Drugs deal wastes $260m

The government is wasting $260 million every year because it is ignoring advice that it is paying too much for the most commonly prescribed drug in Australia.

Health economists and consumer groups say the government must tackle the high prices Australia pays for medicines compared to countries such as Britain and New Zealand in order to reign in spiralling health costs.

Last week a Grattan Institute report found Australia was facing 10 years of budget deficits, primarily driven by rising health costs. Despite this, the price of the cholesterol-busting drug atorvastatin, commonly sold under the name Lipitor, has remained far above the upper limit set by the Pharmaceutical Benefits Advisory Committee.

The chief executive of the Consumer Health Forum, Carol Bennett, said patients would end up missing out on new drugs or paying higher out-of-pocket costs if money kept being diverted towards overpriced medicines. ''The cost of medicines that the taxpayer foots the bill for is absolutely fundamental to ensuring stability in our health system,'' she said. ''If the cost continues to rise, we are going to have to forgo other things.''

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Philip Clarke, a professor of health economics at the Centre for Health Policy, Programs and Economics at the University of Melbourne, said the committee made the decision that the government should not pay more than 12.5 per cent more for atorvastatin than it does for a competitor drug, based on a rigorous assessment of its effectiveness and safety. ''It is hard to understand why an evidence-based recommendation of the committee has been ignored. Why should Australian taxpayers pay $38 per month, when governments in England or New Zealand pay less than $3 for the same drug?''

In a letter published last month in the Medical Journal of Australia, he calculated that the annual cost of not following the committee's recommendation was $260 million.

Australia spends hundreds of millions of dollars more on commonly prescribed drugs because of a deal between the government and the pharmaceutical industry that locked in the prices of commonly prescribed drugs in return for significant discounts.

A spokesman for Health Minister Tanya Plibersek said the drugs had been discounted by about 41 per cent over the past nine months, and more cuts were on the way. ''This represents significant savings to the taxpayers, and underlines the Gillard government's commitment to deliver essential medicines to patients at low cost,'' he said.

The deal between the government and the pharmaceutical industry covers about $36 billion worth of pharmaceuticals over four years, and will expire next year.

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Drugs deal wastes $260m