AUSTRALIA REIMBURSEMENT CUTS PROMPT INCREASED COST FEARS

Local politicians have criticised proposed drug reimbursement price cuts in Australia. The plans envisage a 12.5% reduction, which some sources say could actually increase prescription drug prices if the cut is applied to generic drugs. The move would effectively discourage producers of cheap drugs from making the products, and, according to the claims, drive up prices across the sector.

Australia's government is continuing to discuss the pricing plans with both research-based and generic drug producers. However, few drug companies are likely to welcome further cuts, as the country's drug spending is already among the lowest in the developed world, at an estimated 1.2% of GDP. The government's reimbursement framework, the Pharmaceutical Benefits Scheme (PBS) accounts for around 60% of the market, valued at some US$320mn in 2003, and authorities continue to encourage greater penetration by generic drugs.