Australia's enthusiastic approach to extending the life of pharmaceutical patents has cost the economy “billions of dollars” an independent review has found.

Originally 14 years, then 16 years and now the 20 years enshrined in the US Australia Free Trade Agreement, the review finds the extensions to the standard life of drug patents have been made “without careful regard to whether this was in our own economic interest”.

Justified at the time a measures to “encourage the development of the pharmaceutical products industry in Australia” the review finds instead they've suppressed the development of a generic drugs industry and cost the government $200 million per year by slowing the entry of cheap generic drugs into the pharmaceutical benefits scheme.

Generic manufacturers have missed out on an estimated $2 billion over eight years.

The report says 70 per cent of drug patents expire later in Australia than in other countries.