AUSTRALIA STRUGGLES TO CONTAIN DRUGS BILL

The Australian Ministry of Health could implement new regulations to cut pharmacy profits from the sale of reimbursable drugs. Under the proposals, incentive payments for wholesalers could also be withdrawn, while average prescription payments would increase to AUD11.25 (US$8.46) from the current level of AUD9.95 (US$7.48).

The Australian government is committed to reducing spending on its AUD6bn (US$4.51bn) Pharmaceutical Benefits Scheme (PBS). A recent economic model has forecast that prescription numbers will grow by 23% over the next five years, and the scheme already represents 75% of the market. However, attempts to raise prices and introduce patient co-payments have been opposed both by the drug industry and the public in recent years.

Local observers have stressed the need for greater generic substitution, claiming that without such measures the PBS is in danger of collapse. Unless the five most expensive drugs on the PBS are replaced with generic alternatives within 24 months, it is estimated that the scheme's costs will rise by as much as AUD1.5bn (US$1.12bn).
However, Australia's recent free trade agreement with the US has limited the government's freedom of action. The agreement is expected to favour multinationals and will affect Australian pricing controls, while discouraging generic provision.