Australia's spending on the Pharmaceutical Benefits Scheme (PBS) is growing at a rate of approximately 10-15% annually. Is this important, why is it happening, and can we learn lessons from the papers published in this issue of Australian Prescriber?

Prescribing costs are important. As total health spending in this country is capped, the extra money for drugs has to be found elsewhere. Each year we spend approximately $300 million more on drugs than we did in the previous year. This is equivalent to the annual operating costs of two moderate-sized teaching hospitals. Consequently, we have to ask if the money could be better spent elsewhere.

Why are costs increasing?
Some of the rise in costs is inevitable. With an ageing population, many of whom have chronic diseases, more people will receive long-term treatment in the community. In addition, many conditions that previously required hospitalisation are now managed in the community. These trends probably account for the 5% annual growth in total prescription numbers. However, the total cost of prescriptions is rising at 3 times this rate. So, what else is contributing?

Rising drug prices are not the explanation. In Australia, the prices of new drugs on the PBS are set according to their performance, after a searching examination of their cost-effectiveness.1 Thereafter, they are subject to tight price controls.

Drug costs are rising mainly because of doctors changing their prescribing from relatively cheap to more expensive treatments for common conditions. For instance, between 1994/95 and 1995/96, expenditure on proton pump inhibitors, selective serotonin reuptake inhibitors, ACE inhibitors and calcium channel blocking drugs increased by over $140 million. While new and expensive drugs may be cost-effective in selected cases (this has to be shown before listing on the PBS), they may not be cost-effective in other groups of patients, particularly those with milder forms of the disease. Furthermore, if the conditions being treated are common, the total costs of the new drugs will be very high. New drugs are also promoted much more aggressively than older drugs.

What are the most appropriate mechanisms for achieving cost-effective prescribing? If financial rewards are offered to doctors in return for reduced drug costs, will this compromise patient care? The papers in this issue of Australian Prescriber provide considerable insight, but their applicability to Australian practice has to be assessed carefully.

On page 28, the international experience with drug budgets, financial incentives and other restrictions on prescribing is reviewed. In New Zealand, a 'purchaser/provider split' and budgets for drugs and pathology tests are changing the face of general practice (page 30). These papers need to be read carefully by anyone looking for a quick and simple solution to the complex problem of drug costs.

Ill-considered attempts to limit prescribing costs may have perverse effects. Arbitrary policies can result in cost-shifting, decline in quality of care and ethical dilemmas. Those most likely to suffer are those in most need of care _the chronically ill. Several principles must be observed when attempts are made to reduce prescribing costs. As Soumerai and Ross-Degnan explain, prescribing limits should not be applied at the level of an individual practitioner _ the larger the grouping the better. Practitioners must receive timely feedback on their prescribing patterns and this should cover all prescribed drugs and include information on the prescribing indications. Doctors should be given the best available information on the options for changing drugs, including data on comparative effectiveness and explicit information on costs. Prescribing guidelines are more effective if the doctors feel that they own them. If doctors have no input and see them as being imposed, they are unlikely to influence practice. Finally, there is a call for careful research into the impacts of new policies.

What lessons for Australia are contained in these papers?
Australia is unusual amongst developed countries in having a national medicinal drug policy.2 Quality use of medicines is an important part of the policy. This objective has been supported by the Pharmaceutical Health And Rational use of Medicines (PHARM) Committee, the Health Insurance Commission and the Department of Health and Family Services. Much of the activity has been in the form of projects, but, to date, there has been no development of a systematic and effective policy for prescribing.

Feedback of prescribing data in Australia is rudimentary. Like New Zealand, we have the problem of incomplete 'capture' of prescribing data. The philosophy of successive Australian governments towards non-subsidised drugs has been 'if we don't pay for it, we don't need to collect the data'. This is very short-sighted. We need to be able to examine both the intended and unintended effects of restrictive policies. This requires access to good information. Often this will require 'patient level' data linking prescribing to other services, and including information on indications for the services. While this need not include personal identifying information, there will be concerns about 'privacy'. In my view, the public's need for reliable data on which to judge and ensure the quality and outcomes of health care should override these concerns so long as there are reasonable safeguards to protect the interests of patients.

Australian doctors need access to reliable information on the comparative performance and costs of competing therapies for common conditions such as depression, hypertension, peptic ulcer and acid reflux. Such data often exist because this assessment is made before new drugs are listed on the PBS. However, the data are not open to public scrutiny because of secrecy clauses in the National Health Act and the desire of pharmaceutical manufacturers to keep the information 'commercial in confidence'.3 These restrictions are not compatible with modern policy making which involves public health and large sums of public money. They should be changed.

Saving money from Australia's drug bill will be quite difficult. Substantial savings have been made overseas through transferring prescribing from expensive drugs to near identical, but cheaper, equivalents. For instance, in some countries there are two- or three-fold differences in the prices of very similar histamine H2 receptor antagonists or non-steroidal anti-inflammatory drugs. In Australia, pricing is based on performance. Consequently, similar drugs have similar prices. Furthermore, the minimum pricing policy means that reimbursement is at the level of the cheapest version of a particular drug. These rational processes have saved Australia substantial amounts of money, but make it difficult to achieve additional quick savings. For the treatment of hypertension, it would be easier to persuade a doctor to switch from a relatively expensive calcium channel blocking drug to a cheaper version (if one were available), than it would be to change to a low-dose thiazide diuretic, even though long-term outcome evidence currently favours diuretics.

Finally, it is important that initiatives designed to improve the quality of prescribing and reduce costs become an important function of the Divisions of General Practice. Doctors within an average division annually prescribe drugs costing $10_30 million, and some large divisions 'cost' much more than this. It is more realistic and fairer to spread the 'risk' of high-cost drugs, which are vital for some patients, across such a group than to leave it to a single general practitioner, or even a single practice. The large and rising expenditure on pharmaceuticals by many divisions requires new approaches to management and this should be a priority for the future.


  1. Mitchell A, Henry D. Is the drug `cost-effective'? [editorial]. Aust Prescr 1992;15:74-5.
  2. Mant A, Dowden JS. A national drug policy: what does it mean to you? [editorial]. Aust Prescr 1993;16:74-5.
  3. Marley J. Cost-effectiveness: the need to know [editorial]. Aust Prescr 1996;19:58-9.