The role of value for money in public insurance coverage decisions for drugs in Australia: a retrospective analysis 1994-2004

Med Decis Making. Sep-Oct 2008;28(5):713-22. doi: 10.1177/0272989X08315247. Epub 2008 Mar 31.


Objective: To analyze the relative influence of factors in decisions for public insurance coverage of new drugs in Australia.

Data sources: Evidence presented at meetings of the Australian Pharmaceutical Benefits Advisory Committee (PBAC) that makes recommendations on coverage of drugs under Pharmaceutical Benefits Scheme.

Study selection: All major submissions to the PBAC between February 1994 and December 2004 (n = 858) if one of the outcomes measured was life year gained (n=138) or quality-adjusted life years (QALYs) gained (n=116).

Results: Clinical significance, cost-effectiveness, cost to government, and severity of disease were significant influences on decisions. Compared to the average submission, clinical significance increased the probability of recommending coverage by 0.21 (95% confidence interval [CI] 0.02 to 0.40), whereas a drug in a life-threatening condition had an increased probability of being recommended for coverage of 0.38 (0.06 to 0.69). An increase in $A10,000 from a mean incremental cost per QALY of $A46,400 reduced the probability of listing by 0.06 (95% CI 0.04 to 0.1).

Conclusions: The PBAC provides an example of the long-term stability and coherence of evidence-based coverage and pricing decisions for drugs that weighs up the evidence on clinical effectiveness, clinical need, and value for money. There is no evidence of a fixed public threshold value of life years or QALYs, but willingness to pay is clearly related to the characteristics of the clinical condition, perceived confidence in the evidence of effectiveness and its relevance, as well as total cost to government.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Australia
  • Decision Making
  • Insurance Coverage / economics*
  • Insurance, Pharmaceutical Services
  • Models, Statistical
  • National Health Programs
  • Pharmaceutical Preparations / economics*
  • Quality-Adjusted Life Years
  • Retrospective Studies


  • Pharmaceutical Preparations