Where to now for PHARMAC?

Published in Stuff, 5th. December 2021.

The Interim Report of the review of PHARMAC has just been published, with the thrust of 213 submissions being critical. Eighty per cent of submissions came from representatives of the pharmaceutical industry, people with personal stories of distress, and patient advocacy groups. The remainder were health professionals, with just two submissions from academics, of which I was one.

In many respects this interim report reflects the stock of grievances in the sector, and this is a worthwhile exercise. Yet, there is another aspect. According to results from the just-published New Zealand Health Survey, 97 per cent of adults and 99 per cent of children reported they had not experienced any cost barrier to filling a prescription in the previous year. This was not represented.

The principal concerns of submitters were, among a wide range of matters: Treaty of Waitangi, equitable health outcomes, rare disorders or conditions, focus on containing costs, evidence and advice, decision-making, consumer engagement, and falling behind other developed countries.

Taken at face value it would be easy to take this 20-year report card as an indictment of PHARMAC, a view reflected in all media coverage. And yet this organisation has delivered cumulative annual cost transfers equivalent to nearly ten percent of the entire health budget, while funding a system in which almost no New Zealand resident – child or adult – reports financial barriers to medicines access. These are signal policy achievements.

Building on their concerns submitters made suggestions for improvement, such as greater emphasis on health outcomes in funding decisions, more meaningful stakeholder engagement, faster and more open decisions, use of the latest evidence, and greater articulation with the wider health system.

These suggestions are more constructive in tone, and may well be part of PHARMAC’s current work programme, but they do come with some serious caveats.

Cost. The overall thrust of the submissions and suggestions, if enacted fully, would be to greatly hamper PHARMAC’s ability to get value for taxpayer money in its negotiations over drug prices.

For example, if we had to match the drug prices Australia pays under their funding system which has close involvement of the industry, PHARMAC’s budget would need to treble – but without any guarantee that this would secure any extra medicines.

Clinical Benefit. One important component missing from the debate is whether new medicines actually deliver clear additional clinical benefit over and above existing treatment. In a recent review of nearly 300 medicines evaluated by the US and European regulatory agencies for the decade from 2007, fewer than a third showed significant therapeutic value as rated by at least one of five assessment agencies. PHARMAC could do more to benchmark its therapeutic ratings.

Mandate. Many of the things that submitters were asking PHARMAC to do in the areas of equity and health outcomes are outside its direct control. In the New Zealand Health Survey, for example, nearly ten per cent of adults – about 400,000 people – reported not visiting the family doctor in the last year because of cost. That proportion is closer to 15 percent and more for Maori, Pacific peoples, the disabled, and those living in socioeconomically deprived areas. These are issues for wider health and social policy that PHARMAC as a technical and funding agency can do little about.

Where to from here for PHARMAC?

The most likely outcome is a tweaking of current settings, with possibly an increase in budget. But, in my view, this would be a missed opportunity at a time of major health system reform and change.

Despite all the critics, PHARMAC has proved itself as a leading-edge agency delivering evidence-based and cost-effective decisions on a very substantial part of the health technology landscape.

Most major developed health systems have stand-alone health technology assessment agencies, some also with a mandate in clinical excellence. PHARMAC could provide the cornerstone for the kind of free-standing agency for technology assessment and clinical excellence that the new Health NZ will need. With its core of subsidy decision-making and funding as at present, it could provide a wider clearinghouse for international technology and clinical guidance to the new system.


  1. This is great, Peter – thanks for the update.

    Fran Miller
    Cell: 617-549-3456
    Professor of Law, Emerita
    Boston University School of Law
    Visiting Professor of Law
    University of Hawaii at Manoa


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