Another Review of PHARMAC

With each major change of government in recent years, PHARMAC has been required either to list a particular drug (Herceptin under National), or undergo a review (the current government), or both a new listing (Interferon) and a review (in the early 2000s).

This degree of scrutiny speaks to the sensitive and contested area the agency occupies. As an agent of government it makes inherently controversial decisions (with life-and-death consequences in some instances), but at arm’s length from the political process.

This time, however, the debate around PHARMAC seems to be different. In thirty years of observing this area, I have never seen such a concerted assault on PHARMAC, with barely a week going by without a petition or a media story about the alleged baleful influence of PHARMAC on access to medications. There could be several reasons for this. Is more expected from a government of “compassion and kindness” after a decade of “soft austerity”? Is there a hungrier media and a pharmaceutical industry that is more energetic and savvier? Is it that PHARMAC taking over the procurement of cancer drugs from the DHBs presents a single target? Are social media platforms fuelling more populist, anti-establishment groups across a range of issues?

Whatever the reason, we now have a review headed by Sue Chetwin, former CEO of Consumer New Zealand, with a panel including Heather Simpson, Chair of the Health and Disability System Review, and with terms of reference focused on performance, transparency and accessibility, timeliness of decision-making, equity, new and emerging drugs, criteria for prioritisation, and safety.

On performance, PHARMAC has done well, making savings each year equivalent to its entire budget and sufficient in size to fund a major DHB. It has also taken on an ever-expanding menu of tasks (most recently medical devices) with both quality gains and cost savings.

On transparency and accessibility, it is surprising to the layperson to find that, while financially sensitive information is not open to scrutiny, the records of the key decision-making committee (PTAC) are available on the website. It is also the case that PHARMAC is subject to the Freedom of Information Act, and has a whole section of its website devoted to responding to a large number of requests.

Timeliness of consideration of a drug can be an issue, but often full information is not available to PHARMAC on the entry of a drug to the New Zealand market. This also relates to the government’s interest in new and emerging drugs. Over half of recently listed drugs internationally have been “expedited”, often under circumstances where information on key indicators such as longevity and performance relative to existing drugs is not immediately available.

Equity and prioritization are hard to judge. New Zealand has a low patient co-payment for prescription drugs. Ninety per cent of pharmaceutical use is accounted for by just twenty per cent of medication users, suggesting that those most in need are being targetted, including for multiple conditions requiring complex treatments.

Finally, safety. This is probably prompted by the concerns over PHARMAC’s attempts to substitute cheaper but equivalent generic drugs for more expensive brands. In research with which I have been associated on those with epilepsy, we have found this not to be a problem, although there can be a perception of harm (the nocebo effect) that is not discouraged by the industry.  

Apart from a major funding boost (which is outside the terms of reference for the review), where could PHARMAC raise its game? The industry, and the advocacy groups it fosters, are winning the public relations battle hands down. PHARMAC is in danger of becoming so demonised that it will lose the current tenuous political traction and social license it currently enjoys – because media can always find a human-interest story, with an associated morality tale, on issues of medication access.

But there is another side to this story. Almost all the drugs in question are very expensive, and many of them add limited clinical advantage to existing treatments. Looking through the records of the meetings of PTAC, one can see the careful way in which committee members weigh different sources of information as they become available. Unfortunately, that does not make headlines.

PHARMAC is a remarkable and, to date, unique New Zealand innovation. t is equally remarkable that the agency has survived since 1993 under sustained attack from the pharmaceutical industry. It has had the good fortune to occupy an ideological and pragmatic common ground between governments of very different pollical persuasion for over 25 years, in part because of the billion dollars a year in drug purchasing costs it saves.

Maybe that will see it through this review, as it has through previous challenges to its existence.

Peter Davis

Emeritus Professor of Population Health and Social Science

University of Auckland

Published by

Peter Davis NZ

Peter Davis recently retired from Auckland University where he established and headed the COMPASS research group in the Faculty of Arts for ten years and before that taught and researched in health policy and health services in the Faculty of Medical and Health Sciences (and for a time at the Christchurch Medical School) for 30 years. Peter remains an Honorary Professor in Statistics and an Emeritus Professor in Population Health and Social Science at the University of Auckland. He was recently elected to the Auckland District Health Board where his main areas of interest are: the reporting and using of information to improve the performance of health systems, the effective management of public sector organisations to achieve policy goals, and the development of evidence-informed public policy. Peter is also Chair of the Board of Trustees at The Helen Clark Foundation, a New Zealand-focussed public policy think tank.

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