I Want my Viagra

With all the focus on gains from tax reform, it is easy to overlook the millions of dollars per annum of gains that the Government could deliver by reforming pharmaceutical regulations.  The delays in bringing Viagra to the Australian consumer amount to net losses in satisfaction to Australian consumers of over $20 million per month.  These losses can be multiplied many times over by the costs of delays from other drug approvals.

The price of Viagra is likely to be $15 per pop.  The true cost of delayed access is the "consumer surplus" which regulatory postponement denies to users.  The consumer surplus from Viagra -- the amount users would pay over and above the supplier's price -- will, of course, vary considerably.  Tales of Viagra organised expeditions of Japanese men to Hawaii indicate a willingness to pay on the part of some consumers of several hundred dollars.  And Australian men are no more lusty and no less aspirational than Japanese!

Assuming willingness to pay by the average Australian consumer is $25 above the market price, at an estimated 600,000 doses a month there is an annualised loss of "consumer satisfaction" of $21 million or $250 million on an annualised basis.

As a high profile innovation, Viagra's approval is being fast tracked.  But why duplicate the approval systems of other countries? While those conducting the reviews in Australia are doubtless well credentialled, they can claim no superiority over those who conducted the reviews in the US.  And in the final analysis, pharmaceutical businesses have massive incentives to avoid harming customers in our increasingly litigious age.

There are dozens of new pharmaceuticals offered each year.  On top of this are similar numbers of agricultural and other chemicals.  Each one's review involves experts poring over 100,000 pages of data.  Having similarly trained experts of several countries each examine the same data is duplication and waste additional to that created by approval delays.

On average, Australians gain access to new drugs some 18 months after they have been first approved in an OECD country.  Some improvements have been made following the Baume Report in 1991 which resulted in the average evaluation time falling from 44 months.  But Australia could make considerable savings by "free riding" on other countries' approval processes.

The Baume Report stopped short of advocating automatic approval where this had been given in selected overseas countries.  It saw this as leading to a loss of skill levels in Australia.  This seems much more like protection of highly educated Australian academics.  Establishing income support under the guise of health based regulatory controls is the sort of inefficiency that the micro-economic reform process seeks to combat.  We would be much better off retaining these skills by sending people on sabbaticals to overseas evaluatory agencies.  At least then we would get some kind of fix on the precise costs borne by the community.

We of the "Baby-boomer Me-generation" now hold the levers of political and administrative power.  We are also likely to be the main source of demand for Viagra's staying power.  But only an optimist would forecast that our vested interest in obtaining early access to Viagra would provide the catalyst for reform of the pharmaceutical approval system.  The more likely outcome is that vested interests will prevail with the continuation of time consuming processes that ensure influence for domestic administrators and valued consultancy contracts for Australian assessors.

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