OBJECTIVES

Drug funding decisions are generally the outcome of a bargaining process between the funder and manufacturer. Using decisions from the Pharmaceutical Benefits Advisory Committee of Australia (PBAC), we propose an informal model of bargaining to generate hypotheses about factors that determine the relative bargaining power of the funder and manufacturer (value, risk, time and outside options) and test these in an empirical model of the time to funding decisions.

METHODS

We used a Cox proportional hazards model to analyse the duration of time between first submission and receiving a positive recommendation from the PBAC for drugs considered between 2005 and 2012 if one of the outcomes measured quality-adjusted life years (QALYs) gained (n=298). We control for bargaining relevant drug characteristics, including the cost per QALY, opportunity cost of funding and quality of the evidence. Data from Google Trends was used to measure the level of public interest in the decision as a proxy for the external pressure on the committee to recommend the drug. The Food and Drug Administration (FDA) expedited program designations were used as an objective measure of both disease severity and the drug's potential to address an unmet clinical need.

RESULTS

Consistent with the bargaining model, we find each $10,000 fall in value (increase in cost per QALY) reduces likelihood of recommendation by 12% (95%CI: 6-17). The likelihood of recommendation also significantly reduces if there was uncertainty around the clinical or economic evidence but increases if the drug could addressed an unmet clinical need in treating a serious condition. Each 100% increase in internet searches in the year leading up to the PBAC meeting, increases the risk of recommendation by 39% (95%CI: 3-88).

CONCLUSIONS

Evidence from Australia suggests that decisions on public funding for pharmaceuticals are consistent with a strategic bargaining process.