Pharmaceuticals Benefit Scheme: Effects of the Safety Net

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he aim of the Australian Pharmaceuticals Benefit Scheme (PBS) is to provide Australians with affordable, reliable and timely access to necessary and cost-effective medicines (Department of Health and Ageing, 2005). The Australian PBS has two key policy settings: patient copayments and the ‘safety net’ (SN). The copayment is the direct out-of-pocket contribution the patient has to pay towards the cost of their medicine — for some drug items, consumers may also have to pay a brand or therapeutic price premium. The PBS SN arrangements ‘protect’ individuals and families from large overall expenses incurred through high use of PBS medicines within a calendar year. The basic objective of the SN is to cap PBS drug costs to the ‘sick’ that is, to high users. Its operation is only means tested in the sense that two thresholds exist — a lower threshold for concessional patients and a higher threshold for general patients. Individuals and families who are eligible to access PBS medicines at reduced concessional copayment and SN rates are those who have low incomes and/or are recipients of certain Commonwealth Government pensions and allowances. For concessional patients, the SN threshold has traditionally been set at 52 PBS scripts per year. Once these patients reach the SN, they are no longer required to pay the patient copayment for PBS subsidised items for the remainder of the year. For general patients reaching the SN, the copayment rate is reduced to the lower concessional rate. In his 2005 budget speech, the Federal Treasurer, the Hon. Peter Costello, announced that the SN thresholds would increase for both concessional and general patients from 1 January 2006. Within this policy context, this paper investigates which Australian families are likely to be high users of PBS medicines and therefore benefit from the PBS safety net arrangements. The proportion of PBS scripts used by concessional and general patients funded under the SN arrangements is examined and the distribution of scripts and costs across different family types investigated. Previous research has shown that the PBS is highly progressive with major redistributive effects towards the poor (Harding et al, 2004). The benefits of the SN are available to all heavy users of PBS scripts, irrespective of income within each of the concessional and general patient categories. The SN is not primarily an instrument of redistribution but it may have an incidental redistributive effect because the poor generally have lower health status and are relatively high users of PBS medicines (Harding et al, 2004; AIHW, 2006). A secondary aim of the