Cost of Drugs in Australia's Pharmaceutical Benefit Scheme-Reply

In Reply. —Ms Derby's comments regarding the PBS in Australia are helpful and add important information to the comparison of the Australian health care system within the United States. The question is, "Why are the per capita expenditures higher in Australia when the costs for comparable drugs (28 of 29 common drugs studied by Ms Derby) are lower?" There are 2 likely possible explanations for this: first, to explain the lower drug prices, the government essentially has monopsonistic power over drug prices included in the benefit scheme, since they are the only buyer in Australia. This allows the PBS to effectively negotiate prices with the drug manufacturers closer to (or at) their marginal costs. Second, to explain the higher total expenditures, there are 2 things to consider with respect to quantity. We wonder if the additional expenditures for non-PBS pharmaceuticals, including over-the-counter preparations, account for some of the difference. Even more significant