Investing in new medicines pays for itself: report

A new report has found that investing in new medicines pays for itself by reducing other public health expenditure.

The modeling, published in The impact of pharmaceutical innovation on premature mortality, hospital separations, and cancer survival in Australia, was conducted by American economist Professor Frank Lichtenberg.

“This comprehensive study shows that taxpayers and patients are getting value for money from government investment in the PBS,” says Medicines Australia CEO Tim James.

“The report clearly demonstrates that the PBS is highly cost effective and also reduces health expenditure across our hospitals.”

The report estimates that innovative medicines saved taxpayers almost $7 billion in hospital costs for people up to 80 years of age in 2011 – more than the cost of reimbursing these medicines through the PBS.

“Premature mortality for all diseases fell by 24% in Australia between 1998 and 2011 and around 60% of this can be attributed to innovative medicines,” Prof Lichtenberg says.

“This research estimates that innovative medicines saved over 140,000 years of life before the age of 75 in Australia in 2011.”

According to the report, innovative medicines which were first listed on the PBS between 1989 and 2002 cost $5.8 billion in 2011. This period is used because once an innovative medicine is listed on the PBS it takes nine years for it to reach peak usage.

“Without these medicines, the cost of hospitalisation in 2011 would have been 13% or $6.8 billion higher,” Prof Lichtenberg says.

“This modelling identifies that listing innovative medicines on the PBS has effectively delivered an overall saving in health expenditure.”

The report has also estimated how medicines listed on the PBS affected cancer survival.

The five year survival rate for all cancers in Australia increased from 49% to 62% between 1986 and 2007. An estimated 40% of this improvement is the result of new medicines listed on the PBS. In the absence of new medicines, the five-year survival rate would have been 57% in 2007.

“This report should provide confidence to the Government that listing new medicines on the PBS is an astute investment,” says James.

“It is an investment not only in Australia’s health it’s an investment in the Budget and the economy.”

The report – titled: The impact of pharmaceutical innovation on premature mortality, hospital separations, and cancer survival in Australia – was released by Medicines Australia and completed by Professor Frank Lichtenberg from Columbia University. It was funded through an unrestricted grant from pharmaceutical company MSD.

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