Australasian Science: Australia's authority on science since 1938

A Better Deal for Meds

Image of pills

Australians are paying much more for medicines than they should.

By Ian Lowe

If you want cheaper medicines, get a prescription in New Zealand.

Why do pharmaceuticals cost much more in Australia than in New Zealand? Sydney University’s Philip Clarke and Ed Fitzgerald say Australians are paying much more than they should. They examined specific cases, such as one drug commonly used to treat patients with high cholesterol levels. The wholesale price of Simvastatin in Australia is about $30 per month for regular 40 mg doses. The same treatment would cost $1.50 across the Tasman. Clarke suggested in a recent newspaper article that Australians travelling to New Zealand might make a point of stocking up on the cheaper drugs.

The problem is the agreement between the government and the drug companies that fixes the prices of pharmaceuticals once patents expire. The price of Simvastatin has roughly halved in Australia since its patent expired in 2006, but in most other countries the price has dropped by 95% or more.

New Zealand and The Netherlands have a practice of putting the supply of main generic medicines out to tender, resulting in huge savings. By contrast, the current Australian government has followed the practice of the Howard administration, agreeing to modest reductions in drug prices.

Clarke and Fitzgerald estimate that just paying UK prices for one class of drugs would save Australia about $250 million per year. Under the latest deal there will be no significant price reductions before 2014.

Clarke also argues that we should encourage medicos to prescribe generic drugs rather than more expensive brand names. UK guidelines recommend using the lower-cost alternatives where possible. In the absence of similar guidance, Australian GPs are much more likely to prescribe the pricey drugs. As Clarke concluded: “It’s hard to see how this is in the interest of consumers or taxpayers”.

The response from the industry lobby group, Medicines Australia, was to say that some new drugs are not sold in New Zealand.

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There are worrying signs coming from the Australian electricity industry. Investors are understandably nervous about building new generating capacity. Most are realistic enough to recognise that there has to be an emissions trading scheme or a carbon tax in the near future.

The major political parties are locked into irresponsible inaction in the short term, but it is hard to see how that can continue. There are worrying indications of accelerating climate change. Despite a recent campaign of misinformation, there remains the inconvenient political truth that most voters want a concerted response.

Opinion polls suggest the Prime Minister badly misread the public mood when he backed down on climate change. The same vested interests that opposed the emissions trading scheme are now running a vigorous campaign – presumably subsidised by taxpayers – to oppose the government’s proposed resource rent tax on mineral production.

In that context, I was surprised to see the cost to the community of subsidising the mining industry’s diesel fuel use. When the Howard government introduced its Goods and Services Tax, it agreed to exempt farmers from paying the tax on fuel by establishing a diesel fuel rebate. This same deal was quietly extended to the mining industry. Last year it cost the government $1.7 billion. In other words, an average Australian household paid nearly $200 last year to subsidise mining companies’ fuel use.

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A recent visit to Alice Springs alerted me to the water problem in that desert community. Originally established near a reliable source of water, the town’s demand outgrew the capacity of that source decades ago so a new body of groundwater was tapped. It is very high quality water, needing little treatment, but it is about 25,000 years old so the town is living beyond the capacity of the aquifer to provide sustainable amounts of water. And local use is very high – about 800 litres per person per day. By contrast, Melbourne has a target of getting water use per person down to 155 litres per person per day.

The heavy use of water requires, in turn, large amounts of electricity for pumping. So saving water also saves energy and money, and helps to slow global climate change.

A local conservation program, Cool Mob, has signed up 1900 homes out of a possible 8000 for measures to save water. That is a promising start.

Ian Lowe is Emeritus Professor of science, technology and society at Griffith University.