But listing is only provided by the PBAC if it judges drugs to be effective and not excessively expensive. This drives producers to offer drugs at lower prices and saves Australians a lot of money for their drugs - they are much cheaper than in the US even accounting for implied subsidy costs. Joshua has a couple of good posts on this topic himself but also points to a new NBER study showing that the PBS scheme saves on average a year of life for Australians by encouraging the use of the most recently developed drugs. I cite the abstract:
We examine the impact of pharmaceutical innovation on the longevity of Australians during the period 1995-2003. Due to the government's PBS, Australia has much better data on drug utilization than most other countries. We find that mean age at death increased more for diseases with larger increases in mean drug vintage. The estimates indicate that increasing the mean vintage of drugs by 5 years would increase mean age at death by almost 11 months. The estimates also indicate that using newer drugs reduced the number of years of potential life lost before the ages of 65 and 70 (but not before age 75). During the period 1995-2003, mean age at death increased by about 2.0 years, from 74.4 to 76.4.
The estimates imply that, in the absence of any increase in drug vintage, mean age at death would have increased by only 0.7 years. The increase in drug vintage accounts for about 65% of the total increase in mean age at death. We obtain a rough estimate of the cost per life-year gained from using newer drugs.
Under our assumptions, using newer drugs (increasing drug vintage) increased life expectancy by 1.23 years and increased lifetime drug expenditure by $12,976; the cost per life-year gained from using newer drugs is $10,585. An estimate made by other investigators of the value of a statistical Australian life-year ($70,618) is 6.7 times as large as our estimate of the cost per life-year gained from using newer drugs. We discuss several reasons why our estimate of the cost per life-year gained from using newer drugs could be too high or too low.