Sometimes the good news just doesn't get through. Did you know, for
instance, that the prices of three widely used medicines fell from the
start of this month, meaning more than 850,000 Australians will be
paying less? As federal Health Minister Peter Dutton announced, this is
happening because of a wise policy instituted by the Howard government
in 2007.
The saving on the most frequently prescribed medication on
the pharmaceutical benefits scheme - the anti-cholesterol drug
atorvastatin (known as Lipitor before its patent expired) - will range
between $5.58 and $12.51 a script, depending on which brand the chemist
gives you.
For olanzapine - used for schizophrenia and bipolar
disorder - the saving will be up to $6.69 a script. For venlafaxine -
used for major depressive disorders - the saving will be $7.03 to $10.60
a script.
But Dutton is too modest. He didn't mention that the
wholesale prices of four other drugs have also fallen, reducing the cost
to the taxpayer but not the direct cost to patients.
The
pharmaceutical scheme requires patients to make a co-payment of up to
$36.10 a script (or up to $5.90 for people with concession cards), with
the government paying any amount above the co-payment. So the more the
price falls below $36.10, the greater the direct saving to patients.
There's
just one problem with all this good news. As Dr Stephen Duckett points
out in a report for the Grattan Institute, it's not nearly as good as it
should be. The price cuts the government has extracted from the drug
companies still leave Australian taxpayers and patients paying about 14
times more for those seven medicines than are paid in New Zealand,
Britain and parts of Canada.
Duckett - a hugely experienced health
economist - estimates that, had our government driven a deal as tough
as other governments, patients would be paying less for all seven of
them, not just three. The out-of-pocket saving would average about $21 a
drug.
Take atorvastatin (a medicine close to my heart; as close
as my blood vessels, in fact). The wholesale price of a box of 30,
40-milligram pills has fallen to $19.32 (the price from the chemist
would be a bit higher). The equivalent price in Britain is $2.84 and
across the Tasman it's $2.01.
If our price came down that far it
wouldn't only be ordinary patients who made savings, pensioners and other
concession card holders would too.
Remember, even with our subsidy
scheme, plenty of people don't take the pills they should because they
find it too expensive. (I'm on seven prescription pills; I can afford
it, but plenty of people my age can't.)
There was a time when
Australians paid less for medicine than most people in developed
economies. Now we pay high prices because John Howard decided to go easy
on the international drug companies. In its six years in office Labor
did little to remove this rort. Why not? Keep reading.
The change
came when a lot of widely used medicines came to the end of their
patents. A patent gives its holder a monopoly over production of that
drug. It can charge a very high price for the drug, one far above its
cost of production.
Governments choose to grant patents and so
allow overcharging to encourage companies to incur the high costs and
risks of developing new medicines.
But when the patent expires, other
companies start producing generic versions (all of them still required
to meet standards set by the Therapeutic Goods Administration) at very
much lower prices.
Governments in other countries determine the
lowest price being charged and that is what they pay when buying for
their pharmaceutical subsidy schemes. In Australia, however, we decided
to go easy on the drug companies. When the drugs first came off patent,
we cut the price by only about 30 per cent.
Then Howard introduced
a complicated "price disclosure" system, which has the effect of
lowering the prices of generic equivalent drugs very slowly. Presumably,
if we wait long enough, prices will get down to where they already are
in countries that do a better job of protecting their citizens. In the
meantime, our government has required us - as taxpayers and patients -
to pay far more for our medicines than we need to.
But why? Well, I
don't believe it's because many of the drug companies had their
headquarters in Howard's electorate. Nor are many of the pills
manufactured in Australia. No, it's because the drug companies cut our
chemists in on the deal.
Because so many of their patients trust them,
chemists are politically powerful. If any government were to cut
too far into the taxpayer subsidy our chemists have long enjoyed, the
chemists would go on the war path against that government.
Duckett
- who knows where the bodies are buried - estimates we are paying more
than $1 billion a year too much for generic drugs, with most of that
picked up by the taxpayer.
Soon we will get the midyear economic
statement with its cuts in government spending. There will be more cuts
in the budget in May. Some will affect you.
Joe Hockey will assure you
he had no choice. What he will mean is that he's less afraid of you than
your chemist.
