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Give Pharmac a Break

It seems to happen every few years... the heat comes on Pharmac to provide a particular drug. In the last month alone, there have been outcries about medication for epilepsy, lung cancer, and epipens. And we are always told: “Such and such other country funds it!”

But every funding decision Pharmac makes involves a web of detail and some tough, heart-breaking calls. Maybe sometimes it gets the balance right, maybe sometimes it gets it wrong. But in general, this is an incredibly robust model that has served us well for the past 26 years. The problem is really that it has been too successful. Let’s briefly review why we have Pharmac in the first place.

Why Pharmac?

Just about every country in the world has trouble with health spending rising faster than incomes, and New Zealand is no exception. This has been the case since World War Two and is predicted to continue well into the future. By 2040, health and NZ Super are predicted to make up half of all Government spending.

Pharmac was set up in 1993 as a way of curbing those escalating costs. It has proved to be the most durable and successful reform of its era. The idea is that Pharmac has a fixed budget to spend in the most cost-effective way possible. It bargains with drug companies to keep the prices down. It also weighs up how effective different drugs are across different medical conditions. In simple terms, Pharmac uses its budget to buy as many healthy years of life as possible. It is a pretty thankless task because every decision means someone, somewhere misses out.

Is Pharmac Too Successful?

The problem might be that Pharmac has been too successful. For almost 30 years, it has curbed the growth of the drug budget – in fact, drug spending has fallen – while the rest of health spending has continued to balloon. Not many other countries employ the Pharmac model. Many want to implement something similar, but it is too hard to fight the drug companies’ PR machines. No wonder then that most of those countries provide the latest expensive drug – they spend way more than we do on drugs! Also, those countries are mostly richer than us, so no wonder they can afford to spend more. 

Today, the pressure is on once again for Pharmac to fund certain drugs. Is it me or is it a coincidence that these stories always seem to crop up around election or budget time? I may be cynical, but these stories appear too well timed to not have some drug company PR operating in the background.

Don’t Throw the Baby Out With the Bathwater

The crucial thing, as always, is to keep politicians out of drug-spending decisions. If they get their mitts on them, we will be prey to the PR campaigns of drug companies wanting to flog their latest drug.

The way to deal with this problem (if we decide it is a problem) is to simply allocate Pharmac more money and let it decide how to spend it using the existing processes. Let’s leave things that are working well alone.

The only tweak to Pharmac’s processes that might be needed is to make greater use of citizen’s juries to help Pharmac make some of the tricky values-based decisions it faces.

The place where real reform is needed is not within Pharmac at all, but across the wider health system. We need to apply the same degree of rigour as Pharmac does to all our health spending. We currently spend a lot of money on operations and some of them add very little to our healthy life span. If we scrutinised this area much more closely, it might indicate whether to allocate a greater proportion of money from the standard health budget towards funding more drugs. Given how good Pharmac has been at controlling costs compared to the rest of the health system, that seems likely.

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