Pharmaceutical Benefits Scheme
Sir Henry Newland, President of the British Medical Association’s Federal Council. Image from the State Library of South Australia.
On this day, 1 March 1960, the Pharmaceutical Benefits Scheme comes into effect. The scheme makes life saving and life improving drugs affordable for ordinary Australians and remains a pillar of Australia’s healthcare system up to the present day. Of all the legacies of the Menzies Government, this is one of the most enduring and tangibly beneficial, yet few people remember who to credit for the PBS.
The first Commonwealth Government program of subsidising pharmaceuticals was known as the Repatriation Pharmaceutical Benefits Scheme, and it was introduced in 1919 to provide free medication for veterans dealing with the devastating after-effects of the First World War (though the scheme also covered those who had fought in the Boer War). The RPBS was established as part of the Federal Government’s responsibility for Australia’s armed forces, at the time few people felt that the Federal Government had any wider responsibility in the field of healthcare.
This looked set to change with the Lyons Government’s National Health and Pensions Insurance Bill of 1938, which passed the Parliament, but which was never proclaimed as the Government dropped the Bill in the face of a complex array of opponents which included unions, doctors, small business owners, and farmers. For Robert Menzies, then Attorney General, this was a broken promise which he could not stomach, and he resigned from the Ministry in protest.
Because the Bill was never proclaimed, the legislation was never legally tested, and a cloud hung over the constitutionality of the Federal Government’s intervention in the healthcare field. The Constitutional Conventions of the 1890s had given the Federal Government the power to legislate for old age and invalid pensions, but no specific mention of a wider remit on healthcare was made, and thus it appeared to fall under the residual powers of the States.
This would be tested with the Curtin Government’s introduction of the Pharmaceutical Benefits Act 1944. This provided a range of benefits, but they were to be restricted to medicines listed in the Commonwealth Pharmaceutical Formulary, they required a prescription written by a registered medical practitioner on an official government form, and they had to be submitted to a Commonwealth approved pharmacist.
The Australian branch of the British Medical Association (the forerunner of the AMA) objected to this intrusion of government control into their profession, and feared that it may have been the first step towards Labor’s wider goal of a fully nationalised healthcare system along the lines of Britain’s NHS. At the time, these fears of a socialist transformation of Australian society were very real, as seen would be seen in the Chifley Government’s attempts to nationalise the banks and nationalise the aviation industry, both of which would be overturned by the High Court.
The BMA likewise challenged the legality of the Pharmaceutical Benefits Act, and the High Court found that it too was unconstitutional. In response, the now Chifley Government introduced legislation for a referendum to give the Federal Government the power to make laws on a range of social services, including healthcare. As leader of the Liberal Opposition, Menzies negotiated that he would support the social services referendum provided that a saving clause was introduced to prohibit a socialist scheme of conscripting doctors to work for the government (a plan devised in conjunction with BMA President Sir Henry Newland). Worried about a repeat of the 1944 powers referendum defeat, the government agreed to Menzies’s amendment.
On 21 August 1946 54.39% of Australians, and all States voted that the Commonwealth should have the power to make laws for ‘the provision of maternity allowances, widows’ pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorise any form of civil conscription), benefits to students and family allowances’. The clause thus protected private practices, and what Menzies would dub the ‘sanctity of the doctor-patient relationship’. Menzies’s support and the saving clause proved crucial to the referendum’s success, as the two other referendum proposals put forward that day, on marketing schemes and industrial employment, both failed.
Newly empowered, Chifley introduced the Pharmaceutical Benefits Act 1947, but the BMA remained suspicious of the government’s intentions and many doctors boycotted the scheme. In response, Chifley introduced a £50 fine for anyone who refused to use the officially sanctioned prescription form. This prompted the BMA to go back to the High Court, which found that the fine was compulsion amounting to ‘civil conscription’. By the time of the 1949 election the boycott was so successful that ‘Labor’s PBS was essentially a dead letter’.
After the election and Menzies’s victory, the Country Party’s Earle Page was sworn in as Health Minister. As a renowned surgeon with clear anti-socialist credentials, Page was a man the BMA instinctively trusted (Newland had even gone through Page to reach Menzies over the referendum wording). Page introduced a ‘safety net’ PBS limited to drugs that were clearly lifesaving, and this more modest and achievable goal won over the boycotters. Initially Page’s scheme operated under existing legislation, but in 1953 the Menzies Government passed a new National Health Act, and set up a Pharmaceutical Benefits Advisory Committee, nominated by the BMA, to recommend which drugs should be included in the Schedule of Pharmaceutical Benefits.
Over the next six years medical and scientific advances greatly increased the demand for pharmaceuticals and the number life-altering drugs available, prompting the government to pass legislation establishing the modern PBS and broadening the ‘safety net’ to a comprehensive arrangement. This combined the existing pensioner and general benefit schemes, expanded the range of drugs available for the general public, and introduced a patient contribution (or co-payment) of 5 shillings to ensure that the whole system was financially sustainable. This would prove to be a tremendous success, as prescription volumes more than doubled from 24.6 million in 1959-60, to 60.4 million in 1968-69.
Other key Menzian healthcare reforms centred around a contributory form of national health insurance, where under the 1953 Health Act, people would pay into Medical Benefits Fund, which would help provide for medical necessities from childhood into old age. Although this would later be replaced by Medicare, Menzies and the BMA had nevertheless won the battle against a fully nationalised system, helping to set up Australia’s enduring and successful mixture of public and private healthcare.
Further Reading:
Martyn S Goddard, ‘How the Pharmaceutical Benefits Scheme began’, Medical Journal of Australia, volume 201, 2014.
Amanda Biggs, ‘The Pharmaceutical Benefits Scheme - an Overview’, APH E-Brief, 2002, available at https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/archive/pbs
Sally Wilde, ‘Serendipity, Doctors and the Australian Constitution’, Health and History, volume 7, no. 1, 2005.