Australian Government to Cap PBS Medicine Costs at $25 in January 2026, Amid US Tariff Threats and Supermarket Inquiry
The Australian government, led by Prime Minister Anthony Albanese, has committed to reducing the cost of prescription medicines under the Pharmaceutical Benefits Scheme (PBS) to a maximum of $25 if re-elected. This policy, part of a broader strategy to address cost-of-living pressures, will take effect in January 2026 if the government wins another term. The government has increased its funding for cheaper medicines to almost $10 billion since 2022.
The move has been matched by the Coalition, indicating bipartisan support for lowering medicine costs. The current maximum cost for a PBS prescription is $31.60, and the proposed change would represent a more than 20% cut, aimed at easing financial burdens on working Australians and is expected to save Australians over $200 million annually. Over 80% of prescriptions are part of the PBS, and 21% of Australians have struggled to afford their prescribed medication in recent years.
However, the PBS faces potential threats from the United States, where President Donald Trump has been urged by US pharmaceutical companies to impose 25% tariffs on Australia due to what they describe as 'egregious and discriminatory' pricing policies. These companies argue that PBS listings and related policies hinder their sales and delay access to new medicines in Australia. According to Treasury estimates, these tariffs are expected to directly impact Australia's economic output by less than 0.02% by 2030, while the US exports $3.5 billion in pharmaceuticals to Australia annually.
In response, Australian Health Minister Mark Butler has firmly stated that the government will not negotiate over the PBS, emphasizing the scheme's role in making medicines more affordable for Australians. The government is also working to prevent any tariffs on pharmaceutical trade with the US.
In a separate development, the Australian Competition and Consumer Commission (ACCC) has released a report highlighting the significant market power of the nation's two largest supermarket chains, Coles and Woolworths. The report notes that these chains have some of the highest profit margins globally, amidst rising living costs, within the $120 billion grocery sector.
The government has pledged to facilitate easier negotiations between suppliers and these supermarket giants to address the cost of living, which is expected to be a key election issue. The ACCC's findings have sparked calls for increased competition in the supermarket sector to benefit consumers, with the watchdog listing 20 demands but stopping short of recommending forced break-ups of the supermarket chains.