Patients could pay more for many of the most commonly prescribed medicines under changes to how pharmacists are paid to dispense drugs.
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But government officials say they expect competition among pharmacists to prevent prices rising for consumers.
Currently pharmacists can charge a 15 per cent mark-up on drugs costing up to $30, but from July this mark-up will be replaced by a flat fee of $3.49.
Federal health department official Felicity McNeill told a Senate hearing on Tuesday that the change would make about 50 per cent of medicines more expensive for the government, while the remaining medicines would be cheaper for the government.
The new fee could only make a difference to patients without concessions when they buy medicines which cost less than the $37.70 patient contribution.
However these include nine of the ten most commonly prescribed drugs on the Pharmaceutical Benefits Scheme, such as the cholesterol-lowering drug atorvastatin, the antibiotic amoxycillin, and the reflux drug pantoprazole.
Under the current arrangements, pharmacists could charge a 75 cent mark up on a drug with a wholesale price of $5. But from July 1, a pharmacist would be entitled to charge $3.49, a difference of almost $2.75.
However Ms McNeill said she did not expect consumers to pay more because pharmacists already competed against each other to offer the lowest prices for these drugs.
"We don't anticipate seeing any change in the prices charged in the competitive, discount market," Ms McNeill said.
Greens Senator Richard Di Natale questioned whether such competition existed in country areas.
"If you're in a country town and you're the only pharmacist, what competition is there?"
Health Minister Sussan Ley has defended the flat fee, pointing out that remuneration for pharmacists fell by 16 per cent over the past five years despite an increase in script volumes, as medicine prices came down.
"Pharmacists incur the same infrastructure and handling costs for a box of medicine no matter the price of the drug, yet under the current system the mark up you paid depended on the price of the drug - that's hardly fair to pharmacists, consumers or taxpayers," Ms Ley said.
