03.Solutions to overspending
Capping the budget?
The shopping budget for
the PBS isn’t capped and
is growing fast. The good
news is that uncapped
spending means more
medicines can be bought
and made available to consumers. But on
the flipside, it also discourages thrifty
spending on the part of the PBPA.
The past decade has seen a 20%
increase in the number of PBS
prescriptions dispensed in pharmacies.
Yet the uncapped spending isn’t
something Medicines Australia sees
as a concern. In response to Duckett’s
report recommending capping, Shaw
argued that this could kill consumer
access to new therapies, with the
potential to turn our health system
into that of a “third-world country”.
The general price increases granted
by the PBPA for medicines in the 2011-12
financial year is collectively estimated
to add $25.17m to the cost of the PBS
and associated schemes over five years,
based on volume for each item at the
time of review.
Many governments around the world mandate prices for generics – as a
proportion of the price of the original
patented drug – to prevent overcharging
by companies that are essentially
replicating a formula. Harvey says
that while it is reasonable to pay good
money for innovative drugs, the price
of generics is a problem.
The issues surrounding the use of
generic drugs in Australia is twofold.
According to the Grattan report,
Australian prices for generics are
extremely high – on average, more than
seven times higher than New Zealand’s. Generics generally cost much less to
produce than patented medicines as
the research and development phase to
invent the drug – the costliest stage of the
process – has already been completed.
But despite mandatory price
reductions for generic medicines
introduced in Australia in 2005, the
price we pay for them is generally higher
when compared to other countries.
The current Australian off-patent price
reduction sits at just 16% below that
of the patented product. Duckett says
we should be aiming for at least a 50%
drop in price. Canada mandates an
80% price drop.
The second issue is the manner in
which government embraces generic
medicines. While 27% of medicines
on the PBS are no longer protected
by patent, only 11% of the drugs on
the PBS are generics.
Harvey says that, from a consumer
perspective, it is important to be aware
of “scurrilous propaganda [from the
pharmaceutical companies] that doesn’t
tell the full story” when it comes to
making a decision between original and
generic brands. “Prices would never fall
without generics,” he argues, emphasising
the importance of generics in driving
prices down during the negotiation
phase, which he believes could then
flow on to make more expensive drugs
available to consumers in the PBS.
CHOICE recommends discussing
generic options with your doctor and
pharmacist wherever possible.