How drug companies are playing hardball with Australia’s PBS

Australia is coming under increasing pressure from international drug companies demanding higher prices for their drugs.

In some cases, negotiations have broken down and companies have said they’ll withdraw their drugs from the market. In other cases, companies have said they’ll not apply for their drug to be listed on the Pharmaceutical Benefits Scheme (PBS) at all.

For example, the future of some PBS drugs for multiple sclerosis has been in doubt after pricing disagreements between the drug companies and the Australian government. These medicines will now remain on the PBS while a review of multiple sclerosis drugs takes place.

Earlier this year, drug company Eli Lilly said it would not apply to have its drug tirzepatide (Mounjaro) listed on the PBS for type 2 diabetes after price negotiations broke down.

So what’s really going on in the background? And where does that leave Australians’ access to subsidised medicines, now and into the future?

First the UK, then Australia?

United States drug companies have long sought higher prices for their drugs in international markets.

US President Donald Trump has stepped in to blame other countries for forcing drugs companies to accept lower prices.

We were subsidizing others’ healthcare […] it was really the countries that forced Big Pharma to do things that frankly, I’m not sure they really felt comfortable doing [that].

The US-UK trade deal on pharmaceuticals, announced in December 2025, is the first major surrender to this pressure.

In exchange for no tariffs on UK drug exports to the US, it requires the UK’s National Institute for Health and Care Excellence to increase the price it is willing to pay for new drugs. It also requires the National Health Service (NHS) to double its spending on new drugs by 2036.

The NHS is already squeezed for funds. Extra drug costs will mean cuts to other health care are estimated to lead to up to 291,000 extra deaths by 2036.

The National Institute for Health and Care Excellence currently approves more than 90% of new drugs it evaluates. So this deal will lead to higher prices, not many more new medicines.

It also creates a worrying precedent for other countries, including Australia.

But negotiations are not just about price

The first step to get a new medicine onto the Australian market is Therapeutic Goods Administration approval. Companies must provide clinical trial evidence of their drug’s effectiveness, either compared to a placebo or another drug. A new drug does not need to be better than existing treatments – just no worse.

Then, the company applies for their drug to be listed on the PBS, and the Pharmaceutical Benefits Advisory Committee – an independent team of experts that evaluates whether drugs are cost-effective and should be recommended for PBS listing – steps in.

It asks companies to compare their drug to standard treatment, in terms of health effects such as quality of life or preventing disability, hospitalisations or death. So price negotiations are not just about price. They are also about whether a new medicine improves health.

Sometimes there is no added health benefit. Analyses of the clinical trial evidence for more than 1,000 new medicine approvals in France found about half were no better and no worse than existing drugs.

If the Pharmaceutical Benefits Advisory Committee judges a new drug is no better, the allowable price is no higher than existing treatments for the same condition.

But not everyone’s happy.

Felicity McNeill, Chair of the advocacy group Better Access Australia, told the Australian:

In the past, big companies have been able to accept our pricing […] or even the massive price cuts agreed to by the industry, because we were just almost a charity case […].

Australia is hardly a “charity case”. We spend on average about A$1,250 per person per year on prescription and over-the-counter medicines, ranking eighth globally.

Australia subsidises a lower proportion of prescription medicines than many other countries in the Organisation for Economic Cooperation and Development (OECD) – 48% versus the OECD average of 59%.

But higher PBS prices for subsidised drugs will do little to increase this proportion. That’s because most unsubsidised drugs bought at the pharmacy are older, inexpensive medicines that cost less than a patient’s PBS co-payment. Even if these medicines were to be listed on the PBS, paying for them out-of-pocket would be cheaper.

Patients are weighing in

Patient groups have added their voices to the debate about the future of drugs they say are vital. They’ve shared their fears should multiple sclerosis drugs be removed from the PBS due to price negotiations breaking down.

However, there is little to no evidence of added benefits for these drugs, compared to the newer, more affordable treatment ublituximab (Briumvi). This has led to PBS recommendations for similar pricing.

Many patient groups depend on industry funding. And not all media reporting of patients’ perspectives mention all relevant details about price negotiations.

For example, in recent media reports on the multiple sclerosis drugs, patients do not mention manufacturers’ pricing as a barrier to access. Instead, the focus is only on the potential impact of the government’s price negotiations.

What should Australia do?

Pharmaceutical companies are highly profitable. And much research and development for new drugs is publicly subsidised. Public reimbursement of medicines is also key to equitable and affordable access. So the PBS should not give in to industry bullying.

International drug companies that do not apply for PBS listing or remove existing medicines from the market are likely to remain the exception, not the norm, as they will lose out on sales of their medicines.

If this does happen, there are other options available for Australia to access a needed drug. If a company is selling it elsewhere, Australia can buy it directly from another country via parallel imports.

Under exceptional situations, special access arrangements are also available for patients to access certain drugs that are not available in Australia.

We also need more transparency. Let’s open pricing decisions to public scrutiny. That way, Australians can know if multinational companies are crying poor because of unusually high development and production costs for a specific medicine, or whether these high prices just reflect what they think the market will bear.

Barbara Mintzes, Professor in Pharmaceutical Policy, School of Pharmacy and Charles Perkins Centre, University of Sydney; Ashleigh Hooimeyer, Associate Lecturer, School of Pharmacy, University of Sydney, and Kellia Chiu, Associate Lecturer, School of Pharmacy and Charles Perkins Centre, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.