Abstract

The pharmaceutical subsidy scheme in Australia works in the public interest by keeping prices low while assuring access to drugs across most of the drug classes. By separating the approval to market drugs from the decision to subsidise them, the Commonwealth is able to take advantage of its position--to 'free-ride' on research and development expenditure in other countries. The first part of this paper examines the factors which allow Australia to free-ride. The second part explores some international and domestic factors which may influence the sustainability of the free-riding strategy.

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