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International pharmaceutical price differences

Research report

Released 20 / 07 / 2001

This report compares the prices that manufacturers receive for 150 pharmaceuticals under Australia's Pharmaceutical Benefits Scheme with those obtained in seven other countries.

The report has drawn on information obtained from consultations with government officials, industry representatives and academics both in Australia and overseas.

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  • Media release
  • Contents

Prices for pharmaceuticals listed on Australia's Pharmaceutical Benefits Scheme are much lower than in other key countries, according to the Productivity Commission study International Pharmaceutical Price Differences.

The comprehensive study found that prices in the USA are between 80 to 160 per cent higher than in Australia, and prices in Canada, the UK and Sweden are around 50 per cent higher. Prices in Australia are closer to those in France, and about the same as those in Spain and New Zealand.

The study compares manufacturer prices in Australia and the seven other countries for 150 pharmaceuticals listed on the Pharmaceutical Benefits Scheme (PBS), as at 30 June 2000. These items account for over 80 per cent of total expenditure on PBS-listed pharmaceuticals.

The study also looks at price differences for three particular types of pharmaceuticals, namely new innovative, me-too and generics.

Releasing the report, Commissioner Helen Owens said that 'prices in Australia for new innovative pharmaceuticals are closer to those in the comparison countries. The largest price differences are for me-too pharmaceuticals and, to some extent, generic pharmaceuticals.'

The Commission found that it was difficult to identify specific explanations for the observed bilateral price differences. The observed differences are probably due to a combination of influences, such as international differences in health systems, pharmaceutical subsidy and cost-containment mechanisms and production costs.

However, there is some evidence to support the view that Australia's cost-containment arrangements may have contributed to keeping prices relatively low.

The study was commissioned by the Commonwealth Government, following discussions within the Pharmaceutical Industry Working Group, a consultative forum comprising government and pharmaceutical industry representatives.

Cover, Copyright, Foreword, Contents, Abbreviations and explanations, Glossary, Terms of reference, Key Messages

Methodology and data
Key results
Reasons for price differences

1 Introduction
1.1 Background to the study
1.2 Scope of the study
1.3 Previous studies
1.4 The Commission's approach
1.5 Outline of the report

2 Government interventions
2.1 Patent protection
2.2 Pharmaceutical subsidy arrangements
2.3 Cost-containment policies
2.4 Other government interventions
2.5 Conclusion

3 International price comparisons
3.1 Methodology
3.2 International price comparisons
3.3 Price comparisons by therapeutic group
3.4 Sensitivity of results
3.5 Conclusion

4 Reasons for price differences
4.1 Subsidy arrangements
4.2 Cost-containment mechanisms
4.3 Market launch of new pharmaceuticals
4.4 Price differences for individual categories
4.5 Conclusions

A Consultation
A.1 List of visits
A.2 Roundtable attendees
A.3 Overseas consultation

B International subsidy arrangements
B.1 Canada
B.2 France
B.3 New Zealand
B.4 Spain
B.5 Sweden
B.6 United Kingdom
B.7 United States

C Methodology
C.1 Introduction
C.2 Choosing the basket of molecules for comparison
C.3 Choosing molecules within the basket
C.4 Matching molecules
C.5 Prices used
C.6 Converting prices to a common currency
C.7 Weighting manufacturer prices

D Data sources
D.1 Summary of sources
D.2 IMS Health data
D.3 Australia
D.4 United States
D.5 United Kingdom
D.6 Canada
D.7 New Zealand
D.8 France
D.9 Sweden
D.10 Case study

E Results in detail
E.1 Analysis of matching results
E.2 List price comparisons
E.3 Diagnostic tests
E.4 Price comparisons with Federal Supply Schedule
E.5 Difference between higher and lower estimates of prices
E.6 Therapeutic groups
E.7 Molecule age and launch delay

F Case studies of price differences
F.1 Ranitidine
F.2 Paroxetine
F.3 Salmeterol


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