However, an expected cut in what the federal government pays for medicines failed to materialise in Tuesday's budget.
Nor did a push to strip some over-the-counter medicines from the Pharmaceutical Benefits Scheme.
Treasurer Joe Hockey said the $1.6 billion, five year funding increase would help give 1000 people subsidised access to expensive melanoma treatments.
"Some of these treatments have until now cost up to $131,000 per course of therapy," he told parliament.
"Now they are accessible for all Australians."
The government has also saved $252.2 million over five years from price changes to already listed drugs.
The government was expected to announce a $3 billion saving from a five per cent reduction in pay-outs to pharmaceutical companies, and a $1 billion saving from removing simple pain killers from the PBS.
However, negotiations with the drug companies and pharmacists are continuing.
WHAT'S IN THE BUDGET FOR SUBSIDISED MEDICINES
* $1.6 billion over five years for new and amended drug listings.
* New treatments for multiple sclerosis, breast cancer and colorectal cancer.
* Savings of $252.2 million over five years from price changes to already listed drugs.
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