A new report has found that Australians pay at least 14 times that of people in the UK, New Zealand and Canada for prescription drugs. And breast cancer sufferers could be paying 28 times more for some drugs.
The report by the Grattan Institute compared wholesale drug prices in Australia compared to other countries, and came to the conclusion that we pay over $1 billion too much for pharmaceuticals.
Grattan institute health program director Stephen Duckett, gave a number of examples to ABC News. Mr Duckett said Atorvastatin, one of the highest use drugs in Australia, used to lower cholesterol, had its price dropped from $30 to $19 yesterday, but was still way more expensive than overseas. He says the same pack in the UK was the equivalent of $2.84, and across the ditch in New Zealand, it's even less at $2.01. Breast cancer drug anastrozole costs $92 for a box of 30 tablets in Australia, but in the UK just $3.30 equivalent. That's nearly 28 times more for the same drug.
Despite prices for several drugs under the Pharmaceutical Benefits Scheme (PBS) dropping yesterday by an average of 34%, Mr Duckett says there are bigger savings to be made if the government adopted a different pricing structure. He says rather than relying on drug manufacturers providing information on discounts provided to pharmacies, and then the government adjusting the amount paid to pharmacies under the PBS, the government should adopt a benchmarking system.
He thinks the government should compare prices for drugs in comparable countries and then set its prices at that level and refuse to pay more than that. Mr Duckett says the government has too much red tape to deal with, and that the drug companies sit on both sides of the table when prices are set.
But it's also not clear where those profits are going.
Drug distributors like Australian Pharmaceutical Industries (ASX: API) and Sigma Pharmaceuticals (ASX: SIP) don't appear to be beneficiaries, with very small profits and profit margins of less than 1%. In fact, very few Australian health care companies generate profit margins over 10%. What's more, API also operates a number of pharmacies under the Soul Pattinson brand name. Washington H. Soul Pattinson (ASX: SOL) has a majority stake in API.
Foolish takeaway
If the report's claims are true, it's despicable that Australian consumers are being forced to pay much higher prices that our compatriots in the UK, Canada and New Zealand. The government may want to pay attention to the report too, as it could mean billions saved under the PBS.
