Australians Continue to Pay More for Pharmaceuticals Than Consumers in Other Countries

By Petrina Smith
Friday, 15 November, 2013

Australians continue to pay more for pharmaceuticals than consumers in other countries, although the introduction of generic medicines has contributed to some lowering of prices, according to research published in this month's edition of the Australian Healthcare and Hospitals Association’s journal, The Australian Health Review.

The report authors, Jean Spinks, Gang Chen and Lara Donovan, investigated the relationship between the number of generic medicines available in Australia and pharmaceutical prices over time.

For 76 items on the Pharmaceutical Benefits Scheme (PBS), results over four years suggested that there is a small but statistically significant relationship between the availability of generic medicines and lower prices. Overall summary statistics indicate that benchmark prices have decreased over time as generic drugs have entered the market, although, for nine items, the benchmark price increased when generics became available.

The report’s authors noted that “although increased generic entry may lower prices over time in the Australian context, the price reduction gained is likely to be very small. Whilst generic entry should be encouraged, it is important not to assume that this price-lowering effect is realized without question and that the magnitude of such an effect is comparable with other price-regulated countries.”

Recent studies have suggested that Australia is paying too much for many pharmaceuticals, particularly generics, in comparison with other countries. The researchers found that brand loyalty and volume discounts are also important factors influencing consumer choice and the substitution habits of the dispensing pharmacist. Simply relying on having more generic medications in the market is not enough to put downward pressure on prices.

“Australia has adopted a policy that promotes competition from generic drug sin the pharmaceutical market as a means of controlling prices without much evidence that is likely to be successful in the longer term. The Australian government needs to give some consideration to the way generic prices are determined if the policy aim of using competition to lower prices is to be successful. Monitoring the number of generic sellers in the PBS market to gauge the extent of competition, and the effect on benchmark prices over time, will also be useful to inform future policy decisions,” says Alison Verhoeven, Chief Executive AHHA.

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