Economic Evaluation and the Reimbursement of Pharmaceuticals in Australia

A concern to contain the costs of providing equality of access to prescription medicines while preserving health benefits has led most countries to regulate the availability and price of pharmaceuticals. Australia has successfully reduced the price of pharmaceuticals to about 50 to 60 per cent of the world price. However, in the 1980s utilisation and cost increases led to 6 per cent annual growth in real expenditure. In 1993, Australia became the first country to require economic evaluation in support of applications for listing of new pharmaceuticals for reimbursement. Some questions have been raised as to whether economic evaluation techniques are capable of ensuring a more rational diffusion of drugs, given the lack of standard methodology for economic appraisal and the ability of economics to make what are essentially political decisions on rationing. The inclusion of cost effectiveness criteria for reimbursement and pricing may slow down the adoption of new, more expensive drugs. Whether this is efficient depends not only on its impact on costs, but also on health outcomes.