Patients are set to benefit from a significant drop in the price of many common drugs as a result of changes to be announced in next week's budget.

It is a move which is likely to be popular with patients, but is setting the Federal Government on a collision course with the pharmaceutical industry.

As part of the upcoming budget, the Government is expected to pay out less for generic drugs and direct the money saved toward subsidies on expensive new treatments.

"It's my goal that the overall price of medicines goes down so we can fund new drugs," Health Minister Sussan Ley said.

"We have kept patients and consumers at the table to discuss ways to keep medicines affordable."

Under the proposals, the original patented medicines would not be used as part of the calculation for the cost of generic versions.

It would cut the cost of a range of medicines, reducing some by up to half their current price.

Generic drug makers would be able to offset the losses by selling greater volumes.

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The Coalition is expected to use the changes to bank savings in next week's budget worth $1.7 billion over five years to fund new, expensive medications such as cancer drugs.

Popular drugs which could be cheaper include:

Atorvastatin for high cholesterol, which could drop by more than $3

for high cholesterol, which could drop by more than $3 Duloxetine for depression, which could drop by more than $7

for depression, which could drop by more than $7 Quetiapine for mental health conditions, which could drop by more than $2

Ms Ley said $3 billion worth of new drugs approved by the pharmaceutical benefits advisory committee were waiting to be listed.

"These drugs bring people quality of life while they are ill. They have to be paid for. Everybody across the supply chain of medicines needs to work closely with government to pay for drugs on the PBS (Pharmaceutical Benefits Scheme)," Ms Ley said.

Generic drug changes 'arbitrary, hasty and unplanned'

But Medicines Australia chief executive Tim James said the changes would make it much harder for people wanting access to new drugs.

"We see these changes as arbitrary, hasty and unplanned and that it would not be in the best interests of patients," he said.

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Mr James said the industry wants the Government to pause on the most contentious proposals, including changes to generics.

It is understood that 10 savings proposals, including a 5 per cent cut to new innovative medicines, were put to the pharmaceutical industry and that it was willing to accept nine of them.

Another proposal likely to be adopted in the budget is a tightening of rules on PBS payments for combination medicines.

Last year, the ABC revealed a loophole was costing taxpayers $120 million a year in unnecessary payments for combined drugs.

University of Melbourne health economist Philip Clarke said the most common combination was a mixture of a cholesterol lowering statin with a blood pressure drug.

"In the combination, that would cost the Australian Government each time it's dispensed around $76, but if you were to purchase the drugs individually, it would only cost $40," Professor Clarke said.

"So on that drug alone it costs an additional $30 million a year for the Government to pay for these combination therapies."