In Australia, the cost of many prescription medicines is subsidised under the Pharmaceutical Benefits Scheme (PBS). The PBS makes sure that all eligible Australian residents are able to access prescription medicines in an affordable, reliable and timely manner.

Government policy on generic medicines helps to reduce the overall cost of the PBS, helping to maintain its affordability into the future. In other words, generic medicines provide value for money for the health system, which benefits all individuals.

In many cases, generic medicines may also reduce the direct costs of medicines for individual consumers. For a consumer, the cost of a generic medicine may be different to the original brand medicine depending on whether the generic and/or the original brand medicine have a brand premium, and how much the brand premium is.

If the original brand medicine has a brand premium and the generic medicine does not (or it has a lower brand premium than the original brand), the generic medicine will be cheaper for the consumer.

What are brand premiums?

Under the PBS, the Australian Government pays the same amount for medicines that provide the same health outcomes. Most medicines (in both original brand and generic versions) will cost the same. However, a pharmaceutical company may set a higher price for their brand than the subsidy provided by the government. In such cases, the difference between the subsidy and the price set by the company is passed onto the consumer as a brand premium. In all situations, a pharmaceutical company can only impose a premium on their product when there is at least one equivalent brand of the drug available without a premium.

How much could you save?

Brand premiums range from $0.09 to $76.86 per prescription — most brand premiums, however, range from $1.00 to $4.00. By choosing a medicine that does not have a brand premium you may be able to save, on average, approximately $3.00 per prescription, depending on which medicine you are buying.

For further information visit www.nps.org.au/genericmedicines.

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