Paying the right price for pharmaceuticals: a case study of why the comparator matters

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doi:10.1071/AH10930

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Paying the right price for pharmaceuticals: a case study of why the comparator matters

Jean M. Spinks ^A and Jeff R. J. Richardson ^A ^B

^A Centre for Health Economics, Monash University, Level 2, Building 75 Clayton Campus, Clayton, VIC 3800, Australia. Email: jean.spinks@buseco.monash.edu.au
^B Corresponding author. Email: jeff.richardson@buseco.monash.edu.au

Australian Health Review 35(3) 267-272 http://dx.doi.org/10.1071/AH10930
Submitted: 1 June 2010 Accepted: 13 December 2010 Published: 25 August 2011





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Abstract

This article considers the pricing policy for pharmaceuticals in Australia, which is widely seen as having achieved low drug prices. However, compared to New Zealand, the evidence implies that Australia might have improved its performance significantly if it had proactively sought market best pricing. The Australian record suggests that the information sought by authorities may not be sufficient for optimal pricing and that the economic evaluation of pharmaceuticals may be neither necessary nor sufficient for achieving this goal.

What is known about the topic? Pharmaceutical expenditures vary significantly across countries. Few surveys exist to determine the role of price but these suggest that Australian prices are relatively low compared with most OECD countries.

What does this paper add? An analysis of public data implies that Australia pays significantly higher prices than NZ for its pharmaceuticals. This is attributable to NZ’s more effective use of competition, especially in the market for generics. Australian policy effectively limits competition by the provision of price information to competing companies. Recent agreements are similarly consistent with de facto regulatory capture.

What are the implications for practitioners? There should be a review of pharmaceutical pricing policies with the criterion for success being the ‘lowest’, not ‘comparable’ world prices. Comparators should include prices paid for quality drugs in all, not selected countries, where data are available.

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