The Pharmaceutical Benefits Scheme (PBS) is a program of the Australian Government that subsidises prescription medication for Australian citizens and permanent residents, as well as international visitors covered by a reciprocal health care agreement. Established under the National Health Act 1953, the PBS is separate to the Medicare Benefits Schedule, a list of health care services that can be claimed under Medicare, Australia's universal health care insurance scheme. The PBS began in 1948, following a national referendum in 1946 that granted the federal government legal authority over provision of pharmaceutical services (among other health and social services). Starting from a list of 139 "life-saving and disease preventing" medicines in 1948, the PBS subsidises more than 900 prescription medicines as of 2026. The out-of-pocket amount for some medications has increased since 1960, with increased subsidies for concession holders beginning in 1983. Safety nets were introduced in 2000 and expanded in 2004, limiting the total out-of-pocket expense singles or families would pay per year for health care in Australia.
History
Inception On 16 February 1944, the federal health minister, Senator James Fraser, introduced the Pharmaceutical Benefits Bill 1944 to the Senate. The legislation was part of a wider plan of the Curtin Labor government to create a British-style National Health Service. It was an extension of the Repatriation Pharmaceutical Benefits Scheme, established in 1919 for Australian servicemen and women who had served in the Boer War and World War I. The new scheme provided that medicines listed in the Commonwealth Pharmaceutical Formulary would be free, provided they were obtained via a prescription, written by a registered medical practitioner on an official government form, presented to a Commonwealth approved pharmacist. A Formulary Committee was established to advise the minister about what medications should be included in the formulary. That committee was a precursor to the Pharmaceutical Benefits Advisory Committee. The Australian Branch of the British Medical Association (BMA) challenged the Act and, in Attorney-General (Vic) ex rel Dale v Commonwealth, the High Court of Australia declared the Act unconstitutional on the basis that the Commonwealth did not have the power to spend money on the provision of medicines. That decision prompted the government to initiate a 1946 referendum, which approved an amendment to the Australian Constitution to allow the Commonwealth government to provide pharmaceutical benefits. The Pharmaceutical Benefits Act 1947 was subsequently passed by parliamant. Ongoing resistance by the medical profession forced amendments to provisions that required practitioners to use Commonwealth prescription forms or face a fine. Again, the BMA challenged the Act and again the High Court found it unconstitutional. In November 1947, under Section 15 of the 1947 Act, the Commonwealth made arrangements to supply free products for immunisation against diphtheria and whooping cough. Despite the High Court finding, the Commonwealth attempted to implement the scheme with voluntary participation, but only a few doctors participated. The PBS commenced on 1 July 1948. Finally, in October 1949, in British Medical Association v Commonwealth (1949), the High Court ruled that the PBS was constitutional. With the election of the Menzies Coalition government in December 1949, the comprehensive scheme proposed under the 1947 Act was altered to limit the PBS list to 139 "life saving and disease preventing drugs". The new regulations came into force on 4 September 1950. Changes to PBS were introduced on 1 March 1960 by the National Health Act No. 72 1959, which combined the existing pensioner and general schemes, expanded the range of drugs available to the general public and, to provide some control on volumes and expenditure, introduced a patient contribution (or co-payment) of 5 shillings. Despite the introduction of the co-payment, prescription volumes increased from 24.6 million in 1959/60, to 60.4 million in 1968/69, and Commonwealth expenditure rose from $43 million to $100 million at the end of the decade.
2000s Former federal Treasurer Peter Costello and the Liberal Party attempted to raise the patient co-payment of PBS medicines by up to 30 per cent in the 2002 Federal Budget, however this measure was blocked in the Senate in which various minor parties held the balance of power. However, in June 2004 the main opposition party, the Australian Labor Party, announced that it would allow the PBS co-payment increases to proceed through the Senate. By 2003 the number of drugs included under the scheme had expanded to 601 general products which were marketed as 2,602 different brands. The scheme was appealing to policy makers because it required no major capital works program and could be implemented immediately without lengthy consultation with the medical profession. In 2007, a “price disclosure” regime was added to obtain more value out of the existing scheme. This meant prices and volumes for generic versions of medicines sold to pharmacies had to be disclosed to the Department of Health. With this information, the payments to pharmacies can then be assessed to reduce excessive markups. This new data would be received in cycles of 23 to 27 months meaning price reductions would only flow through in those intervals. This regime was later expanded in 2010 to cover all subsidised medicines and reduce the data cycles to 18 months. In response to these changes, the Pharmacy Guild of Australia claimed the survival of local pharmacies would be threatened from lower margins.
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