1 October: cuts deliver $400 million annual saving to taxpayers

1 October 2014 saw the first set of price reductions under the new, further accelerated, Simplified Price Disclosure arrangements. Price reductions applied to 442 forms and strengths of 82 drugs and ranged between 10% and 62%.

As a result of these price reductions, pharmaceutical manufacturers, wholesalers and pharmacies have contributed more than $400 million in annual savings to taxpayers.


Figure 1: Impact of 1 October 2014 Price Disclosure reductions by ATC Group

$1 billion in cuts in the last 12 months

The four sets of price disclosure reductions over the last 12 months (1 December 2013, 1 April 2014, 1 August 2014 and 1 October 2014) have reduced annual funding on affected drugs by approximately $1 billion. This is on top of the significant savings provided in earlier rounds.

PBS costing less for taxpayers

Government spending on the PBS per head of population has continued the decline that started with the inception of Expanded and Accelerated Price Disclosure in April 2012. Out-of-pocket costs have also declined as a result of price disclosure and more drugs being priced below the general co-payment level.


….with Price Disclosure delivering lower prices, and prescription volumes well under control.

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Data Sources: PBS Date of Supply data published on pbs.gov.au, and population estimates from the Australian Bureau of Statistics. Date of Supply data is the only data that provides a reliable comparison over time. Date of Supply data is updated each month however the data used here was accessed in October 2014 and should be subject to only minor future revision.

Parliamentary Budget Office (PBO) Confirms Sustainability of the PBS

The Parliamentary Budget Office’s Projections of Government spending over the medium term confirmed that the PBS not only had grown slower than GDP historically but predicted that it would represent a “negligible” share of government expenditure growth over the medium term (see PBO chart below). It is now time that the consequences of sustained reductions in PBS prices, and the low growth outlook, are properly addressed. All components of the PBS – pharmacies, wholesalers and manufacturers – are under increasing pressure. Now is the time to provide certainty for the industry and for the patients that are so well served by the PBS.


Price disclosure has generated massive savings and the PBS has been shown to be on a sustainable path. A commitment to further timely investment in cost effective new medicines, viable remuneration arrangements for pharmacist dispensing and professional services, and appropriate funding for wholesaling of PBS medicines, are now urgently required. To provide an environment that encourages investment, the sector also requires stability and predictability. Further changes to price disclosure would deter investment and more jobs would be lost. Changes are unnecessary and should not be contemplated.