Pharmac Review

Pharmac has played a major role in delivering access to medicines over the last 25 years. However there have been concerns raised about the model and the government felt there is scope for improving it.

The purpose of the Review and the recommendations it made are to ensure that New Zealanders can have confidence Pharmac makes the best contribution it can to improving health outcomes for all New Zealanders, particularly Māori and Pacific peoples, as part of the wider health and disability system.

The Review focused on two areas:

• How well Pharmac performs against its current objectives and whether and how its performance against these could be improved,
• Whether Pharmac’s objectives maximised its potential to improve health outcomes for all New Zealanders as part of the wider health system, and whether and how these objectives should be changed.

The Review helped to ensure the public can have confidence in the work of Pharmac by investigating and making recommendations on two key issues:

1. How well Pharmac performs against its current objectives and whether and how its performance against these could be improved.
2. Whether Pharmac’s current objectives (with emphasis on equity for Māori and Pacific peoples) maximise its potential to improve health outcomes for all New Zealanders as part of the wider health system, and whether and how these should be changed.

In addressing these questions, the scope of the Review is expected to include:

• Whether Pharmac’s operating model and role remain fit for purpose given significant social, economic, and technological developments that have occurred since it was established.
• Whether Pharmac’s current responsibilities (e.g. funding decisions for medicines, medical devices, vaccines etc.) should be reduced or expanded in light of Pharmac’s role and the role of other parts of the health system in achieving improved health outcomes.
• The timeliness of Pharmac’s funding decisions, including both:
  • the time taken to assess and prioritise treatments for funding; and
  • the time it takes for a treatment to be funded, which depends upon both prioritisation and the fixed budget available.
• How transparent and accessible to the public Pharmac’s decision making processes are.
• Benchmarking of public funding of new medicines comparing New Zealand with other countries, recognising that there will be significantly differing models internationally.
• The model Pharmac uses to assess benefits and costs that informs its decisions, whether it remains fit for purpose and consideration of alternative assessment models used internationally.
• How Pharmac utilises the Pharmaceutical budget to achieve the best outcomes possible, within the allocated funding envelope, including for example:
  • Whether Pharmac is appropriately deciding how to allocate funding between high volume and high cost treatments.
  • The balance of funding between “new medicines” and other treatments.
• Equity, including access to treatments for Māori and Pacific peoples.
• Whether decisions taken by Pharmac adequately consider impacts on other parts of the health system, for example the implications its commercial arrangements have on resilience of supply and access to medicines.
• How effectively Pharmac collaborates with other health sector agencies (including the Ministry of Health, DHBs, PHOs and others) to improve health outcomes and implement government policy, and Pharmac’s role alongside these in the wider health system.

The following were outside the scope of the Review:

• Any matters that are commercial-in-confidence or that relate to specific commercial arrangements.
• The appropriateness or otherwise of any specific decisions Pharmac has made or are under consideration.
• The day-to-day operation of Pharmac.
• The statutory independence of Pharmac and its form as a Crown entity.
• Pharmac’s role making Pharmaceutical funding decisions on behalf of the government.
• The fixed nature of the Pharmaceutical budget and the total amount of funding allocated for Pharmaceuticals.

On 2 March 2021 the Government announced that it had commissioned a review of the Pharmaceutical Management Agency, known as Pharmac.

An interim report was released on 2 December 2021.

The Panel delivered its final report to the Minister of Health on 28 February 2022.

The Minister of Health received the final report from the Pharmac Review Panel on 28 February. The Minister fully considered the report and consulted with his Cabinet colleagues about the best process for addressing the recommendations, including its release.

An independent review panel was appointed to undertake the Review. The Panel members included:

Sue Chetwin (Chair)

Sue was the Chief Executive of Consumer NZ for 13 years where she successfully campaigned for many important consumer law reforms. Prior to this, Sue had been a journalist for more than 25 years and was the editor of the Sunday News, Sunday Star Times and the Herald on Sunday. Sue is a member of a number of boards and review panels. Earlier this year, Sue was made a Companion of the New Zealand Order of Merit for services to consumer rights.

Professor Sue Crengle

Sue is a doctor who is a specialist in general practice and public health medicine, and has been working as a researcher for over 25 years. Her research interests include health services research, inequities in health, and child and youth health. She is currently a Professor of Hauora Māori in the Department of Social and Preventive Medicine, at the University of Otago. Sue is a member of a number of advisory groups and is a Māori representative on the WellSouth board. She is affiliated with Waitaha, Kāti Mamoe and Kāi Tahu.

Dr Tristram Ingham

Tristram is a Medical Epidemiologist with expertise in addressing health inequities, especially within Māori health, long-term conditions, disability rights, and healthcare governance.

He is a senior research fellow at the University of Otago, where he is involved with a number of epidemiological and clinical studies. Major research interests are asthma (particularly among Māori), bronchiolitis, the role of vitamin D in respiratory health, and sleep disordered breathing. He chairs the Muscular Dystrophy Association (Tuaatara | Central Region) and is vice chair of the Muscular Dystrophy Association of New Zealand.

Frank McLaughlin

Frank has 25 years’ experience across regulation, public policy and legislative processes, corporate governance, corporate advisory and transactions. He is a Consultant at Chapman Tripp and has previously held roles within the public service as a Deputy Secretary at the Ministry of Justice and within the Department of Prime Minister and Cabinet.

Heather Simpson

Heather has a background in health economics and was previously an economics lecturer at the University of Otago. From 1999 – 2008 she was Chief of Staff to then Prime Minister, Rt Hon Helen Clark. She went on to work at the United Nations Development Programme as a Special Advisor. Heather has extensive advisory committee experience including as Chair of the Health and Disability System Review.

Leanne Te Karu

Leanne Te Karu is of Ngāti Rangi, Whanganui, Muaūpoko descent. She is a member of the first cohort of pharmacist prescribers in Aotearoa. Her expertise focuses on complex chronic care, with addressing unmet need and optimal prescribing. She works in general practices, predominantly Māori of lower socioeconomic demography. However, her career has intentionally spanned different environments of the health sector, including primary and secondary care, academia, and Ministerial appointments. In addition, she has been a long-time advocate of a health systems response to the medicines system.

Nb. The Review was supported by a small Secretariat.

The Panel felt it was important to record and consider what a wide range of stakeholders and Pharmac had to tell them. Many of the people the Panel heard from were consistent in the concerns they shared about Pharmac. This was supported by the initial analysis undertaken and led to the observations in the interim report.

The Panel considered 213 submissions from industry, clinicians, patient groups and academics. All the submissions were considered and analysed by research experts.

In assessing Pharmac’s approach to equity, the Panel looked at Pharmac’s goals for equity, their progress towards these goals and the extent to which pro-equity systems and processes are embedded within the core functions and structures of the organisation.

The Panel used the Ministry of Health’s definition of equity which focuses on identifying and removing differences in health that are not only avoidable but unfair and unjust, as its starting point.

The Panel continued to look into these issues as it prepared the final report.

The Panel received considerable detail from submitters for the interim report. It continued with targeted consultation.

The Pharmaceutical Management Agency (Pharmac) is a Crown entity established in 1993 which has the statutory objective under section 47 of the New Zealand Public Health and Disability Act 2000 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.”

Pharmac is widely regarded as having been highly effective in achieving cost reductions that enable maximum value to be achieved from the fixed annual Pharmaceutical budget. Since it was established Pharmac’s role has widened to also include medical devices, vaccines, haemophilia products, cancer medicines, and hospital medicines.

Given Pharmac’s role it is inevitable that its decisions attract criticism. Petitions are regularly presented to the Health Select Committee, often objecting to specific decisions not to prioritise an expensive new treatment, or decisions to switch public funding between similar Pharmaceuticals and the impact this can have on patients.