table border=0 cellpadding=0 cellspacing=0 width=100%>
Yahoo! is not affiliated with the authors of this page or responsible for its content.
used current drug for which a newer drug is a more cost-effective therapy. However, an alternative to drug therapy altogether (such as diet and exercise in treating hypertension) may be excluded. Thus, a local optimum may be reached at the expense of global efficiency.
used current drug for which a newer drug is a more cost-effective
therapy. However, an alternative to drug therapy altogether (such as
diet and exercise in treating hypertension) may be excluded. Thus, a
local optimum may be reached at the expense of global efficiency.
The second reason that economic evaluation may not promote
efficiency in practice is related to drug pricing. The analysis is con-
ducted before a price has been established, although the guidelines
specify how new drug prices should be estimated. The previous PBS
listing decisions implicitly determine the cost per unit of health gain
that the commonwealth government is prepared to pay, now around
$78,000 per additional life year. To date, submissions have ranged
from $5,000 to $235,000 per additional life year. However, manufac-
turers may inflate their estimate of cost to be closer to the shadow
price that the commonwealth has shown that it is prepared to pay.
s Other strategies. The requirement for cost-effectiveness
analysis was not promoted as a cost containment strategy only. It is
one of a number of initiatives aimed at improving quality and appro-
priateness, as well as control of costs. Other strategies, more specifi-
cally aimed at cost control, have been employed (Exhibit 4).
Most consumers have always faced a drug copayment. However,
there were groups, primarily those on government pensions, for
whom drugs were provided free prior to 1990. A copayment was
introduced at the same time as a compensating increase in the aver-
age weekly pension. This had some effect on reducing demand.
28
The use of cheaper equivalent drugs has been promoted through
the Minimum Pricing Policy. Doctors are encouraged to write pre-
scriptions for generic drugs so that the pharmacist can select the
least expensive alternative. Where a branded prescription item is
EX HIBIT 4
Cost-Control Strategies In The Australian Health Care System
Area of expenditure
Strategy
Pharmaceutical benefits
Cost-effectiveness analysis
Copayments
Generic prescribing
Equivalent drug substitution
Primary medical care
Control of fee levels
Development of organizational structure, encouraging research and
continuing education
Limited eligibility to claim under Medicare
Alternative funding to fee-for-service
Other medical services
Control of fee levels
Hospital services
Global capped budgets
Case-mix
SOURCE: Authors synthesis.
106
AUSTRALIA
H E A L T H
A F F A I R S
~
V o l u m e
1 8 ,
N u m b e r
3
I n t e r n a t i o n a l
H e a l t h
R e f o r m