Generic Medicines in Australia: Business Dynamics and Recent Policy Reform

Abstract

This article describes the role of generics in the Australian prescription drug market and patterns of business activity in this dynamic market segment. The Pharmaceutical Benefits Scheme (PBS) is the central mechanism for the supply of prescription medicines. PBS prices are arrived at through cost-effectiveness analyses comparing new products against already available products and therapies. In this system, prices do not operate effectively as incentives for consumers or prescribers to choose generics, and their market share was historically marginal. In recent years, generics suppliers achieved a growing market share through discounts (trading terms) to pharmacists. It is estimated that around 30% of PBS scripts, representing around 15% of PBS sales by value, are now filled with generics. Complex changes to the PBS were introduced in 2007, to be phased in over the period to 2012, aimed at increasing the scope for cost benefits to the government, and to lesser extent consumers, from the expanding availability of generic medicines.

Keywords: Australia, generic medicines, Pharmaceutical Benefits Scheme, pharmacies