Australia’s government and consumers are paying up to 10 times more for generic cholesterol-lowering drugs compared to England, says new research.

There has been debate over the high cost of statins as part of Australia’s (Pharmaceutical Benefits Scheme) but the study, by health economists at the University of Sydney, shows that Australia has comparatively low use of cheaper generic statins such as simvastatin and pravastatin. In England, only around 26% of statins prescribed are more expensive patented drugs, whereas in Australia these account for 70% of all prescriptions. If Australia increased generic use to match the levels in England, it could save up to an additional A$6.11 billion over the next 10 years, say the researchers, associate professor Philip Clarke and Edmund Fitzgerald, reporting in the Medical Journal of Australia (MJA) this week.

From January 2005 to October 2009, the cumulative loss to Australia from paying more than the English price for generic statins was more than A$900 million, and spending could have been reduced by a further A$1.08 billion if Australia had increased the proportion of generic medications prescribed to match trends in England, the authors estimate.

Depending on the proportion of statin prescriptions that are subject to lower generic pricing, from January 2009 to December 2019 potential savings from paying English prices could be as high as A$3.21 billion, and savings of up to A$9.31 billion could be made by paying English prices and using generic statins only, they add.

With over 20 million prescriptions per year, statins are estimated to account for around A$1 billion out of the PBS’ total annual spending of some A$7 billion. Dr Clarke points out that it is not just in England where some generics are so much cheaper; in Australia the wholesale cost of statins is around A$30 per month but in New Zealand the price is just A$1.50 a month, while even in the US generic statins are available for just over $4 per month through some chain pharmacies.

“We need to look for ways to make these drugs cheaper. Many other countries such as New Zealand have introduced tendering process for major drugs that has produced major price reductions,” he adds.

With an aging population and the availability of new therapeutic technologies, the upward trend in pharmaceutical expenditure in Australia is likely to continue, but finding ways to finance this is becoming difficult, especially given the recent deterioration in federal government revenue, which has resulted in a sizeable budget deficit, the authors conclude. Therefore, it is likely that savings will need to be found in the health sector to offset new health expenditure, and one of the most effective strategies for limiting growth in PBS expenditure is to pay the lowest possible price for generic medications while maintaining quality and ensuring continuity of supply, they suggest.

“Health care reform is not just about putting more money into the system, but better using the resources we already have. If we can make savings from reducing the price of statins and other generic drugs, it will allow us to spend the money elsewhere,” said Dr Clarke.

However, last week a leading industry spokesman warned of the “grave risk” that the PBS might no longer to able to continue supporting the development of new drugs because of government pricing decisions.

While the cost of developing new medicines is increasing globally, the price of old products against which governments compare these new medicines against is falling, and the result is “an alarming disconnect between the reimbursement policies adopted by countries like Australia and the commercial realities of developing new medicines for future generations,” Brendan Shaw, chief executive of industry group Medicines Australia told a conference on the future of the PBS in Sydney.

“In the drive to cut costs and get today’s new medicines at cheap prices, governments risk limiting the supply of new technologies in the future for our children and grandchildren,” said Dr Shaw. This “is one of the great intergenerational issues of our age, but one that is not being confronted in Australia at the moment,” he added.