The economic impact

The economic impact I n recent years at least four types of policy have been enacted by governments in different nations as they seek to contain the rising costs of health care: competitive bidding for the supply of different services; higher levels of cost-sharing by the consumer; the provision of information to suppliers and consumers to encourage more informed use of services or health-eareproducts; and government regulation of different marketplaces in health care. Although different in form and process, these four approaches have a common goal: to create more competition in the marketplace for health care so as to reduce the price and/or volume of the services and products that are used. The lAC draft report pays scant regard to the first and the third approaches but waxes enthusiastic about the second and fourth. This paper summarizes the economic issues as they affect the pharmaceutical industry (mainly manufacturers and pharmacists) and reflects on some of the consequences of the report if it is implemented by the Government. I do not canvassevery economic issue in detail; this task has been undertaken elsewhere,' The lAC Inquiry is the seventh Inquiry into the industry since the early 1970s and the manufacturersand the pharmacists had different hopes for its outcome. The 150' or so manufacturers wanted significant changes in the inflexible, heavily subsidized Pharmaceutical Benefits Scheme (PBS) and a withdrawal of the generic pricing policies that were introduced into the PBS by the Hawke Government in May 1983, both of which depressed average prices on the PBS. The manufacturers' association estimated that in the previous decade, the combination of low prices and extensive costinducing government regulations had been responsible for the cancelled investment of at least $15 million, the deferred investmentof $40 million, the loss of 720 jobs and the loss of $4 million in research funds that were rescheduled