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How medicines are approved for use in Australia

In Australia, all medicines must be approved for sale by the Therapeutic Goods Administration (TGA), a division of the Australian Government Department of Health. Manufacturers of prescription medicines usually also apply for the medicine to be subsidised under the Pharmaceutical Benefits Scheme (PBS), in which the Government pays some of the cost of medicines for patients. Learn more about how medicines are regulated, what happens before a medicine reaches the shelves, and why not all medicines are subsidised.

6 min read

Medicines regulation and clinical trials

In Australia, all medicines must be approved for sale by the Australian Government’s Therapeutic Goods Administration (TGA). Companies can also apply for prescription medicines to be subsidised under the Pharmaceutical Benefits Scheme (PBS). If a medicine is subsidised under the PBS, the government pays part of the cost.

All medicines sold or PBS-listed must meet standards of quality, safety and effectiveness. The TGA also decides how freely it should be available – for example, on prescription only, in pharmacies only or sold in supermarkets.

Some of the strongest evidence about the effects of medicines comes from clinical trials, which are research studies conducted to find out how well medicines work. Read more about what clinical trials tell us, and why they are important.

Clinical trials give us information about a medicine’s side effects.

A medicine’s journey from the lab to you

A medicine must pass a series of experiments, trials and approval processes before it is available for sale.

Laboratory experiments
Biochemical and animal experiments to show if a medicine could be useful and safe in humans

Phase I clinical trials
  • test safety and work out the dose
  • about 20–80 healthy volunteers

Phase II clinical trials
  • test how well the medicine works and how safe it is
  • about 100–150 volunteers with the target illness

Phase III clinical trials
  • give more information about how well the medicine works and how safe it is
  • about 1000–3000 volunteers with the target illness

Approval by the Therapeutic Goods Administration (TGA)
Medicines are approved for sale in Australia by the TGA if:
  • phase III trials meet efficacy and safety standards
  • quality manufacturing standards are met

Pharmaceutical Benefits Scheme subsidy
Medicines are approved for subsidy on the PBS by the Australian Government if the medicine is as good as, or better than, other medicines with the same effect (benefit to health) at an acceptable price

Phase IV clinical trials
  • Comparisons with other treatments for the same illness, and use in wider settings than earlier trials
  • Ongoing safety monitoring

The first clinical trial (Phase I) is small, with only 20–80 healthy volunteers. This trial will work out how the human body reacts to the medicine, and what is a safe dose. The next trial (Phase II) involves 50–100 people who have the target illness, and gives information about how well the medicine works and more information about dosage.

If the medicine still looks promising after these early trials, it will be tested in a bigger trial (Phase III). This phase usually involves 1000–3000 people with the target illness. The Government regulatory body, the Therapeutic Goods Administration, looks at the results of Phase III trials when deciding whether to approve a new medicine for use in Australia.

How the Therapeutic Goods Administration approves medicines

In Australia, all medicines must be approved for sale by the Therapeutic Goods Administration (TGA), a division of the Australian Government Department of Health.

Manufacturers of prescription medicines will usually also apply for the medicine to be subsidised under the Pharmaceutical Benefits Scheme (PBS), in which the Government covers a portion of the cost. 

The approval process involves reviewing the evidence to assess a medicine's safety and efficacy, and checking that the medicine meets manufacturing quality standards. When a medicine is approved by the TGA, a decision is also made about how freely available it will be (prescription or non-prescription).

For prescription medicines

The TGA must approve the clinical trial evidence of the medicine's stated benefits and agree that all the recognised side effects are acceptable. The TGA also checks that the information about the benefits and side effects in the product information for those prescribing the drug is accurate and clear. Typically, it takes a long time for a medicine to be developed and to accumulate enough evidence to be approved for sale – perhaps a decade. Many medicines don't make it through this long process because they don't do well enough in the early trials.

For non-prescription medicines 

The rules for TGA approval vary according to safety of the ingredients. These medicines are categorised as lower- or higher-risk according to their side effects and the seriousness of the illnesses they treat:

  • Listed medicines are lower-risk products and show an 'AUST L' number on the label. The TGA assesses their quality and safety, but not their efficacy – the TGA has not evaluated these medicines to see if they work. Listed medicines include products with well-known established ingredients, such as vitamin and minerals, and many complementary medicines that have a long history of traditional use. Read more about how the TGA assesses listed medicines.
  • Registered medicines are higher-risk products and show an 'AUST R' number on the label. The TGA does a comprehensive assessment of their quality, safety and efficacy. This category of medicines includes mild pain relievers, cough and cold preparations, and antifungal creams.

Medicine schedules and availability

When a medicine is approved for sale in Australia, the Therapeutic Goods Administration (TGA) decides how freely it should be available: for instance, prescription-only, pharmacy-only or sold in supermarkets. Government ‘Schedule’ levels are a national classification system that controls how medicines are made available to the public.

Rules Examples

Available for general sale

Can be sold in supermarkets, grocery stores, health food stores as well as pharmacies, with labels about safe use if needed

Cough and cold remedies, non-prescription pain relief such as aspirin and paracetamol, vitamins, herbal supplements

Pharmacy medicine
(Schedule 2)
Available on the shelf at pharmacies. A pharmacist or pharmacy assistant must be available for advice if required Diarrhoea medicines, antihistamines
Pharmacist-only medicine
(Schedule 3)
Only available behind the counter at a pharmacy, but no prescription required. A pharmacist must be consulted Hydrocortisone cream for skin irritations, some asthma inhalers, emergency contraceptive pill
Prescription-only medicine (Schedule 4)

Must be prescribed by an authorised healthcare professional. May be supplied in hospital or purchased from a pharmacy with a prescription

Contraceptive pills, antibiotics, strong pain relievers, heart and cholesterol medicines
Controlled drug
(Schedule 8)
Must be prescribed by an authorised healthcare professional, who may need another permit to prescribe these medicines. May be supplied in hospital or purchased from a pharmacy with a prescription. Very strong pain relief medicines (eg, morphine), medicines used to treat drug dependence (eg, methadone)

In general (though not always), the safer the medicine, and the more minor the condition it is approved to treat, the more freely the medicine is available. A few other factors are also important.

The TGA must consider:

  • safety of the medicine
  • seriousness of the condition it is meant or approved to be used for
  • effects when used correctly
  • side effects
  • likelihood of accidental or deliberate misuse
  • effects if taken accidentally by children
  • effects of taking an overdose
  • potential for people to become dependent on it
  • benefits of making it easily available.

Remember that non-prescription medicines can also have side effects and interact with your other medicines. Some non-prescription medicines have specific rules about their availability:

  • Pharmacist-only medicines are stored behind the pharmacist’s counter. You can buy them only after talking to a pharmacist to make sure they are appropriate and safe for you.
  • Pharmacy medicines are stored on the open shelves in pharmacies. You do not have to seek advice from a pharmacist before buying them, but if you want advice you can ask for it.

Non-prescription medicines that do not fall into either of these categories can be sold in supermarkets, grocery stores and health food stores as well as pharmacies. Complementary medicines are in this group.

In some cases, the amount of medicine in a packet may affect where and how it can be sold. As a result, small packets of some medicines are available in supermarkets and other retail outlets, but packets containing more tablets, or higher doses, are available only in pharmacies – thus, supermarkets can sell paracetamol in packets of 20 tablets or less, but packets of more than 20 tablets can be sold only in pharmacies.

For more information, see TGA: Scheduling of medicines and poisons.

What is PBS listing?

If the Therapeutic Goods Administration (TGA) is satisfied that a medicine meets its standards for manufacturing quality, safety and effectiveness in treating a particular illness, it will approve it for sale in Australia. The manufacturer can then apply for the cost to be subsidised under the PBS.

When a medicine is subsidised under the PBS, you pay a lower price for the medicine and the government pays the rest.

Applications for PBS listing are evaluated by the Pharmaceutical Benefits Advisory Committee (PBAC) to determine if the medicine will provide a health benefit that is better than, or at least as good as, that provided by an existing medicine or with fewer side effects. If so, it will recommend that the medicine be subsidised on the PBS. In most cases, provided that the medicine's price is acceptable to the government, the government will accept this recommendation.

The PBS system is unique because the pharmaceutical company must prove its medicine is worth the price asked of the government. If the pharmaceutical company cannot prove the new medicine is better than an existing treatment, the government will only pay the same price as it does for the existing medicines. If the new medicine has uncertain benefit and a high cost, it is unlikely to be PBS-listed.

The PBAC also makes recommendations about whether new vaccines should be included in the National Immunisation Program or PBS, after advice from the Australian Technical Advisory Group for Immunisation (ATAGI) on the effectiveness of the vaccine in the Australian population.

Useful links

Why does the PBS subsidise a medicine for some illnesses and not others?

The PBAC decides whether evidence from clinical trials for a medicine shows a health benefit for people with a particular illness. The PBS listing will be limited to illnesses and situations where a benefit has been proven.

The PBAC also considers whether the proven benefits of the new treatment justify the proposed cost.

For example, a medicine may have good evidence that it improves survival in lung cancer, but very little evidence in kidney cancer. In this case, the PBS listing might only be for people with lung cancer.

In some cases, the PBAC may also recommend that the medicine be subsidised under the PBS only for certain groups of people if they feel wider use could be unsafe.

6 min read

Date published: 17 January 2017
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