Pharmac – the Right Prescription?

Dr Bryce Wilkinson
Insights Newsletter
24 July, 2020

The Pharmaceutical Management Agency, Pharmac, attracts plenty of praise and criticism.

It has achieved notably low prices for many pharmaceutical medicines but is widely criticised for not subsidising a wider range of medicines and being slow to subsidise new medicines. Does this mean the Pharmac model is flawed?

The Initiative will shortly publish the research report Pharmac: the right prescription? to answer this question.

Pharmac’s statutory objective is to “secure for eligible people in need of pharmaceuticals, the best health outcomes that are reasonably achievable from pharmaceutical treatment and from within the amount of funding provided.”

The amount of funding for the agency to do its job is determined by the government’s annual Combined Pharmaceutical Budget (CPB). For 2020/21 that amount totalled just over $1 billion, or about $220 for each Kiwi.

Why $1 billion? Why not a higher or lower amount? Pharmac is incessantly criticised for not subsidising medicines that some people would like it to subsidise. But the critics rarely identify what medicines they think it should not be subsidising.

Implicitly they are criticising the government for not providing more funding. It is a big stretch then to blame Pharmac for the government’s funding decisions.

So, what is the optimal amount of funding? The answer to that question depends on why all people need to be subsidised rather than just those in financial need. The upcoming report examines this central aspect.

It also highlights that the best health outcomes are not necessarily the best wellbeing outcomes. People with poor health usually have other needs and must make trade-offs to deal with an illness. The report explains why it would be difficult to give the Pharmac scheme a real wellbeing focus.

The report addresses the common claim that failing to subsidise a medicine is to deprive New Zealanders of access to it. It examines whether there are undue barriers to the importation of unsubsidised medicines and to the provision of private health insurance cover for them. Such barriers could create problems for those not in financial need.

The report also examines Pharmac’s performance in administering its subsidies. Dissatisfied with Pharmac’s ‘before and after’ price comparisons, it compares the agency’s price performance with the corresponding scheme across the Tasman.

The report’s findings and opinions on these matters will be published next week.

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