Australia Could Save $1.4 million per Day paying NZ Drug Prices

It’s a well-known fact that Australia is paying up to 21 times more for 19 of the 20 most common prescription drugs. This comes eight years after the government was supposedly meant to resolve the high costs issue in our country. The continued expense means that Australian taxpayers are throwing away at least $400 million per year on generic medicines.

How can the government be wasting so much money compared to other countries and why are general consumers having to put up with paying more for their medical treatments. It's under the Australian pharmaceutical benefits subsidy scheme that the government agrees the price it pays chemists for medicines. However, drug companies sell the pills much cheaper to chemists who then make profits of up to 80%. So is this right?


The most popular prescription drug in Australia currently is the cholesterol lowering medicine called Atorvastatin, which costs $19.69 per pack - nearly twice what it costs in the UK ($10.45).

The balance between Money and HealthEight years ago the government brought in a price disclosure policy, which identified the discount prices the pharmaceutical manufacturers were offering to chemists, in an aim to recover savings for taxpayers. Estimates suggest that the government will save a massive $18 billion from imposing these reforms from 2007 to 2017.

Little to our surprise, however, the Pharmacy Guild has complained that the new policies within the current financial year has cut profits of an average pharmacy by $90,000. Despite their complaint, the University of Melbourne’s economist Professor Philip Clarke discovered that as a country we are still overpaying for generic drugs despite the huge saving. He says:

The Australian government is still paying way more for other drugs for example each tablet of a typical dose of (antipsychotic) Olansapine costs $2.55 (each pill) in Australia, but just 13 cents in England,” he explained.


His analysis showed more staggering results such as the anti blood clotting drug Clopidogrel which costs the Australian government $12 per pack, while the British government only pays $3.60 for each pack. Still not convinced, well how about antidepressant and anti-anxiety medication such as Venlafaxine which costs our taxpayers $11.10 per pack, when Britain are paying just $2.70 for theirs. Professor Clarke went on to say “there is significant scope for the Government to make further savings and to implement policies that would make widely used drugs cheaper for many consumers.”

Stephen Duckett, a former secretary of the Commonwealth Health Department found that even if Australia paid the same prices as New Zealand did for 62 identical drugs, we could save $1.1 billion per year. The Commonwealth would save $1.4 million each day if it paid New Zealand prices for the cholesterol drug atorvastatin.

How the Government Spends Money on DrugsAs if all that wasn’t enough of a headache, the government is now about to negotiate a five-year funding deal with the Pharmacy Guild worth a staggering $15 billion. This, along with this weeks news that the Pharmacy Guild want the government to sign a letter agreeing that supermarkets cannot sell prescription drugs, has the Australia medical Association president Professor Brian Owler flabbergasted. Effectively taxpayers are paying $15 billion to protect pharmacists.

Peter Dutton, Australia’s Health Minister has already warned that health costs are getting out of control. Although this didn't stop his planned increase in Pharmaceutical Benefits Scheme (PBS) medicine prices as of January 2015, with increases of $5 for workers and 80 cents for pensioners. This has pushed up the maximum cost of a prescription to $42.

The rise will knock family budgets by $4.8 billion over the next four years, with patients in some electorates facing increased costs of $300. This is making pensioner's decisions between food, heating and healthcare more and more difficult.


Health Costs are rising for everyoneSo if our government paid true market prices for generic medicines we could see our drug costs decrease by as much as 50%. This would in turn also mean that the government would save $400 million per year, which is $100 million, more than it plans to save from increasing our meds by $5. To put these figures into perspective, that $400 million could pay for 42,000 hip replacements or 1,113,000 tonsillectomies, 726 new hospital beds or 12 new cancer centres.

There is some light at the end of the tunnel, argues a spokesman from the Pharmacy Guild, saying “People should be wary of selective comparisons with overseas countries. We could provide examples of drugs cheaper in Australia than overseas, systems are different.”. He continues “We are reaping far greater savings than expected for the taxpayer and over the next five year’s pharmacy agreement, we estimate the savings from price disclosure will be $14 billion.”

Mr. Dutton exclaimed “the easy option would be to tell everyone everything is free. At the moment we raise $10 billion from the Medicare levy and spend $20 billion a year on Medicare.”


However, in my opinion if we had cheaper drugs to start with we wouldn’t have a constant need of finding ways to reduce costs, especially not through a $15 billion agreement with the Pharmacy Guild. It almost seems like the government could avoid its 8% GST hike, if it simply organised itself a bit better and fought for better agreements that other countries have like the UK and New Zealand with so called “Drug Lord Corporations.” We are not a developing country; Australia should be able to afford a good health system.

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