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.Pharmaceutical Benefits Act 1944 (Cth) . 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 1947Pharmaceutical Benefits Act 1947 (Cth) . 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.
2010s A large reduction on prices of medicines occurred from 1 April 2012 under the Gillard Labor government. This reduced the price of some medicines to below the PBS general copayment amount resulting in cost savings for Australians.
According to the Department of Health Annual Report, the cost of the PBS in 2014–15 was $9.1 billion. According to a report by the Australian Productivity Commission the PBS is expected to cost 2.6% of Australia's GDP by 2045 up from 0.7% in 2005. Further attempts to restrain the growth in costs of the PBS may be needed, however, attempts to increase consumer prices of drugs have always proved politically unpopular. The comparative cost-effectiveness processes of the PBS nonetheless ensure it provides Australian citizens with more equitable access to medicines than in many other developed nations and for many the issue of sustainability of the PBS as a key component of the egalitarian architecture of Australian society is equivalent to asking whether that nation's education system or defence forces are sustainable.
In 2016, 17 types of medication were removed from the PBS, including Panadol Osteo, aspirin, iron/folic supplements, electrolytes, and laxatives. Other medications include medication for reflux, skin allergies, antacids, urine test strips, and Vitamin B12 injections. The change was expected to save the government approximately $87 million a year.(3 November 2015) Dan Conifer. Government to remove paracetamol, aspirin, other common drugs from Pharmaceutical Benefits Scheme. ABC News. Retrieved 31 July 2016.
2020s–current In May 2022, the Albanese government was elected and rapidly implemented changes to the PBS as a cost of living measure. On 1 July, the safety net thresholds were reduced.
In October 2022, a legislative amendment was passed to reduce the general copayment to $30 from 1 January 2023; there was no reduction to the concession copayment. Despite the changes being announced to assist Australians with the cost of living amid rising interest rates and the general copayment rate reduced to be 20% lower than when Labor last held office in 2013, the concession rate remained 19% higher than it had been in 2013.
In January 2023, the general copayment reduction was the first decrease since the inception of the PBS. In 2025, the copayment amount was not indexed with inflation for the first time in more 25 years.
Operations
PBS is governed by the National Health Act 1953 and National Health (Pharmaceutical Benefits) Regulations 1960 (Cth). Pharmaceutical benefits under PBS may only be supplied by pharmacists and medical practitioners approved under the Act.
Applications to list a drug on the Pharmaceutical Benefits Schedule are administered by the Department of Health. Pharmaceutical benefits under the PBS are administered by Medicare Australia (formerly the Health Insurance Commission) under the Health Insurance Act 1973 (Cth).
A benefit under PBS is only given on medications which are listed in the Pharmaceutical Benefits Schedule. The medication may be listed for general use as an unrestricted benefit, or for a specific indication as a restricted benefit. When a PBS medication is dispensed by a pharmacist, the patient pays the patient contribution (subject to concessions and safety nets) and Medicare Australia pays the remainder of the agreed cost of the medication to the pharmacist.(8 February 2006). Review of Prescription Charges in Western Europe, North America and Australasia . The Scottish Government. Retrieved 24 April 2014.
The cost of a medication is negotiated between the government, through the Department of Health, and the supplier of the drug. The agreed price becomes the basis of the dispensed price of the medication which is negotiated between the government and the Pharmacy Guild of Australia under the current Community Pharmacy Agreement. The dispensed price includes the wholesaler's markup, pharmacist's markup, and a dispensing fee. Pharmacies purchase PBS-listed drugs from the wholesaler or supplier, and claim the difference between the dispensed price and the patient co-payment contribution from Medicare Australia.
Medical practitioners, dentists, optometrists, midwives and nurse practitioners who are registered with the Australian Health Practitioner Regulation Agency (AHPRA) can write PBS-subsidised prescriptions. Pharmacists can prescribe scheduled medicines, but these are not subsidised by the PBS. Podiatrists can prescribe from an authorised list of medicines, but these are also not available on the PBS.
Patient contribution and safety net When purchasing a medication under PBS the maximum price a patient pays is the patient contribution (also called a co-payment or out-of-pocket cost), which in 2019 was A$40.30 for general patients. For PBS medications costing less than $40.30, the patient pays the PBS dispensed price plus an additional $1.17 safety net recording fee plus an optional pharmacy charge of $4.33 or less, provided that the total charge does not exceed $40.30. This copayment amount is generally indexed with the Consumer Price Index at the start of each year.
Concessional patients – i.e., low-income earners, welfare recipients, Health Care Card holders, etc. and those covered under the Repatriation Pharmaceutical Benefits Scheme (RPBS) – pay a patient contribution of $6.50 in 2019. Patient contributions are compulsory and cannot be discounted by pharmacies.History of PBS Copayments and Safety Net Thresholds . Department of Health. Retrieved 1 January 2016.
Safety net provisions in PBS reduce patient contributions when singles and families exceed in a calendar year the PBS safety net threshold: when a general patient reaches the general PBS threshold, their co-payment reduces to the concession price for the remainder of that calendar year; while concession patients who reach the concession PBS threshold do not pay anything on PBS medications for the remainder of the year. The PBS safety net is separate from and in addition to the Medicare safety nets.
Changes in patient contributions and the safety net over the years are as follows: