Generic drug prices and policy in Australia: room for improvement? A comparative analysis with England
Sarah J. Mansfield
+ Author Affiliations
- Author Affiliations
Department of General Practice, Deakin University, 2–18 Colac Road, Belmont, Vic. 3216, Australia. Email: s.mansfield1@gmail.com
Australian Health Review 38(1) 6-15 https://doi.org/10.1071/AH12009
Submitted: 30 November 2012 Accepted: 11 November 2013 Published: 31 January 2014
Abstract
Objective To assess the degree to which reimbursement prices in Australia and England differ for a range of generic drugs, and to analyse the supply- and demand-side factors that may contribute to these differences.
Methods Australian and English reimbursement prices were compared for a range of generic drugs using pricing information obtained from government websites. Next, a literature review was conducted to identify supply- and demand-side factors that could affect generic prices in Australia and England. Various search topics were identified addressing potential supply-side (e.g. market approval, intellectual property protection of patented drugs, generic pricing policy, market size, generic supply chain and discounting practices) and demand-side (consumers, prescribers and pharmacists) factors. Related terms were searched in academic databases, official government websites, national statistical databases and internet search engines.
Results Analysis of drug reimbursement prices for 15 generic molecules (representing 45 different drug presentations) demonstrated that Australian prices were on average over 7-fold higher than in England. Significant supply-side differences included aspects of pricing policy, the relative size of the generics markets and the use of clawback policies. Major differences in demand-side policies related to generic prescribing, pharmacist substitution and consumer incentives.
Conclusions Despite recent reforms, the Australian Government continues to pay higher prices than its English counterpart for many generic medications. The results suggest that particular policy areas may benefit from review in Australia, including the length of the price-setting process, the frequency of subsequent price adjustments, the extent of price competition between originators and generics, medical professionals’ knowledge about generic medicines and incentives for generic prescribing.
What is known about the topic? Prices of generic drugs have been the subject of much scrutiny over recent years. From 2005 to 2010 the Australian Government responded to observations that Pharmaceutical Benefits Scheme prices for many generics were higher than in numerous comparable countries by instituting several reforms aimed at reducing the prices of generics. Despite this, several studies have demonstrated that prices for generic statins (one class of cholesterol-lowering drug) are higher in Australia compared with England and many other developed countries, and prices of numerous other generics remain higher than in the USA and New Zealand. Recently there has been increasing interest in why these differences exist.
What does this paper add? By including a much larger range of commonly used and costly generic drugs, this paper builds significantly on the limited previous investigations of generic drug prices in Australia and England. Additionally, this is the first comprehensive investigation of multiple supply- and, in particular, demand-side factors that may explain any price differences between these countries.
What are the implications for practitioners? Practitioners may contribute to the higher prices of generic medications in Australia compared with England through relatively low rates of generic prescribing. There are also significant implications for health policy makers, as this paper demonstrates that if Australia achieved the same prices as England for many generic drugs there could be substantial savings for the Pharmaceutical Benefits Scheme.
References
[1] McLachlan A, Ramzan I, Milne R. Frequently asked questions about generic medicines. Australian Prescriber 2007; 30 41–3.[2] Birkett D. Generics − equal or not? Australian Prescriber 2003; 26 85–7.
[3] Department of Health and Ageing (DoHA). Update: questions and answers on new pricing and listing arrangements for generic medicines on the Pharmaceutical Benefits Scheme. Canberra: DoHA; 2005. Available at http://www.health.gov.au/internet/main/publishing.nsf/Content/8464B883F90180E1CA25732B0048D610/$File/qamar05.pdf [verified 11 July 2012]
[4] Clarke PM, Fitzgerald EM. Expiry of patent protection on statins: effects on pharmaceutical expenditure in Australia. Med J Aust 2011; 194 53–5.
[5] Clarke PM. Challenges and opportunities for the Pharmaceutical Benefits Scheme. Med J Aust 2012; 196 153–4.
| Challenges and opportunities for the Pharmaceutical Benefits Scheme.Crossref | GoogleScholarGoogle Scholar | 22339510PubMed |
[6] Bulfone L. High prices for generics in Australia − more competition might help. Aust Health Rev 2009; 33 200–14.
| High prices for generics in Australia − more competition might help.Crossref | GoogleScholarGoogle Scholar | 19563309PubMed |
[7] Spinks JM, Richardson JR. Paying the right price for pharmaceuticals: a case study of why the comparator matters. Aust Health Rev 2011; 35 267–72.
| Paying the right price for pharmaceuticals: a case study of why the comparator matters.Crossref | GoogleScholarGoogle Scholar | 21871185PubMed |
[8] Duckett S, Breadon P, Ginnivan L, Venkataraman P. Australia’s bad drug deal: high pharmaceutical prices. Melbourne: Grattan Institute; 2013.
[9] Clarke PM, Fitzgerald EM. Expiry of patent protection on statins: effects on pharmaceutical expenditure in Australia. Med J Aust 2010; 192 633–6.
| 20528715PubMed |
[10] Dylst P, Simoens S. Generic medicine pricing policies in Europe: current status and impact. Pharmaceuticals 2010; 3 471–81.
| Generic medicine pricing policies in Europe: current status and impact.Crossref | GoogleScholarGoogle Scholar |
[11] Dylst P, Simoens S. Does the market share of generic medicines influence the price level? A European analysis. Pharmacoeconomics 2011; 29 875–82.
| Does the market share of generic medicines influence the price level? A European analysis.Crossref | GoogleScholarGoogle Scholar | 21797288PubMed |
[12] Dylst P, Vulto A, Simoens S. Overcoming challenges in market access of generic medicines in the European Union. J Gen Med 2012; 9 21–28.
[13] Garattini L, Tediosi F. A comparative analysis of generics markets in five European countries. Health Policy 2000; 51 149–62.
| A comparative analysis of generics markets in five European countries.Crossref | GoogleScholarGoogle Scholar | 1:STN:280:DC%2BD3M%2FgsF2rtA%3D%3D&md5=fc320fc7ea5637ac268266a49e945cdeCAS | 10720685PubMed |
[14] Glowicka E, Lorincz S, Pearesi E, Romero LS, Verouden V. Generic entry in prescription medicines in the EU: main characteristics, determinants and effects. Brussels: European Commission; 2009.
[15] Godman B, Shrank W, Anderson M, Berg C, Bishop I, Burkhardt T, Garuoliene K, Herolz H, et al Comparing policies to enhance prescribing efficiency in Europe through increasing generic utilization: changes seen and global implications. Expert Rev Pharm Outcomes Res 2010; 10 707–22.
[16] Kanavos P, Costa-Font J, Seeley E. Competition in off-patent drug markets: issues, regulation and evidence. Economic policy. 55. De Menil, G., Portes, R., Sinn, H.-W. European Economic Association. Oxford: Blackwell Publishing; 2008. pp. 411–594.
[17] Puig-Junoy J. Impact of European pharmaceutical price regulation on generic price competition: a review. Pharmacoeconomics 2010; 28 649–63.
| Impact of European pharmaceutical price regulation on generic price competition: a review.Crossref | GoogleScholarGoogle Scholar | 20515079PubMed |
[18] Simoens S. A review of generic medicine pricing in Europe. Generics and Biosimilars Initiative Journal 2012; 1 8–12.
| A review of generic medicine pricing in Europe.Crossref | GoogleScholarGoogle Scholar |
[19] World Health Organization, Health Action International. Measuring medicine prices, availability, affordability and price components. 2nd edn. Geneva: World Health Organization and Health Action International; 2008.
[20] Thomson S, Osborn R. Squires D, Reed S (eds) International profiles of health care systems 2011. London: The Commonwealth Fund; 2011.
[21] Department of Health and Ageing (DoHA). National medicines policy. Canberra: DoHA; 2000.
[22] National Health Service. The NHS Constitution. London: Department of Health; 2005.
[23] House of Commons Health Committee. The Influence of the Pharmaceutical Industry: Fourth Report of Session 2004-05. London: House of Commons Office; 2009 Limited.
[24] Department of Health and Ageing (DoHA). Expenditure and prescriptions twelve months to 30 June 2011. Canberra: DoHA, Data and Modelling Section Pharmaceutical Policy and Analysis Branch; 2011. Available at http://www.health.gov.au/internet/main/publishing.nsf/Contents/pbs-stats-pbexp-jun11 [verified 10 July 2012]
[25] National Health Service. Prescription cost analysis England 2011. London: Health and Social Care Information Centre Prescribing and Primary Care; 2012. Available at http://www.ic.nhs.uk/statistics-and-data-collections/primary-care/prescriptions [verified 10 July 2012]
[26] National Health Service. Prescription cost analysis England 2010. London: Health and Social Care Information Centre Prescribing and Primary Care; 2011. Available at http://www.ic.nhs.uk/statistics-and-data-collections/primary-care/prescriptions [verified 10 July 2012]
[27] The World Bank. Data: population, total. The World Bank; 2012. Available at http://data.worldbank.org/indicators/SP.POP.TOTL [verified 25 February 2012]
[28] Adams B. NHS spending on drugs fell in 2011. InPharm. 2012. Available at www.pharmafile.com/news/172081/nhs-spending-drugs-fell-2011 [verified 14 July 2012]
[29] Pharmaceutical Benefits Scheme. 2012 Changes to PBS pricing arrangements: agree prices spreadsheet. Australian Government Department of Health and Ageing; 2012. Available at http://www.pbs.gov.au/info/industry/pricing/pricing-arrangements [verified 20 July 2012]
[30] National Health Service. Electronic Drug Tariff. NHS (England and Wales) Business Services Authority, NHS Prescription Services; 2012. Available at http://www.ppa.org.uk/edt/July_2012/mindex.htm [verified 14 July 2012]
[31] Office of Fair Trading (OFT). Medicines distribution: an OFT market study. London: UK OFT; 2007.
[32] Kanavos P. Do generics offer significant savings to the UK National Health Service? Curr Med Res Opin 2007; 23 105–16.
| Do generics offer significant savings to the UK National Health Service?Crossref | GoogleScholarGoogle Scholar | 17257472PubMed |
[33] Australian Taxation Office. Foreign exchange rates, translation to Australian dollars. Australian Taxation Office; 2012. Available at http://www.ato.gov.au/businesses/PrintFriendly.aspx?ms=businesses&doc=/content/22855.htm [verified 10 July 2012]
[34] Lofgren H. Generic medicines in Australia: business dynamics and recent policy reform. South Med Rev 2009; 2 24–8.
[35] Organisation for Economic Co-operation and Development (OECD). OECD policy roundtables: generic pharmaceuticals 2009. Paris: OECD Competition Committee; 2010.
[36] Pharmaceuticals Industry Strategy Group. Pharmaceutical Industry Strategy Group final report December 2008. Canberra: Pharmaceuticals Industry Strategy Group, Commonwealth of Australia; 2009.
[37] Simoens S. Generic medicine pricing in Europe: current issues and future perspective. J Media Econ 2008; 11 171–5.
| Generic medicine pricing in Europe: current issues and future perspective.Crossref | GoogleScholarGoogle Scholar |
[38] Faunce T. Drug price reforms: the new F1−F2 bifurcation. Australian Prescriber 2007; 30 138–40.
[39] Pharmaceutical Services Negotiating Committee. Reimbursement arrangements for mediciens. Pharmaceutical Services Negotiating Committee; 2012. Available at http://www.psnc.org.uk/pages/medicines.html [verified 23 July 2012]
[40] Department of Health and Ageing (DoHA). The impact of PBS reform. Report to the Parliament on the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007. Canberra: DoHA; 2010.
[41] Office of Fair Trading (OFT).. Medicines distribution: an OFT market study (Annexe D). London: UK OFT; 2007.
[42] de Boer R. PBS reform − a missed opportunity? Aust Health Rev 2009; 33 176–185.
| 19563306PubMed |
[43] Department of Health and Ageing (DoHA). Pharmaceutical Benefits Scheme expanded and accelerated price disclosure arrangements: procedures and operational guidelines. Canberra: DoHA; 2010.
[44] Generics Bulletin Price Watch UK: Category M switches can affect prices. Generics Bulletin 2012; 17 25
[45] Espicom. The world generic market report 2012. Volume II: national markets. West Sussex: Epsicom Business Intelligence; 2012.
[46] British Generics Manufacturers Association. Homepage. British Generic Manufacturers Association; 2012. Available at http://www.britishgenerics.co.uk [verified 11 July 2012]
[47] Espicom. The pharmaceutical market: Australia. Espicom; 2012. Available at http://www.espicom.com/ProdCat2.nsf/Product_Alt_URL_Lookup/pharmaceutical_market_australia?OpenDocument&BCID=00000002 [verified 11 July 2012]
[48] Mylan Inc. Form 10-K (annual report) for the year ended December 31, 2011. Canonsburg: Mylan Incorporated; 2012.
[49] Faunce TA. Challenges for Australia’s Bio/Nanopharma Policies: trade deals, public goods and reference pricing in sustainable industrial renewal. Aust New Zealand Health Policy 2007; 4 9
| Challenges for Australia’s Bio/Nanopharma Policies: trade deals, public goods and reference pricing in sustainable industrial renewal.Crossref | GoogleScholarGoogle Scholar | 17543114PubMed |
[50] Probyn AJ. Some drugs more equal than others: pseudo-generics and commercial practice. Aust Health Rev 2004; 28 207–17.
| Some drugs more equal than others: pseudo-generics and commercial practice.Crossref | GoogleScholarGoogle Scholar | 15527401PubMed |
[51] Chong C, March G, Clark A, Gilbert A, Hassali M, Bahari M. Brand substitution involved identical alternatives: a nationwide study undertaken among Australian community pharmacists. J Gene Med 2011; 8 158–65.
[52] Britt H, Miller G, Henderson J, Bayram C, Pan Y, Velnti L, et al. General practice activity in Australia 2009−10. Canberra: Australian Institute of Health and Welfare; 2010.
[53] National Health Service (NHS). Prescriptions dispensed in the community: England, statistics for 2000 to 2010. London: NHS Health and Social Care Information Centre; 2011.
[54] Australian Medical Association. Medicines − 2008 position statement. Australian Medical Association; 2008. Available at http:/www.ama.com.au/position-statement/medicines-2008 [verified 16 July 2012]
[55] Australian Government. Memorandum of understanding: Australian Government and Medicines Australia. Canberra: Commonwealth of Australia; 2010.
[56] Harvey KJ, Vitry AI, Roughhead E, Aroni R, Ballenden N, Faggotter R. Pharmaceutical advertisements in prescribing software: an analysis. Med J Aust 2005; 183 75–9.
| 16022612PubMed |
[57] Newby DA, Robertson J. Computerised prescribing: assessing the impact on prescription repeats and on generic substitution of some commonly used antibiotics. Med J Aust 2010; 192 192–5.
| 20170455PubMed |
[58] Australian Medical Association. Australian Medical Association brand substitution survey. Canberra: Australian Medical Association; 2006. Available at http://ama.com.au/node/4014 [verified 20 July 2012]
[59] Hassali MA, Kong DC, Stewart K. Generic medicines: perceptions of general practitioners in Melbourne, Australia. J Gene Med 2006; 3 214–25.
| Generic medicines: perceptions of general practitioners in Melbourne, Australia.Crossref | GoogleScholarGoogle Scholar |
[60] Carney SL, Gazarian M, Denholm JT, Reith DM, Penhall RK, Jenkins CR, et al What’s in a name? Brand name confusion and generic medicines. Med J Aust 2011; 195 650–1.
| What’s in a name? Brand name confusion and generic medicines.Crossref | GoogleScholarGoogle Scholar | 22171851PubMed |
[61] Hassali MA, Stewart K, Kong DC. A national survey on knowledge and perceptions of senior medical students in Australia about generic medicines. Med J Aust 2008; 188 123–4.
| 18205593PubMed |
[62] Simoens S. Trends in generic prescribing and dispensing in Europe. Expert Rev of Clin Pharmacol 2008; 1 497–503.
| Trends in generic prescribing and dispensing in Europe.Crossref | GoogleScholarGoogle Scholar |
[63] Duerden MG, Hughes DA. Generic and therapeutic substitutions in the UK: are they a good thing? Br J Clin Pharmacol 2010; 70 335–41.
| Generic and therapeutic substitutions in the UK: are they a good thing?Crossref | GoogleScholarGoogle Scholar | 20716231PubMed |
[64] Office of Fair Trading (OFT). Medicines distribution: an OFT market study (Annexe A). London: UK OFT; 2007.
[65] British Medical Association (BMA). BMA backs public accounts committee over generic drugs. Management in Practice. 2008. Available at http://www.managementinpractice.com/default.asp?page=article.display&article.id=7537 [verified 1 August 2012]
[66] Department of Health and Ageing (DoHA). About the PBS − frequently asked questions. Canberra: DoHA; 2012. Available at http://www.health.gov.au/internet/main/publishing.nsf/Content/health-pbs-general-faq.htm [verified 14 July 2012]
[67] Pharmaceutical Benefits Scheme. Browse price premiums. Australian Government Department of Health and Ageing Pharmaceutical Benefits Scheme; 2012. Available at http://www.pbs.gov.au/browse/brand-premium [verified 16 July 2012]
[68] Barker D. Bulky billing: missing out on fair and affordable health care. Policy Brief No. 28. Canberra: The Australia Institute; 2011.
[69] Pharmaceutical Health Information System. Generic policies out-patient sector 2010. Pharmaceutical Health Information System. 2010. Available at https://phis.goeg.at/index.aspx?_nav0031 [verified 14 July 2012]
[70] Simoens S, De Coster S. Sustaining generic medicines markets in Europe. Leuven: Research Centre for Pharmaceutical Care and Pharmaco-economics, Katholieke Universiteit Leuven; 2006.
[71] Chong CP, March G, Clark A, Gilbert A, Hassali MA, Bahari MB. A nationwide study on generic medicines substitution practices of Australian community pharmacists and patient acceptance. Health Policy 2011; 99 139–48.
| A nationwide study on generic medicines substitution practices of Australian community pharmacists and patient acceptance.Crossref | GoogleScholarGoogle Scholar | 20732723PubMed |
[72] Medicare. Premium free dispensing incentive. Australian Government Department of Health and Ageing; 2011. Available at http://www.medicareaustralia.gov.au/provider/pbs/pharmacists/reforms.jsp [verified 16 July 2012]
[73] Beecroft G. Generic drug policy in Australia: a community pharmacy perspective. Aust New Zealand Health Policy 2007; 4 7
| Generic drug policy in Australia: a community pharmacy perspective.Crossref | GoogleScholarGoogle Scholar | 17543112PubMed |
[74] Kanavos P, Holmes P, Loudon D, Mitchell S, Taylor D, Thomson J. Pharmaceutical parallel trade in the UK. London: Civitas; 2005.
[75] Hassali MA, Kong DC, Stewart K. Generic medicines: perceptions of consumers in Melbourne, Austalia. Int J Pharm Pract 2005; 13 257–64.
| Generic medicines: perceptions of consumers in Melbourne, Austalia.Crossref | GoogleScholarGoogle Scholar |
[76] Zweimuller J. Discussion (competition in off-patent drug markets: issues, regulation and evidence). De Menil G, Portes R, Sinn H-W, European Economic Association. Oxford: Blackwell Publishing; 2008. pp. 411–594.
[77] Doran E, Robertson J. Australia’s pharmaceutical cost sharing policy: reducing waste or affordability? Aust Health Rev 2009; 33 231–40.
| Australia’s pharmaceutical cost sharing policy: reducing waste or affordability?Crossref | GoogleScholarGoogle Scholar | 19563311PubMed |
[78] Sweeny K. The impact of copayments and safety nets on PBS expenditure. Aust Health Rev 2009; 33 215–230.
| 19563310PubMed |
[79] British Generics Manufacturers Association. About the BGMA: introduction. British Generics Manufacturers Association; 2012. Available at http://www.britishgenerics.co.uk/about-the-bgma/introduction [verified 24 July 2012]
[80] The Senate. Official Committee Handsard, Senate Community Affairs Legislation Committee. Reference: National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2010. Tuesday, 9 November 2010. Senate Community Affairs Legislation Committee. Canberra: Commonwealth of Australia; 2010.
[81] British Independent Pharmacy and Wholesale Association. Shortages of prescription medications in the UK: causes and solution. British Independent Pharmacy and Wholesale Association. 2012. Available at http://www.bipwa.co.uk/document/index.php [verified 24 July 2012]
[82] Walter E, Dragosits A, Said M. Distribution profile and efficiency of the European pharmaceutical full-line wholesaling sector. Vienna: Institute for Pharmaeconomic Research; 2012.
[83] Barnes T. It’s time to bust open the pharmacists’ closed shop. The Australian, 25 January 2012. News Corporation; 2012. Available at http://www.theaustralian.com.au/national-affairs/opinion/its-time-to-bust-open-the-pharamcists-closed-shop/story-e6frgd0x-1226252791691 [verified 14 July 2012]
[84] Thurecht N. Generics and the crystal ball. Aust J Pharm 2011; 92 51–53.
