01.Pricing loophole costs us millions
Australian health policy experts, Professor Philip Clarke and Alex Avery
, have found drug pricing loopholes which allow combination drugs – which involve two drugs combined into one tablet – to be sold at a higher price than total price of the two drugs sold separately.
Combination drugs are increasingly prescribed by Australian doctors, especially for people with chronic conditions. Their main advantage is that people need to take fewer pills, therefore leading to better patient compliance – people are more likely to take the drugs as prescribed and therefore gain the health benefits of them. And initially at least, it’s cheaper than buying the drugs separately.
One of the best examples highlighting the problem is clopidogrel + aspirin, which prevents heart attack, stroke and premature death. On the PBS the dispensed price is $54.96, for which ordinary (non-concessional) patients pay $36.90. However, clopidogrel is just $20.88 and you can buy 100 aspirin for around $3, leaving the government and the consumer out of pocket, with the aspirin component adding as much as $1.10 per tablet.
So how does a pharmaceutical company make this profit? By introducing two brands of the same drug. Initially the price of a combined drug is linked to the component drugs, and is the same or cheaper than the component drugs. So when the component prices fall – for example when they come off patent – the price reductions apply to the combination drug.
However, if after the initial PBS listing there is more than one brand of the combination drug, even if they’re from the same manufacturer, the rules change and the cost is no longer linked to the component drugs.
Clarke and Avery have identified other manufacturers taking advantage of this by introducing a second brand of a combination drug just before the end of the initial PBS listing period, allowing them to charge higher prices.
The authors have calculated that the price differential of the clopidogrel + aspirin combination is around $20 million for the Australian government and around $2.5 million for the 12,000 consumers who take it – and that’s just one combination drug. With similar scenarios among other combination drugs it could be costing the government a total $120 million per year.
While the higher price could be at least partly recouped in health system cost savings due to greater patient compliance, the authors recommend a new pricing framework for combination drugs where costs are permanently linked to the component drugs.