NZ pricing model is better?
March 18, 2013
AUSTRALIANS are paying far too
much for prescription drugs,
especially drugs that are no longer
under patent, according to a new
report by the Grattan Institute.
The first report from Grattan
Institute’s Health Program,
Australia’s bad drug deal, compares
Australian drug costs with the
prices paid in New Zealand.
The report also looks at how drug
prices are set elsewhere and
explains the steps that will “get a
much better drug deal for
Australia”.
“In New Zealand, drug prices have
plunged dramatically, freeing up
money to spend on new drugs and
other kinds of care,” the report
said.
“New Zealand’s secret is simple.
“The Government has taken the
politics out of price-setting
and appointed independent
experts to make decisions.
It has also capped the budget for
drugs, which ensures clear
priorities and tough negotiations
with pharmaceutical companies.
“For Australia’s PBS, by contrast,
decisions on drug pricing are
opaque and unconstrained by a
budget,” the report added.
The report went on to criticise the
Department of Health’s PBS
committee, saying that two of its
six members are representatives of
drug companies.
“They have little interest in
keeping prices low,” the report said.
“In New Zealand, politicians
decide how much is spent on drugs
in total, then independent experts
negotiate prices.
“In Australia, expert judgements
come first but can be overridden by
political decisions.
“No one assesses how much we
should spend overall.
“As a result, our wholesale prices
for identical drugs are now more
than six times New Zealand’s.
“In some cases, they are more
than 20 times higher,” the report
added.
Steps to improve Australia’s
pricing process, according to the
report, include “reversing the
politics”.
“In other words, political choices
should determine the overall drug
budget, but not the value of
individual drugs at the end of the
process,” the report said.
“An independent board of
experts, with a defined, indexed
budget, should set prices.
“As well, the price of new
generics should be no more than
half the price of the originator,
with annual benchmarking against
the world’s best prices,” the report
added.
These changes would cut
“wasteful” spending by at least
$1.3 billion per annum, according
to the report.
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