Prescription medicine

Is the government’s unsavvy spending on prescription medicines costing consumers millions of dollars more per year than they need to pay?
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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.

Generic drugs

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.


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