Ending Prozac's Secret Kick Back Program

As seen in this Australian report

Pharmacists would forgo secret kickbacks from drug companies in return for compensation costing the taxpayer hundreds of millions of dollars, under a scheme the federal Minister for Health, Tony Abbott, is believed to be considering.

Pharmacists have fought to keep the under-the-counter discounts of up to 70 per cent for dispensing some of the most lucrative prescription drugs, quadrupling profit margins approved under the Pharmaceutical Benefits Scheme.

For generic versions of one cholesterol-lowering drug, for example, pharmacists can reap more than the government-approved profit of $10.74, and end up with $49.89, according to figures provided to the Herald. But it is understood Mr Abbott is considering a scheme that includes an interim plan to return to pharmacists the PBS savings from scrapping the discount deals.

The aim is to lift the secrecy cloaking the discounts drug manufacturers pay pharmacists.

This has been proposed as part of a government revamp to unlock potential savings to the PBS on generic drugs that cost significantly less overseas. The PBS sets the price the Government pays for a prescription drug, allowing pharmacists $10.74 in mark-ups and dispensing fees for a standard prescription.

Generic makers of chemically identical medicines can vie for business by offering discounts of 50-70 per cent to persuade chemists to dispense their brand.

For the generic version of the cholesterol-lowering drug simvastatin this can mean a 70 per cent price cut for the pharmacy, which would pay $16.78 for the drug, which is listed by the PBS at $55.93. As well as the profit margin of $39.15, they also get the $10.74 payment, increasing their profit to $49.89.

Generic versions of Fluoxetine, originally Prozac, have a PBS-approved price of $23.72 but can be sold to pharmacies for about half that.

Mr Abbott is getting heat from other ministers, including the Treasurer, Peter Costello, and the Minister for Industry, Ian Macfarlane, to keep the savings available from the rise of generics. Mr Macfarlane is said to be outraged at the kickbacks to pharmacists. But Mr Abbott is also under intense pressure from the influential Pharmacy Guild to protect member revenues.

Under the PBS subsidies, concession card holders pay only $4.70 for a prescription, while others pay up to $29.50. The Government pays the rest if the cost of the medicine is higher.

Critics say although the PBS has delivered universal access to modern high-cost drugs, it fails to provide real competition to keep pharmacy prices down.

Chris Bilkey, a former drug company chief executive, said there was an overwhelming need to change the PBS. Mr Bilkey was the Australian chief of the former drug giant Pharmacia and later managing director of the generic company Bellwether Pharma.

He said analyses by both companies had shown the Government was paying $500 million a year more than it needed to for generic medicines.

Yesterday Mr Abbott said he would take seriously any proposal that a reputable organisation put to the Government to offer a better deal on generic medicines.