Guest post by Philip Clarke on the price of medicines

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As you may know over the last few years I have been arguing for a reduction in the price of common generic medications in Australia. Due to policy shortcomings, Australia currently pays some of the highest prices in the world for many of its generic medications. For example, a recent chapter of a CEDA report (The price is wrong: Pharmaceutical expenditure in Australia over the last decade and options for reform) shows Australia is spending $1.3 billion per year more than England on the 8 most costly generic drugs (see p.47).

Not only does this impact on taxpayers but also consumers. For example, using current prices for the PBS and the comparable prices for the England, the dispensed prices for a drug like atorvastatin 40mg would fall from $52.73 to $11.69.

The first positive signs of change  occurred in early August in the last Budget update, when the Government moved to reduce the period over which prices for generics change from 18 to 12 months. While this is still much slower than England (where prices adjust every three months), this will bring about significant savings to government and consumers (estimated to be over $800million over 3 years).

The Pharmacy Guild has embarked on a campaign to oppose these changes arguing that it will impact on pharmacy profitability and result in 5000 job cuts. While the former maybe true, it hard to judge the latter, particularly as the funds pharmacy owners receive from high price generics come on top of the $600,000 they receive on average through the Community Pharmacy Agreement.

Interestingly, the price disclosure policy is bi-partisan policy, having been introduced by Tony Abbott when he was Health Minister in 2007. Importantly, when he introduced the policy he made it explicit that its purpose was to  remove most of the funds flowing to pharmacists from high generic prices: “Now the difference in price under our system as it currently stands is mostly accruing to pharmacists by way of discounts and so what we are trying to do with these changes is to harvest most of those discounts for the benefit of taxpayers”. The recent changes are simply designed to speed-up the rate at which reductions in wholesale prices flow through to consumers and taxpayers.

THE BOTTOM LINE: THE CONSUMERS HEALTH FORUM, CHOICE AND ACOSS have just launched a campaign ‘Stand up for Cheaper Medicines’ which includes an email campaign for candidates in the upcoming election:

Please consider participating to enhance general consumer welfare across Australia!

Philip Clarke

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