Healthy Skepticism Library item: 19599

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Publication type: news

Dunlevy S
High-priced generics push out new drugs
The Australian 2011 Jun 4
http://www.theaustralian.com.au/news/nation/high-priced-generics-push-out-new-drugs/story-e6frg6nf-1226086728647

Full text:

OVER the next five years the Australian government will pay $1.66 billion more per prescription for generic drugs to lower cholesterol than does Britain.

And if Australia matched Britain’s price, taxpayers could subsidise new breakthrough drugs for cancer, schizophrenia, pain relief and blood clots, says Sydney University associate professor Philip Clarke.

Professor Clarke says his research shows Australia pays among the highest prices in the world for generic versions of the cholesterol-lowering drug Simvastatin, which costs the government $31.18 a month under our medicine subsidy scheme.

In Britain, Simvastatin costs $3 a month, and in the US Kmart pharmacies sell it for $5.90, while in New Zealand it costs just $1.44. The average international price is $6.45 a month.

The Gillard government’s pharmacy reforms, meant to save taxpayers $1.9bn over five years, are taking too long to cut the price, Professor Clarke says.

The problem will be compounded when the nation’s top-selling drug, Lipitor, another anti-cholesterol medicine, comes off patent next year, he says.

Lipitor costs $17 a month in Canada, where it is already off patent, but under a memorandum of understanding our government reached with the medicines industry the $61 wholesale price for 40mg Lipitor in Australia will be cut by only 16 per cent to $51.24 next year when it comes off patent here, and will not decline further until 2014.

Even under patent, Lipitor costs in Britain, just $47 per month, and in New Zealand it costs just $37.

Statins account for 16 per cent of the $10.3bn spent under our Pharmaceutical Benefits Scheme which subsidises medicine prices.

Australia pays more for medicines because the price is set by a regulation that prompts a price cut of just 16 per cent when a new, generic competitor enters the market, and then a 12-month price disclosure process that reveals what price pharmacists pay.

Other countries such as Canada cut the price they pay by 75 per cent when a drug comes off patent, while New Zealand and The Netherlands run a tender system that delivers much cheaper medicines.

To contain the costs of the drug subsidy scheme, the Gillard government has this year delayed assistance for six new medicines that its expert advisory body wants subsidised.

The government says it cannot afford to pay for a cost-saving new schizophrenia medication, Invega Sustenna, a pain relief drug called Targin, a drug to prevent blood clots called Fragmin, a treatment for lung problems called Symbicort, an endometriosis treatment called Synarel and a medical use for Botox.

Professor Clarke says the government could easily afford subsidies for these and other drugs if it cut the price it pays for generics.

He says one way of doing so would be to move to a tender system such as the ones used in New Zealand or The Netherlands.

Another option would be to include a basket of overseas prices in the price disclosure system.