Drug prices

["John M. Legge" <jlegge@xxxxxxxxxxxxxx>]

Australia's vigorous endorsement of America's invasion of Iraq is to be
rewarded by a free trade agreement. Naturally Australia is expected to make
concessions.

One concerns the Pharmaceutical Benefits Scheme (PBS), a system where the
Australian Government, as a monopsony buyer, sets the prices for 350 or so
important drugs. The drugs are then onsold to patients at about US$8 per
prescription or US$2 for the socially disadvantaged and aged. Because the
drugs are sold to the Australian government at 60 to 80 per cent below list
price, Australia has an affordable universal prescription drug benefit
scheme.

The US, in response to the US drug lobby, has demanded that the Australian
government accept the drug companies' list prices.

I understand that a number of US public hospital systems and Medicare
administrators have copied the PBS and negotiated their own substantial
discounts.

If the US and Australia agree a treaty whose provisions include banning the
Australian PBS from exerting monopsony power, won't the treaty be equally
effective at stopping US Medicare administrations and public hospital
systems doing the same?  Is the administration's, and the drug lobby's,
concerns over the PBS a cover for a major raid on US state government's
purses?

JML