Generic Medicines in Australia: Business Dynamics and Recent Policy Reform (Commentary) (Report‪)‬

Introduction Prescription drug sales in Australia at around US$8 billion constitute a small share of the US$800 billion global market (1). Yet Australia is a high income economy with strict regulatory requirements closely monitored by drug policy analysts and the pharmaceutical industry (2). Prescription medicines are subsidized by the Commonwealth (federal) government through the Pharmaceutical Benefits Scheme (PBS). The PBS is designed to ensure 'timely access to the medicines that Australians need, at a cost individuals and the community can afford' and forms a central component of the National Medicines Policy (3). Through the PBS the government exercises strong market power which has delivered, for decades, relatively low prescription drug prices (4). The design of the scheme precludes effective price competition and generics prices historically approximated those of originator brands. Consequently the Australian market was until recently the almost exclusive preserve of the big brand companies. The generics sector remains small, in both value and volume terms, by comparison with economies such as the US and the UK, though policy changes and the increasing availability in international markets of cheap generics ensure an expanding role for generics also in Australia (5-7). Recent assessments suggest that around 30% of PBS prescriptions are dispensed with a generic, representing around 15% of the value of sales (8). In response to escalating health costs, and patents expiring on many big products, the Department of Health and Ageing (DoHA) has been searching for ways for tax payers and consumers to benefit, to a greater extent than hitherto, from low cost generics. The result is a major policy reorientation in 2007 aimed at driving down generics prices. This article briefly explains these changes, against the background of a sketch of regulatory arrangements and the business of generics in Australia. The focus is on the PBS market, which represents the bulk of prescription drug sales (public hospital tendering arrangements have long ensured a dominant role of generics in that sector) (9).