Drug policy may save $300 million

Government and patients would save millions of dollars with this policy.

A scheme that could save the government $300 million on Pharmaceutical Benefits Scheme (PBS) costs would also encourage drug companies to invest in research into innovative breakthrough drugs.

A new report from the Grattan Institute shows that the government is losing $320 million per year on PBS drugs. However, this could be reversed if a current policy, which has been in place in Australia since 1998, is implemented properly.

The therapeutic group premium policy sets PBS prices based on the best value drug available, preventing the government from wasting money on over-priced drugs. While there are many similar drugs available that can combat certain conditions, prices can vary significantly. The government price would be fixed at the cost of the least expensive option. The saving would then be passed along to the patient.

The policy repeatedly failed implementation in the past because the pharmaceutical industry turned a blind eye to the purchase of high-cost drugs while ignoring many of the cheaper ones. The government is also accountable, since it publishes a manual advising drug companies about how to set drug prices so as to avoid triggering the policy. In Australia, the policy is applied to just four groups of drugs. By contrast, Germany has 30 groups and in the Netherlands nearly every drug is accounted for.

An extra fee would be applied to drugs from companies that fail to be competitive and cut their prices. This may drive patients towards better value options, as they would be able to choose drugs without premiums. Doctors could have the extra fee waived if their patients faced risks from using the low-cost option. The competitive pricing of similar drugs would encourage drug companies to focus money on developing new, worthwhile drugs and to make them as cost-effective as possible.

To rectify the situation and fix the policy and ensure vested interests are kept out of policy making, the Grattan Institute says that Australia should establish an independent drug purchasing agency. New Zealand’s PHARMAC works to negotiate better drug prices and enforce the therapeutic group premium policy. In Australia, ensuring the therapeutic group premium policy is enforced would save millions of dollars for both government and patients.

Read the Grattan Institute report.


    To make a comment, please register or login
    24th Jun 2015
    This wouldn't work because then someone in the public service would actually have to make a decision.
    24th Jun 2015
    It's difficult to raise this but I suspect that may elderly are way over prescribed their medication. When my mother first went into a low level hostel we naturally reviewed the pills she was taking. She was taking buckets of pills till we did a full review of her medication. The Dr and Pharmacies seem to do very well out of the elderly? Plus she was being over charged as they did not apply the prescription limit to her. Frankly my mother was being ripped off. Any one else have this experience?
    25th Jun 2015
    I totally agree that money can be saved with cheaper medication but it has to be as effective as the original I have been taking Nexium for a couple of years and was put onto a new "just the same " but it did not work found other people with the same problem using this drug. After speaking to many people without answers the nurse at my doctors surgery told me the drugs are probably the same but the fillers are not and these are what upsets some people this has since happened with another one and I am told yes I can have the one I have been using for a few years but it will cost more ,so do we pay more use a drug which is not doing the job or go wothoutand suffer in silence
    26th Jun 2015
    no i wouldn't suffer in Silence gerry you have a right to get the correct medication for you.
    Complain to your doctor, about the other one that was supposed to be the same, and if he's a good doctor he will complain to the drug company if he gets enough complaints if> as they all get a small cut if they prescribe that med to you? It does make you wonder if they care at all sometimes. If not much is done i'd change doctors :( gl with that

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