Australians are paying three times more than New Zealanders for their prescriptions drugs, a report shows.
They're also on average paying five times the best international price for a group of seven commonly-prescribed medicines, including the cholesterol drug Lipitor.
If the federal government made some simple changes to the way prices are set under the taxpayer-funded Pharmaceutical Benefits Scheme it could save the budget and patients more than $500 million a year, the Grattan Institute report estimates.
The government was overpaying for generic medicines that were no longer covered by patents, it says.
The report calls on the government to benchmark the prices of generic drugs in Australia against prices paid overseas.
This would save $93 million a year and cut the price of 16 commonly prescribed drugs in Australia by an average of $6.43 per pack.
As well, the needed to overhaul the rules for interchangeable drugs that were equally effective and safe for most people.
Australia is buying and pricing its drugs the wrong way, said the institute's health program director Stephen Duckett, a former head of the federal health department.
"Fixing this policy mess would give patients a better deal and improve the budget bottom line.
