Pharmaceutical Pricing Policies in Australia

Abstract

This chapter presents the health care system in Australia, the regulation and funding of medicines, the medicine supply chain, and the successive medicine pricing policies that have been implemented over the last two decades. We include an analysis of the impact of these policies on prices of pharmaceuticals in Australia compared to prices in other similar countries.

The Pharmaceutical Benefits Scheme (PBS) is the Australian public insurance program that provides subsidised prescription medicines to all Australian residents. The Scheme is also the process by which medicine prices are regulated. Reference pricing and value based pricing have been the cornerstones of the pricing of subsidised pharmaceuticals since the introduction of mandatory economic evaluation in 1993. In the 1990s, Australian medicine prices were found to be competitive compared to similar countries. Since 2000 there has been a change in the structure of the medicine market driven by a large increase in the number of generic medicines as a result of the end of patent protection of commonly used branded medicines. A number of pricing reforms were implemented successively in 2005, 2007, 2010 and 2014 with the objective to align PBS prices for generic medicines with pharmacy purchase prices. The price reforms included a series of mandatory price reductions and the introduction of price disclosure cycles, the latter which require manufacturers of generic medicines to provide information about their market prices to pharmacists so that PBS-listed medicines prices can be adjusted in line with the market price.

Overall, these policies have been effective in decreasing medicines prices and pharmaceutical expenditure. However, there are still higher prices of generic medicines compared to some countries such as New Zealand and the United Kingdom. The high prices for new medicines requested by the pharmaceutical industry may now represent the most pressing challenge faced by the Australian PBS and will require further development of pricing agreements.

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