Competition and Drug Pricing in the PBS: An Economic Interpretation

The paper will describe and attempt to assess some of the evidence in relation to six hypotheses. It is very preliminary. In its subsequent development it will attempt to pull together evidence from international sources and other Australian studies, from our case studies and from our analyses of various data sources, to assess these hypotheses. The six hypotheses are as follows. 1. Increasing Role of Benefit Paid Pharmaceuticals. 2. Highly Regulated Prices, with Administered Competition. 3. Extensive Non-Price Competition between Suppliers. 4. Low and Short-Lived Returns to Innovation. 5. Relatively High Price, Low Volume Approach to Generics. 6. Duopoly Situation for Many Post-Patent Drugs