PBS Co-Payment Discount: A cost-benefit appraisal

Cadence Economics, in conjunction with Green Square Associates, have sounded a warning about the economic impacts of the Commonwealth Government's (already legislated) proposal for pharmacists to offer up to a $1 discount on the PBS co-payment from 1 January 2016.

Cadence Economics undertook the detailed fiscal and cost benefit analysis for the Pharmacy Guild of Australia. Our analysis showed that the proposed policy change was likely to increase the costs of PBS outlays for the Commonwealth, as opposed to the savings it was expecting.

In addition, our CBA showed that the losses from the policy change were likely to outweigh the benefits (where most of the benefits were, indeed, simply transfers from pharmacists in terms of gross margins to consumers and taxpayers). This is because of declining service standards for key consumer groups such as the elderly and chronically ill as well as the increase in demand for medicines requiring higher levels of government subsidisation.

The analysis, which is available here, is a perfect showcase of our bespoke modelling capabilities in that we were able to assess a complex issue in a rigorous economic framework using innovative modelling techniques, notably our use of geographical economic modelling.

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