When he announced the government’s response to the recent independent review of PHARMAC Health Minister Andrew Little
boldly declared that “the days of the independent republic of PHARMAC are over.” His words were warmly welcomed by many
patient advocacy groups, tired of battling for years to get timely access at an affordable price to the medicines their
clients required. However, he will need to tread very carefully to ensure that his words do not come back to haunt him.
Until the late 1980s, there were few controls on the prices charged by pharmaceutical companies for making their
medicines available in New Zealand. The government simply paid the ever-escalating medicines bill, and it was no
surprise that, as medicines became more complex and sophisticated, pharmaceutical expenditure got completely out of
control.
In 1988 the government took the dramatic temporary step of removing laxatives and antihistamines from the list of fully
subsidised medicines. The inevitable ensuing public outcry allowed the government to attempt to frame the public
argument that the cost of pharmaceuticals had risen out of control and needed to be reined in, while at the same time
ensuring that New Zealanders had reasonable and affordable access to the medicines they needed.
Although the public did not buy the government’s argument, the then Department of Health agreed to appoint an official
whose primary task was to negotiate better pricing arrangements with the pharmaceutical companies. However, that move
quickly proved ineffective. So, in 1993 the government established a stand-alone agency, PHARMAC, to determine based on
independent clinical assessment the medicines that should be funded, and then to negotiate with suppliers the price to
be paid. In its early years, PHARMAC launched what it described internally at the time as a “jihad” against the
pharmaceutical companies and their pricing policies, which probably cost New Zealand in terms of medicines availability
over the medium term.
PHARMAC not only used its funding policy to determine which medicines would be made available, but also negotiated
directly with the pharmaceutical companies on pricing. At the same time, PHARMAC’s establishment neatly removed the
issue of medicines supply from the sphere of direct political influence. This enabled successive Ministers of Health to
say that decisions about medicines availability and funding were made on the best available independent clinical advice,
without and involvement from politicians. The government’s role was now limited to setting PHARMAC’s annual funding
level.
Nearly thirty years on, though, creaks were beginning to appear in the PHARMAC model, so a review was timely. With more
new and innovative medicines becoming available to treat more conditions, PHARMAC was increasingly struggling to meet
the rapidly growing patient demand. Even though funding levels have been sharply increased under the present government,
many patient groups still felt they were still missing out, and that New Zealand was slipping behind comparable
countries in the provision of medicines.
The changes recommended by the review, most of which have been accepted by the government, have been intended to refocus
PHARMAC in a kinder, gentler way, more in tune with the medicines’ environment of today, than the 1990s. Hence the
Minister’s bravado comment and the general support of the various patient groups for the changes that have been
announced.
However, these changes will still mean medicines’ acquisition and supply is a matter of rationing, with PHARMAC and its
clinical advisers still determining which patients’ needs and medicines should have greater priority within their
funding resources. The demand for new and innovative medicines, which will become ever more expensive as they become
more sophisticated, will almost certainly intensify. Unless this government and future governments continue to double
the PHARMAC budget every four to five years, which in these straitened financial times seems unlikely, the situation
will quickly return to where it was.
Unless, of course, the government’s longer-term plan is to fully fund all medicines that are clinically approved for New
Zealand, no matter what their cost or comparative efficacy. There would then be no need for PHARMAC at all, as all that
would be required for a medicine to be available in New Zealand would be clinical approval by Medsafe. The government
would be left to just pick up the tab and pay whatever price the pharmaceutical companies demanded. And just like it did
in the 1980s, the government’s pharmaceutical bill would quickly balloon out of control.
There are no present signs this is the government’s intention, which means that PHARMAC will continue to play a
rationing role, albeit from a higher budget baseline. Inevitably, over time, situations will occur where it is forced to
make choices, or where it needs to stand firm in the face of a public clamour for a medicine that may not be justified
on efficacy grounds. The public grumbling about PHARMAC will gradually return.
The missing link in all this which has been overlooked in the revamp of the national Medicines Policy has been
establishing the optimum range of medicines that should be available in New Zealand, consistent with our national health
priorities and the health needs of our population. It would then be for PHARMAC and the government to jointly work out
the best way they could be procured and funded, and the relative needs of New Zealanders met fairly and equitably.
Without that, medicines policy looks set to continue to operate in a vacuum, with PHARMAC, however kinder and gentler it
may be portrayed, still left to make the hard decisions. In that environment, proclaiming that “the days of the
independent republic of PHARMAC are over” seem set to come back to haunt this Minister and his successors as hollow,
inaccurate and simply wrong.