High prices for generics in Australia : more competition might help

Bulfone, Liliana 2009, High prices for generics in Australia : more competition might help, Australian health review, vol. 33, no. 2, pp. 200-214.

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Title High prices for generics in Australia : more competition might help
Author(s) Bulfone, Liliana
Journal name Australian health review
Volume number 33
Issue number 2
Start page 200
End page 214
Publisher Australian Medical Publishing Company
Place of publication Sydney, N.S.W.
Publication date 2009-05
ISSN 0156-5788
1449-8944
Keyword(s) Pharmaceutical drugs
Prices
Competition
Australia - Social policy
United States - Social policy
Summary It is commonly believed that dispensed prices of medicines in Australia are substantially lower than those in other developed countries, particularly the US. This article reports the results of an analysis comparing dispensed prices for the most commonly prescribed and the highest cost items in Australia with dispensed prices in the US. Although a large majority of items are less expensive in Australia than in the US, Australian prices are higher for a substantial number of products, particularly generic drugs. This article examines various policies affecting the pricing of generics in Australia. It is postulated that the main cause for higher prices for a substantial number of generic products is the lack of price competition. This results from government policy which ensures that a price reduction by one company is communicated immediately to all competitors in that market along with an invitation to match the reduced price. The dominant strategy for all suppliers is to only reduce their price in response to a reduction in price by a competitor. The result is a lack of differentiation in pricing across brands of a medicine on the Schedule of Pharmaceutical Benefits. The government could improve the structure of the generics market and encourage greater competition by ceasing to disclose competitor firms’ offers to other competitors. The government could conduct pricing reviews of each generic product relatively infrequently (eg, only once annually or every 18 months). At the time of the pricing review, the government would request confidential offers on price for a generic from all players in the market. Brands should then all be listed under the Pharmaceutical Benefits Scheme (PBS) at the offered price. Prices offered by the individual supplier would apply until the next pricing review. The PBS would continue to subsidise up to the price of the lowest priced brand, with brand premiums applying to all brands priced higher than the benchmark price. Such an approach would provide opportunity for players in the market to capture market share by being thelowest priced brand.
Language eng
Field of Research 140208 Health Economics
160508 Health Policy
Socio Economic Objective 920207 Health Policy Economic Outcomes
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2009, Australian Medical Publishing Company
Persistent URL http://hdl.handle.net/10536/DRO/DU:30021318

Document type: Journal Article
Collection: Public Health Research, Evaluation, and Policy Cluster
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