5
Mar
2017

Cutting a better drug deal

by Stephen Duckett


Australians pay more than $500 million a year too much for their prescription drugs.

Taxpayers and patients would pay less if the Federal Government made some simple changes to the way prices are set under the Pharmaceutical Benefits Scheme.

Drug prices in Australia are more than twice as high as in the UK and more than three times higher than in New Zealand.

Australians on average pay five times the best international price for a group of seven commonly prescribed drugs. The price of the cholesterol medicine atorvastatin (Lipitor), the most prescribed drug in Australia, is about 1.5 times the best international price. In Australia, a box of 30 1mg tables of the breast cancer drug anastrozole (Arimidex) costs $19.20. In the UK it is just $2.45.

The high price doesn’t just hit Australians in the hip pocket, it harms their health: in the past 12 months about 8 per cent of Australians didn’t get, or deferred getting, prescribed drugs because they couldn’t afford them.

The Commonwealth Government is overpaying for generic medicines that are no longer covered by patents. Drug companies are already forced to reveal how much pharmacies actually pay for generic medicines, and the government reduces the amount it pays to pharmacies for each drug accordingly. But this policy is working too slowly. The government should benchmark the prices of generic drugs in Australia against prices paid overseas. This would save $93 million a year and cut the price of 16 commonly prescribed drugs in Australia by an average of $6.43 per pack.

In addition, the government needs to overhaul the rules for interchangeable drugs that are equally effective and safe for most people. Such drugs are supposed to be put into “therapeutic groups”, and within each group the government only pays the price of the cheapest drug.

But Australia’s “therapeutic group premium policy” is riddled with loopholes. Taxpayers and patients could save a further $445 million a year if the policy were strengthened and broadened to cover 18 therapeutic groups, which are all included in a similar policy in Germany.

Australia is buying and pricing its drugs the wrong way. Fixing this policy would give patients a better deal and improve the budget bottom line.

Listen to a podcast with Stephen Duckett discussing the report

Read the media release

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