiveness: dose prescribed in community does not

match clinical trials.Estimating Incremental Benefit in

Comparison to a Comparator: must go beyond a statement of

benefits exceeding health risks to quantify this amount.

19

Problems in Australia

Shortage of Experts: would not be true in U.S.

Appropriate Comparator: what is replaced in practice vs. market leader.

Rarely is a Comparison Made to a Non-Drug.

Drug Development Dead Due to Low Prices.

Access to Appropriate Medicines?Unsuccessful in Containing Costs?

20

Similar Activities in Other Countries

Guidelines in Ontario, British Columbia, New Zealand.

NEJM (2000) statement.U.S. “Guidelines” - Hillman and others

(Annals of Internal Medicine); USPHS report.CCOHTA Canadian Coordinating Office for

Health Technology Assessment - guidelines for guidelines.

Positive lists (formularies) in: Portugal, Sweden, U.K., Japan, Canada.

21

Users in U.S. and Other Countries

Negative Lists: Netherlands.U.S. Managed Care Companies.U.S. Pharmaceutical Benefits in three

tier PBM.Medicaid (Florida).UK: National Institute for Clinical

Effectiveness.

22

Application to United States

Imagine we passed a Medicare Drug Benefit. We would have to decide: what drugs would be reimbursable; what Medicaid would pay; what, if any, co-pay there would be.

We might have to adopt a similar scheme.

23

Application to United States

Now most managed care company plans include three tiers of pharmaceutical coverage: generics, with no co-pay; brand name drugs at a small co-pay; new drugs with a large co-pay.

The three tiers are often determined based on “deals” or price, but not on cost-effectiveness, or based on evidence of outcome.

24

Reflections Based on PossibleUses in United States

Fastest growing employment area in companies.

No cost containment.Beyond patients and physicians? Good

for patient? Improperly used by triple tier

pharmaceutical benefits; no one understands triple tier.

Improper advertising of cost-effectiveness claims.

25

Reflections Based on PossibleUses in United States

Benefits of new drugs/breakthroughs poorly understood and measured.

Industry claims process is unfair.Possibility that drug development

would be impeded.