Finding ways of curbing government expenditure on the PBS while maintaining social equity and access to 'essential' medicines is at the centre of ongoing public debate. This paper outlines future developments that will extend the current model to include health outcomes. Adding health outcomes represents a path-breaking advancement in modelling the PBS and will advance the debate on PBS sustainability beyond the prevailing cost containment mentality to consider not only the costs of pharmaceutical use but also the benefits that result from the use of these medicines.