Cost of drugs can be a hard pill to swallow

The pharmaceutical business is often described as one of the the most profitable industries on the planet. And Australian drug I worry about the consumer, says Professor David Jacksonprices are amongst the most expensive in the world.

As Federal Cabinet considers radical plans to bring down the costs of pharmaceuticals, Professor David M Jackson from Charles Sturt University’s (CSU) School of Biomedical Sciences explains why the price of drugs in Australia is too high.

According to Professor Jackson, part of the problem is a lack of competition between pharmacies. Recently, the pharmacy industry fought, and won, a battle with the major supermarkets who wanted to open chemist shops in their stores.

“You can buy small quantities of aspirin in a supermarket, and that’s cheap,” says Professor Jackson. But that’s where the bargains end for the consumer. “What you pay depends on the wholesale price plus the mark-up, which can vary between 40 and 70 per cent.”

At the moment, the pharmaceutical companies can virtually set their own price for a new drug. One example is the relatively recent statins…drugs for controlling cholesterol levels. “The patent life is about 14 years, and they can charge whatever the market will bear until a generic drug comes along. Australia spends one billion a year on statin drugs, that’s phenomenal,” says Professor Jackson, “New Zealand spends just fifty million a year on statins.” How come?

“Because New Zealand has a tender system. It says, we have a certain budget, we do not need six different statins. They tender it out.

“So effectively what New Zealand does is say, well, we haven’t got the money to subsidise these very expensive statins, we’ll subsidise one statin.”

It’s a good system for bringing down the price of pharmaceuticals, but it doesn’t explain the high cost of generic drugs in Australia.

“They cost next to nothing to make, why are they only a bit cheaper than the brand name? The government negotiates the price, and they have to balance the conflicting needs of the pharmaceutical industry, the consumer, the pharmacies.”

If Federal Cabinet adopts the New Zealand model, could there could be a backlash from the powerful pharmaceutical lobby?

“It’s hard to say. In New Zealand, some researchers say it’s harder to get research money. They also say a lot of clinical trials are now no longer done there, but I don’t really believe that. But what has happened is quite a few pharmaceutical companies have closed their doors and moved offshore.

“But I worry about the consumer. I don’t care about the Federal Goverment, I don’t especially care about the drug companies. Australia is going the way of the US, where people in a lower socio-economic group don’t have access to drugs.”