Australia’s Pharmaceutical Benefits Scheme (PBS) will produce savings to the Commonwealth Government of A$6 billion by 2017, double the government’s own forecasts of A$3 billion, says a new report.

Last year, a number of reforms were made to the Scheme, following warnings from the Treasury that the aging population and increasing costs of drugs would render it unsustainable. As a result of these reforms, the position of the PBS now looks stable, according to Professor Peter Sheehan, director of the Centre for Strategic Economic Studies at Victoria University, which conducted the study for industry group Medicines Australia.

In fact, Prof Sheehan is sceptical that the “crisis” suggested by the Treasury ever existed, and says the warnings contained in its report showed little understanding of the pharmaceutical market.

Nevertheless, he says: “what’s really important about the reforms and our assessment of them is it suggests that people will continue to get access to the best medicines at a reasonable price.”

Recent years have seen a number of changes to the way the PBS operates. On August 1, 2005, a new policy imposed a 12.5% price cut at the entry of the first new brand of a medicine after that date, once for each medicine.

The next package of reforms included the creation of two formularies on the PBS, effectively separating new patent-protected medicines from older, off-patent drugs. Only off-patent products for which there is more than one brand are now subject to price reductions, with consequent savings to the government, and it will continue to reap the benefits of these as a number of top-selling medicines lose patent protection in the future and new suppliers enter the market, say the researchers.

“The main conclusion is that after some concern about burgeoning costs, the position of the PBS now looks stable. We expect costs to grow by only 3%-4% and to be a fairly stable share of Gross Domestic Product (GDP),” said Prof Sheehan. “The scheme is not costing consumers a great deal more but the cost to government is being constrained,” he added.

In the 10-year period to 2018 following their introduction, the PBS reforms are projected to cost manufacturers A$8.13 billion in lost sales and wholesalers will be A$591 million worse off, according to the study. However, pharmacists are projected to be A$2.34 billion better off and patients are expected to make savings of A$420 million, it adds.

Brendan Shaw, acting chief executive of Medicines Australia, said the report shows that PBS growth is much lower than expected, and that the reforms are doing what they were designed to do. “No further reform is needed in this area,” added Dr Shaw.