The use of the Pharmaceutical Benefits Scheme (PBS) for dispensing discharge prescriptions in public hospitals and the implementation of national guidelines to improve the quality of care of patients in transition between hospital and community have been proposed by the Commonwealth. Issues relevant to the implementation of these reforms include the financial risks to States and hospitals, the impact of PBS procedures on hospital practices and the availability of pharmacists. If implemented, the dual sources of pharmaceutical funding would remain, perpetuating the opportunities for cost shifting, and inequities in access would continue. An alternative reform could entail the Commonwealth funding all pharmaceuticals in hospitals using a model developed specifically to complement hospital practices. Support for hospitals to improve the quality of patient care should be provided regardless of the pharmaceutical funding model.