Objectives: The aim of this study was to estimate the relationship between the financial impact of a new drug and the recommendation for reimbursement by the Australian Pharmaceutical Benefits Advisory Committee (PBAC).

Methods: Data in the PBAC summary database were abstracted for decisions made between July 2005 and November 2009. Financial impact—the upper bound of the values presented in the PBAC summary database—was categorized as ≤A$0, >A$0 up to A$10 million, A$10 million up to A$30 million, and >A$30 million per year. Descriptive, logistic, survival, and recursive partitioning decision analyses were used to estimate the relationship between the financial impact of a new drug indication and the recommendation for reimbursement. Multivariable analyses controlled for other clinical and economic variables, including cost per quality-adjusted life-year gained.

Results: Financial impact was a significant predictor of the recommendation for reimbursement. In the logistic analysis, the odds ratios of reimbursement for drug submissions with financial impacts ≥A$10 million to ≥A$30 million or >A$0 to <A$10 million compared with ≤A$0 were 0.12 (95 percent confidence interval [CI]: 0.03–0.51) and 0.16 (95 percent CI: 0.04–0.60), respectively. In the recursive partition decision analysis, the first split of the data was for submissions with a positive financial impact compared with those with a zero or negative financial impact.

Conclusions: In Australia, financial impact on the drug budget is an important determinant of whether a new drug is recommended for reimbursement when cost-effectiveness estimates and other clinical and economic variables are controlled.

Objectives: Research has shown that effectiveness, cost-effectiveness, and severity of illness each play a role in drug reimbursement decisions. However, the role of budget impact in such decisions is less obvious. Policy makers almost always demand a budget impact estimate yet seem reluctant to formally include budget impact as a rationing criterion. Health economists even reject budget impact as a legitimate criterion. For these reasons, it is important to examine its use in rationing decisions, and rationales underlying its use.

Methods: We trace several rationales supporting the use of budget impact through a literature review, supplemented by semistructured interviews with eleven key stakeholders involved in drug reimbursement decisions in the Netherlands.

Results: Budget impact arguments are used in certain instances, although policy makers appear uncomfortable with its use because well described rationales still are lacking. In addition, we identify the following rationales to support budget impact as a rationing criterion: opportunity costs, loss aversion, uncertainty and equal opportunity.

Conclusions: Budget impact plays a role in drug reimbursement decisions and has rationales to support its use. However, policy makers do not easily admit that they consider budget impact and are even reluctant to explicitly use budget impact as a formal criterion. A debate would strengthen the theoretical foundation of budget impact as a legitimate criterion in the context of drug reimbursement decisions. Such discussion of budget impact's role will also enhance policy-makers' accountability.