Governments need better guidance to maximise value for money: the case of Australia’s Pharmaceutical Benefits Advisory Committee

Abstract

In Australia, the Pharmaceutical Benefits Advisory Committee (PBAC) makes recommendations to the Minister for Health on which pharmaceuticals should be subsidised. Given the implications of PBAC recommendations for government finances and population health, PBAC is required to provide advice primarily on the basis of value for money. The aim of this article is twofold: to describe some major limitations of the current PBAC decision-making process in relation to its implicit aim of maximising value for money; and to suggest what might be done toward overcoming these limitations. This should also offer lessons for the many decision-making bodies around the world which are similar to PBAC. The current PBAC decision-making process is limited in two important respects. First, it features the use of an implicit incremental cost-effectiveness ratio (ICER) threshold that may not reflect the opportunity cost of funding a new technology, with unknown and possibly negative consequences for population health. Second, the process does not feature a means of systematically assessing how a technology may be of greater or lesser value in light of factors that are not captured by standard measures of cost effectiveness, but which are nonetheless important, particularly to the Australian community. Overcoming these limitations would mean that PBAC could be more confident of maximising value for money when making funding decisions.