Australian patients pay 3.7 times the international average for prescription drugs, according to a report from the Grattan Institute.  Because of this, many Australians are forced to delay critical medical treatment because of cost.

The report titled "Cutting a Better Drug Deal" says Australia's prices remain almost twice those of the UK, and 3.1 times higher than New Zealand's.  Part of the problen is the government's policy known as the therapeutic group premium, which the Grattan Institute says is applied far too narrowly.  It works like this:  Different drugs used to treat the same condition, and which do exactly the same thing, are clustered into a therapeutic group.  The government then subsidises the cheapest drug within that therapeutic group. 

The problem is, Australia applies the policy to only seven therapeutic groups, whereas nations such as Germany has more than 30 therapeutic groups.

"The way the therapeutic group premium operates in Australia is bad," the report states.  "There are too few drug groups, and the current policy tolerates higher prices for drugs which are largely equivalent to cheaper versions."

If the government would increase the number of therapeutic groups to 18, it could save more thn $200 Million per year.

"What we are saying with this report is that while price disclosure has been somewhat effective, there are a number of measures the government could introduce to supplement price disclosure and create additional savings," said Grattan's Stephen Duckett to the told Guardian Australia.  "The government has to be looking for every possible saving, especially if they are considering lifting the Medicare rebate freeze, which will cost them billions of dollars each year."

Overall, the report calls on the government to supplement the Pharmaceutical Benefits Scheme price disclosure system with a benchmarking against drug prices paid internationally, as exists in Canada, New Zealand and the European Union.