The Federal Government stands to save as much as $1.3 billion a year if it reformed its approach to purchases of prescription drugs under the Pharmaceutical Benefits Scheme, according to the Grattan Institute’s Health Program Director Stephen Duckett.

Launching the new report, Professor Duckett outlined how the government can mitigate rising health costs and achieve significant savings which could be made if the political will was there.

“To see what can be done we only need to look at New Zealand, which has capped its drug budget, appointed independent experts to make vital decisions, and taken the politics out of price-setting,” Professor Duckett said.

In his report, Professor Duckett argues that Australians are paying far too much for drugs that could easily be provided far cheaper if the reforms he suggests were made.

The PBS scheme, Professor Duckett argues, is uncapped any budgetary constraints, and has been infiltrated by represenatives of large drug companies and have little interest in keeping prices as low as possible.

Professor Duckett highlighted the issue by examining the case of atorvastatin, a blood cholesterol drug, which the PBS pays over $51 per box of 40 tablets. New Zealand, however, pays only $5.80 for a box of 90 tablets.

Australia can only achieve significant savings if it appoints a truly independent panel, like New Zealand’s Pharmaceutical Management Agency, argued Professor Duckett.

Secondly, significant savings can be made through paying less for generic drugs which can be bought for low prices because they are off-patent. Currently, Australian firms cut prices by 16 per cent when a patent expires, but in countries such as Canada, prices can drop by as much as 82 per cent.

The full report can be found here