Australia has long boasted of a pharmaceutical reimbursement system that secures low prices while broadly protecting patient access.
Yet recent events show that a set of pricing policies risks colliding the country's national health needs with the realities of an increasingly globalised and borderless market.
The result is a perverse outcome where medicines become commercially unviable for supply to the Pharmaceutical Benefits Scheme even as manufacturers find ways to provide the same product free outside the system.
Consider the case of AstraZeneca’s lower-dose ZOLADEX Implant (goserelin) for breast cancer.
Listed on the PBS since 1991, off patent and with no competing generics in Australia, the implant has nevertheless suffered repeated statutory price reductions over the past decade, halving its price since it was first listed.
On an inflation-adjusted basis, the 1991 reimbursement price of just over $400 would be close to $1,000 in 2025. There is no generic, the implant is notoriously hard to manufacture, and the price has almost halved since it was listed.
These reductions are part of a regime designed to systematically lower prices of medicines in the F1 formulary.
ZOLADEX remains in F1 because a second brand has never been listed. Policymakers have responded to the absence of generics by constructing alternative mechanisms to ensure the pricing impact of the statutory reduction that applies when medicines move from F1 to F2.
It is entirely artificial and fails to recognise global and market realities. Has anyone ever asked why, when there are generics in other markets, one has never made it to Australia?
AstraZeneca will offer the product to affected patients for free through a patient access program and move to broaden access to a higher-dose implant on the PBS. That addresses the risk to patients, but it also highlights a structural problem. Our pricing framework can push suppliers away from the PBS, even where the consensus, including by the Pharmaceutical Benefits Advisory Committee, is that it creates a problematic situation for patients.
For years, some countries have used forms of international reference pricing to anchor domestic reimbursement to prices observed elsewhere. Australia is often cited as a reference country.
Developments in the United States, which is moving toward a Most-Favored-Nation (MFN) policy for new medicines, along with other proposals currently under consideration by legislators, make pricing ever more borderless.
Even where MFN per se does not apply, as in the case of ZOLADEX, the economic linkages between markets are clear. Manufacturers aim to set prices in a global reality. Steep reductions in one jurisdiction tied to domestic fiscal objectives can influence decisions in others.
The ZOLADEX implant is a useful example of a circumstance that does not fit neatly into the existing pricing policy paradigm.
It is hard to manufacture, long off-patent without local generics, and yet its price has nearly halved since listing. Automatic price cuts that do not account for production complexity or cross-market commercial dynamics can therefore have unintended and undesirable consequences.
A policy that routinely treats price reductions as an unalloyed public good, without a mechanism to systematically identify when such reductions threaten supply or local manufacturing incentives, is objectively flawed. The result can be perverse. Medicines leave the PBS or rely on manufacturer goodwill programs rather than stable system-wide arrangements. That outcome is bad for patients, bad for clinicians, and bad for long-term supply security.
The risk is that our system becomes overly parsimonious with the consequent implications for sustainability.
A mature national conversation must recognise the drivers of this problem, including international reference pricing, statutory reductions, market size, and cross-border commercial calculations, manufacturer cost structures for difficult-to-make products, and weak incentives for local generic entry in niche low-volume markets.
We should also be realistic about short-term fixes, such as the exercise of ministerial discretion to waive or vary reductions. Creating a problem and then applying post hoc fixes to avoid negative consequences is neither ideal nor good policy.
Our policy discussion needs to recognise that pricing operates in an increasingly global market. Australia must confront the reality that there are very few direct country-to-country comparisons from which it will emerge as the market to protect.
Are we even capable of discussing the global realities of pricing?
Unfortunately, in this system, any discussion that might recognise an imperative to systematically pay higher prices for single-brand medicine is treated like institutional 'Kryptonite'. We need to confront realities and deal with it in a mature and open-minded way.
