Introduction: Policy-makers worldwide struggle to balance health with industrial policy objectives in the pharmaceutical sector. Tensions arise over pricing and reimbursement in particular. What health plans view as necessary to maintain equitable access to medicines, industry views as inimical to R&D and innovation. Australia has grappled with this issue for years, even incorporating the goal of ''maintaining a responsible and viable medicines industry'' into its National Medicines Policy. Methods: This case study was conducted via a narrative review that examined Australia's experiences balancing health and industrial policy objectives in the pharmaceutical sector. The review included electronic databases, grey literature and government publications for reports on relevant Australian policy published over the period 1985-2007. Results: While pharmaceutical companies claim that Australia's pricing and reimbursement policies suppress drug prices and reduce profits, national policy audits indicate these claims are misguided. Australia appears to have secured relatively low prices for generics and ''me-too drugs'' while paying internationally competitive prices for ''breakthrough'' medicines. Simultaneously, Australia has focused efforts on local pharmaceutical investment through a variety of industry-targeted R&D incentive policies. Discussion: Despite the fact that policy reviews suggest that Australia has achieved balance between health and industrial policy objectives, the country continues to face criticism from industry that its health goals harm innovation and R&D. Recent reforms raise the question whether Australia can sustain the apparent balance.
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