The Australian government has announced a major review into the current funding arrangements for chemotherapy drug dispensing, and that it will pay an additional A$60 pay for every chemotherapy transfusion for an interim period of six months.

Health Minister Tanya Plibersek said the review follows talks between the government and the Pharmacy Guild of Australia over appropriate subsidies for dispensing chemotherapy after the reduction in the price paid by the government for key cancer drug docetaxel.

Some chemotherapy providers used the inflated price paid to them by the government for the drug itself to cross-subsidise the cost of delivering it, but after its price dropped and generic versions entered the market, some providers claimed that they would no longer be able to keep treating cancer patients without additional funding.

"The government wants to identify and manage every component of funding appropriately and ensure that cross-subsidisation is not required to support the viability of chemotherapy services,” said Ms Plibersek.

The government will provide A$29.7 million in the 2013-14 Budget to pay providers an additional A$60 for each chemotherapy infusion on an interim basis for six months, she said. The funding will cover the review period between July 1 and December 31 this year, and be provided in addition to current fees of $76.37.

The subsidy paid to pharmacists to dispense standard medication is A$6.52, but the complexity of preparing chemotherapy medication means the dispensing subsidy was already greater, and some providers had said it should be more, she added.

"To be able to find room in the budget for new medicines and treatments, it is essential taxpayers get the most out of every health dollar we spent. In the case of docetaxel, inflated prices had meant the government was in some instances paying A$2,800 above the market price for this drug," said the Minister.

She also pointed out that, since 2007, the government had added 30 new drugs to treat 15 different cancers to the Pharmaceutical Benefits Scheme (PBS), at an additional cost of A$1.3 billion.

Ms Plibersek also emphasised that the price of chemotherapy drugs provided through the PBS has not and will not rise beyond normal inflation. The most paid for a whole course of treatment for the drugs is currently A$5.90 for a concession patient or A$36.10 for a general patient.

The review has been welcomed by the Consumers Health Forum of Australia (CHF), whose chief executive, Carol Bennett, said that it will shine a light on both the actual costs involved in the provision of chemotherapy drugs as well as on how some providers may have been using the payments from government to cross-subsidise other services, and that this may have implications for other services impacted by the price disclosure policy.

"We need truth in costing around health services," she said.

"It has also been of great concern to CHF that health consumers facing very difficult challenges may have been told they will not be able to access life-saving treatment they need because of a funding dispute. This is deplorable behaviour that we would not want to see repeated," said Ms Bennett.

The Pharmacy Guild of Australia welcomed the interim funding, and the fact that it had been found from outside the Community Pharmacy Agreement. “This means that the vast majority of community pharmacies which are not involved in the provision of chemotherapy medicines will not be disadvantaged," said the Guild's executive director, David Quilty.

Ministers also point out that the review will not be limited to chemotherapy dispensing services funded from the PBS. It will also consider the funding and clinical services delivered as part of a cancer patient's treatment, the different business models in the private and public health sectors that provide chemotherapy services and how these services have changed since the chemotherapy funding arrangements were implemented in December 2011.

The review will report to Ms Plibersek by this October.