Cost Effectiveness Analysis and the Consistency of Decision Making: Evidence from Pharmaceutical Reimbursement in Australia 1991-96

The Commonwealth Government of Australia subsidises the price that consumers have to pay for drugs that are listed on the Pharmaceutical Benefits Schedule (PBS). Drugs can only be listed on that schedule once a pharmaceutical company has made a submission to the Pharmaceutical Benefits Advisory Committee (PBAC). Economic evaluation has been a mandatory part of that submission since 1993. This paper investigates whether decisions made by the PBAC are consistent with the evidence about the cost-effectiveness of that drug supplied by the pharmaceutical company. The paper also discusses whether the advice given by the PBAC to list a drug on the PBS reveals a threshold incremental cost-effectiveness ratio beyond which the PBAC is not prepared to recommend reimbursement. Method: All 355 submissions made to the PBAC between 1991 and June 1996 were reviewed. Submissions were ranked in a league table by incremental cost per life year gained (26 submissions) or the cost per QALY gained (9 submissions) and compared with advice give by the PBAC about that drug. Results: The main observation from the league table is that between 1991 and 1996 the PBAC cost-effectiveness threshold range lay between $37,000 and $69,000 per extra life year gained. Some drugs with an incremental cost per extra life year gained less than this were not recommended for listing suggesting that the cost effectiveness ratio was not the only factor determining the reimbursement decision. Other factors considered include the quality of life years gained, the quality of the evidence, the nature of the condition and the availability of substitute therapies, and the financial implications to government.