Image for representation showing flags of Australia and US.
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Shanghai: Australia will "not compromise" on its policy to subsidise the cost of some medicines, the government said on Wednesday, after US President Donald Trump's executive order to lower domestic drug prices roiled the global pharmaceutical industry.
The Trump administration wants to reduce the gap between US drug prices and those in other developed countries, including many in Europe, where prescription drugs cost, on average, one-third of the cost in the US.
"We have been clear that Australia will not compromise on our policy setting. The Pharmaceutical Benefits Scheme (PBS) is not up for negotiation," a spokesperson for Australia's Department of Foreign Affairs and Trade told Reuters in a statement.
Australia has "always been a strong advocate for open and rules-based trade," the statement said.
On Monday, Trump said he wanted to "equalize" prices with other countries by implementing tariffs.
In Australia, pharmaceutical companies are able to freely set medicine prices on the private market but the government subsidises the cost of some medicines used in community and outpatient settings through the PBS.
A recent analysis by the Australia Institute, a public policy think tank, found that some medicines in the US were more expensive than in Australia.
During US-Australia free trade negotiations more than two decades ago, Washington pushed hard to include provisions to water down the PBS, but the final changes were not as significant as the US pharmaceutical industry had wanted, according to the think tank.
European governments are examining whether Trump can force them to pay more for prescription medicines, Reuters reported earlier on Wednesday.