Budget 2018 highlights

The federal budget’s changes to the way the government pays for high-cost PBS medicines will drive a sharp reduction in the headline cost of the PBS – gradually removing most rebates previously paid to the government by medicine manufacturers, according to the Pharmacy Guild of Australia.

The government says the change in the payment arrangements for high-cost medicines will, among other benefits, address pharmacy cashflow issues raised during the recently-completed Review of Pharmacy Remuneration and Regulation.

The change will mean a significant reduction in revenue from rebates for high-cost medicines with special pricing arrangements, reducing PBS revenues and expenses by a corresponding amount. The government’s budget papers state there will be no net reduction in overall government investment in the PBS as a result of this change.

The reduction in PBS revenue – through the paring back of the rebates and the corresponding reduction in PBS expenses (specifically high-cost medicine prices) – amounts to $5.4 billion from 2018-19 to 2021-22.

The headline cost of the PBS is expected to decrease by 19.8 per cent in real terms for the period 2018-19 to 2021-22, due largely to the change to the rebate regime.

According to the Guild, if the impact of this high-cost drug decision is removed from the numbers, the headline cost of the PBS is still estimated to decrease by 7.3 per cent in real terms for the period 2018-19 to 2021-22 – mainly reflecting ongoing medicine-price reductions through the price-disclosure process.

Notwithstanding the projected reduction in aggregate PBS spending, the government has included an additional $1 billion for new PBS listings during the next four years.

Pharmacy approvals
Charges for applications for pharmacy approvals will come into force from July 1, 2019.

The budget papers reveal the user-pays measure is intended to recover the full cost of the community pharmacy approval process. It will raise around $5 million during four years from pharmacy-approval applicants.

The application fee will be applied from July 1, 2019 for pharmacists seeking approval to supply PBS medicines at new or relocated premises. There will also be an application fee for a change of ownership of a pharmacy.

Rural health strategy
The budget provides a boost for the rural health workforce with $83 million to be spent over five years towards achieving stronger rural, regional and remote health outcomes by aligning the distribution of the health workforce to areas of greatest need.

While primarily focused on the GP workforce, the Stronger Rural Health Strategy includes a workforce-incentive program to provide incentives for general practice to employ other health professionals, including non-dispensing pharmacists.

e-prescribing
The budget provides $28 million over five years to upgrade the e-prescribing software system used by clinicians to prescribe medicines.

The budget papers say this measure supports a national electronic prescribing system intended for prescribers, pharmacists and their patients to have a fully electronic PBS prescription as an alternative to paper-based prescriptions.

Generics and biosimilars
The government will spend $5 million over three years to increase the use of generic and biosimilar medicines.

This funding will facilitate continuation of the biosimilar-medicines-awareness campaign established as part of the PBS sustainability package announced in May 2015.

It is estimated the increased use of generic and biosimilar medicines will lead to a reduction in PBS expenditure of $335.8 million during the five years from 2017-18.

Small-business tax changes
The small-business $20,000 instant asset write-off has been extended in the budget for a further 12 months to June 30, 2019. Despite uncertainties about passage through the senate, the government says it remains committed to implementing its full 10-year Enterprise Tax Plan, which would reduce company tax for all incorporated businesses over time to 25 per cent.

The government has already legislated the tax cuts for incorporated small businesses with annual turnover up to $50 million, beginning on July 1, 2018. Unincorporated small businesses receive an equivalent increase in their small-business-tax discount rate, the Guild concluded.