Healthy Skepticism Library item: 950

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Schneemann K.
Health spending justified
The Australian 2005 Apr 12

Full text:

In the lead-up to today’s Productivity Commission report on the Economic Implications of an Ageing Australia, Health Minister Tony Abbott has revealed how he will justify escalating future health costs. Health expenditure should not just be considered as a cost, he says, but also as an investment.

“Intelligent health spending produces a more productive, healthier [population],” he says.
Despite the Government’s concerns over costs associated with the Pharmaceutical Benefits Scheme and its projected increased costs into the future, it will be Australia’s saving grace in dealing with the overall costs of our ageing population and the importance of productivity.

Which is why all the main political parties need to consider a novel way of looking at the PBS; they need to consider the merits of spending more, not less, on medicines for Australia in order to ensure a sustainable national medicines policy.

Take workforce participation. In the past decade the Government has come up with many schemes to encourage greater workforce participation. Think Work for the Dole and the present emphasis on employment for mothers.

What should be the next big policy? Pharmaceuticals. Clinical trials are being conducted for medicines that could treat almost all of Australia’s national health priority areas. About 600 medicines are in the pipeline for asthma, cancer, diabetes, cardiovascular disease, mental health, injury prevention, arthritis and dementia.

Such treatments will ensure that older Australians can be productive and work longer. For instance, a new arthritis treatment could mean an older Australian could continue working for another five years. That person would not only continue working but also pay taxes and not be on a pension. A family member may no longer need to care for them and they too could rejoin the workforce.

And this is just a hypothetical for arthritis. Treatments that will emerge for various other diseases will also prolong people’s productivity. A review of a decade of research, mostly from clinical trials, reveals about a dozen medicine types that reduce productivity losses caused by respiratory illnesses, diabetes, depression, dysmenorrhoea and migraine.

An investment in medicines, furthermore, will reduce costs in the health system. As an example, the top four PBS medicines by value reduce the risk of cardiovascular disease, stomach ulcers and asthma attacks.

One of the four, omeprazole, assists in healing stomach ulcers, reducing the need for surgery, and another, salmeterol, helps manage asthma, which also reduces hospital costs.

In several studies it has been found that an increase in spending on new medicines by $1 leads to savings in the hospital sector of $3 to $4.

All those who are in favour of curbing availability of medicines to save money should also consider the following.

A study associated with the US Medicaid program found that restrictions on reimbursement for three medicines increased the rates of institutionalisation in nursing homes, emergency mental health visits, and full-day or half-day hospitalisations in community mental health centres – all at costs far in excess of the savings on the medicines.

In Australia, an observational study showed the total cost of treating a person for schizophrenia fell by $2800 per year over three years as newer, atypical antipsychotic medication increased.

Nobel laureate economics professor Gary Becker believes that even without full cures, new drugs for leading diseases will reduce expensive and unproductive time spent in hospitals, nursing homes and under the care of family members, and also have the potential to cut medical spending growth sharply.

Australia’s PBS spending should be put into perspective. It will continue to be a growing area of commonwealth healthcare expenditure in years to come, and spending on it should be properly considered. But no, the expenditure is not out of control; Australia’s spending on pharmaceuticals is below average compared with other developed countries.

Treasurer Peter Costello has acknowledged that there are three drivers of economic growth: the population, its participation and its productivity.

“I call it the law of the three Ps,” he has said. “If population is working against us, participation and productivity have to work for us.” Medicines will be critical in resurrecting the latter two Ps.