Understanding Medicine Spending in Australia
Trends and dynamics in healthcare and medicine spending
Institute Report
Jul 15, 2020

About the Report

This report focuses on the current and historic levels of spending on medicines in Australia. As government data suggest healthcare and medicine spending is rising, an enhanced understanding of the drivers of those trends can better inform policy. The report provides unique views of IQVIA data alongside official government statistics to provide context and clarity to these important issues.

Report Summary

The report analyzes pharmaceutical spending trends in Australia and includes comparisons to spending in other healthcare sectors. In particular, the report examines the Pharmaceutical Benefit Scheme (PBS) and pharmaceutical sector spending. While overall healthcare spending has grown 5% on a CAGR basis between 2010 and 2018, net PBS spending on pharmaceuticals decreased from 8% to 5% of total healthcare spending in this period. The report also presents analyses of the impact of rebates, brand volume, and price on spending, as well as a view of per capita revenue and net spending. In the period from 2010 to 2019, pharmaceutical net revenues remained relatively flat with the launch of new brands driving spending and price events as the largest negative driver of growth. Net pharmaceutical revenues and PBS spending have remained constant on an adjusted per capita basis capita basis, at an average just over $1 per day, compared to steadily increasing spending on hospital and medical, which is currently averaging over $13 per day per person in Australia.

Key Findings

The majority of net healthcare spending is on hospital and medical services, while PBS net spending has declined from 8% to 5% since 2010.

Historical Percentage of Overall Net Healthcare Spending by Sector, Fiscal Years 2010–2018, AU$Bn

Historical Percentage of Overall Net Healthcare Spending by Sector, Fiscal Years 2010–2018
  • Australia’s net healthcare spending has increased from $121.5 billion to $183.1 billion in fiscal year from 2010 to 2018.
  • Hospital and medical services represent the largest percentage of net healthcare spending, realizing costs of $124 billion in fiscal year ending 2018, while PBS net pharmaceutical spending has declined from 8% to 5% of net healthcare spending.
  • All other medicines spending has remained a constant share of net healthcare spending at 6%.

 

Total non-discounted revenue from pharmaceuticals has risen over the past 10 years, but remains flat when accounting for rebates.

Total Non-Discounted Revenue, Rebates and Reported Net Spending for Fiscal Years 2010–2019, AU$Bn

Total Non-Discounted Revenue, Rebates and Reported Net Spending for Fiscal Years 2010–2019, AU$Bn
  • Over the last 10 years, total non-discounted revenue from pharmaceuticals has increased 25.9%, reaching just over $12.0 billion in fiscal year 2019.
  • However, net revenues have remained relatively constant over the ten-year period after accounting for rebates, which have risen from $9.3 billion to $9.8 billion — a 5% increase since fiscal year 2010.

 

Pharmaceutical spending growth is largely flat after accounting for rebates, and is driven by protected brand volume and new brands, offset by price events.

Brand Volume, New Brands, and Net Price Contributions to Growth, Fiscal Years 2010–2019, AU$Bn

Brand Volume, New Brands, and Net Price Contributions to Growth
  • Price events have been the largest negative driver of growth in the period, with a peak of -$2,274 billion in fiscal year ending 2017. This corresponds to CAGRs of -22.3% over a five-year period, and -17.3% over a nine-year period.
  • Protected brand volume remains a strong positive contributor to growth especially in 2016 and 2017.
  • As a result of the negative contribution of price events in fiscal years ending 2013, 2014, 2015 and 2017, total pharmaceutical spending growth declined despite the positive contribution of growth by new brands.

 

Net pharmaceutical revenues and PBS spending have remained constant on an adjusted per capita basis averaging slightly over $1 per day.

Historical Real Net Per Capita PBS Spending, Revenues, and GDP, Fiscal Years 2010–2018, AU$ 2019$

Historical Real Net Per Capita PBS Spending, Revenues, and GDP
  • On an adjusted per capita basis capita basis, Australians pay just over AUD $1 per day for access to PBS medicines.
  • Spending on PBS medicines was $390 in 2019, which was up 6% from a low of $366 in 2010.
  • Both per capita net PBS spending and per capita net pharmaceutical revenues account for 0.7%, respectively, of total per capita GDP in fiscal year 2018, a decline from 0.9% in fiscal year 2010.
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